Brazil’s latest iron ore exports data highlights ongoing growth challenges Macquarie Research,

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Brazil’s latest iron ore exports data
highlights ongoing growth challenges
 Brazil’s latest iron ore export data showed another month of relative stability in
September, but also another month in which the year-on-year change was
negative. This ongoing lack of growth and the base effect (with record
shipments recorded in October 2010) leaves a further downside risk to our
seaborne trade assumptions and keeps the pressure firmly on high-cost
Chinese domestic ore to balance the market.
Latest news
 Most LME base metals prices moved lower in trading on Monday after
German Chancellor Angela Merkel played down prospects for a complete
plan to resolve the eurozone sovereign debt crisis in the near term. However,
precious metals prices rose, led by palladium with a rise of 3.4%.
 US industrial production recorded its third rise in a row, with an increase of
0.2% MoM in September, according to figures from the Federal Reserve on
Monday. The main contributions to higher output came from the automotive
and IT industries. However, a separate report showed manufacturing in the
New York region continuing to contract this month; the economic index from the
Federal Reserve Bank of New York was reported at minus 8.5 for October.
However, this did mark a rise from September’s reading.
 Freeport-McMoRan has reportedly suspended operations at the company’s
Grasberg copper mine in Indonesia’s Papua province, with reports circulating
of escalating social unrest at the strike-hit operation, following the fatal shooting
of some workers late last week. It has been reported that a pipe for
transporting copper concentrates has been cut and some workers are said to
be blocking the main road to the mine. The strike, which started on 15
September, is now its fifth week. Grasberg is the world’s second-largest
copper mine, producing ~625,000t of copper-in-concentrate in 2010, equal to
~4% of global output.
 Chinese nickel pig iron (NPI) producers have started to cut output, following
the recent sharp fall in nickel prices, according to feedback from a conference in
Nanjing. We estimate the latest nickel prices are still below the cash cost of
some NPI producers.
 Japan’s Nippon & Sumikin Stainless Steel Corp has agreed to a roll-over of
headline contract prices for South African charge chrome at 128¢/lb CIF from
3Q to 4Q11, as anticipated. This follows last week’s roll-over in Europe at
120¢/lb DDP (see Commodities Comment, 13 October 2011).
 The weak steel market is filtering through to Asian scrap prices, with the
winning bid in Japan's Kanto Tetsugen auction down ¥4,000/t ($52/t) from last
month, while Tokyo Steel (Japan's largest EAF-based manufacturer) has cut
its scrap intake price below ¥33,000/t ($428/t) for the first time this year.
 McCloskey reports that Rio Tinto has followed Xstrata's lead in settling semisoft
coking coal benchmarks at $179/t FOB Australia for a six-month period
from 4Q11 to 1Q12 – double the usual contractual term. However, it also
suggests Rio has agreed to a contract for 4Q11 only with a Japanese
steelmaker at $187/t FOB. Even if the latter report is accurate, the price would
still represent only 65% of the premium hard coking coal contract settlement,
below usual levels.