Macquarie LME Summit poll – cautious optimism on base metals:: Macquarie Research,

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Macquarie LME Summit poll –
cautious optimism on base metals
Feature article
 At Macquarie’s LME Week base metals summit, our annual survey highlighted
that, yet again, the base metal exposure favoured by most investors on a 12-
month view is copper. However, copper was also the favoured short over the
same timeframe, reflecting the lack of conviction in the market. In terms of net
preference, both aluminium and nickel are much more preferred by
participants than during the 2010 seminar.
 The overall mood was one of caution, with price expectations unsurprisingly
pared back from last year’s summit. Tomorrow’s Commodities Comment will
look at the macroeconomic poll results in more detail.
Latest news
 Base metals had a better day at the start of LME Week, with only copper and
lead marginally down and aluminium showing a decent 2.1% rise. Nickel was
the star performer, up a substantial 8.1% (just to note, it was only 3% up
before Jim Lennon’s presentation at the Macquarie LME Summit!).
Palladium’s slide continues, down 3.1% to below $600/oz.
 BHP Billiton has for a sixth time rolled over its monthly reference price for
manganese ore shipments from October to November, leaving benchmark
Gemco lump ore unchanged at $5.50/dmtu CIF China. Mn ore prices had
fallen sharply through the second half of last year and early-2011 – BHPB's
October reference price is 15% below the same month of last year – but
prices appear to have stabilised as high stocks start to be drawn down.
Chinese Mn ore port stocks fell by 5% MoM to 3.73mt (gross weight wet
basis) in September, according to provisional data published in the Tex
Report. Crude steel production remains strong, and as the stock draw
continues, we would anticipate prices for Mn ore to start moving up.
 PMI data in China and the US surprised to the upside in September. The
keenly watched US ISM index rose 1 index point to 51.6, with new orders
(49.6) and inventory (52) largely unchanged from last month. The official
China PMI was up 0.3 to 51.2, although this is a weak result given normal
seasonality seen in the series, with the level of the index the same as
September 2008. Elsewhere, the EU PMI was marginally better than the flash
estimate, although it was still low at 48.5, with the Japan PMI also stumbling
from 51.9 to 49.3, with the recent strength of the yen a headwind there.
 Wiggins Island Coal Export Terminal (WICET) has announced it has begun
construction on the new terminal in Gladstone following completion of its
financing and tenure agreements. The first shipment is expected in mid-2014,
with QR National also planning to provide the necessary rail infrastructure for
the project.
 China Coal announced on Sunday that it had received approval to resume
production at two of its five underground coal mines that were closed for
safety inspections following flooding at its Goldensea operations. Heading into
the national holidays, Chinese thermal coal prices were firm at RMB840/t at
Qinghuangdao, with port stocks also very low at 4.5mt.