Copper mine supply still struggling  Macquarie Research,

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Copper mine supply still struggling
 While financial markets focus on the potential for copper demand to fall as
China’s economic growth slows and the eurozone debt crisis continues to cast
a shadow over the outlook for the global economy, it may be forgotten that
world’s copper miners are still struggling to supply the market.
Latest news
 “Down, down, deeper and down!” These words, once sung by the rock band
Status Quo, sum up well the recent mood and direction in base metals markets.
Prices took another tumble on Thursday, with copper crashing 6.6% to close at
$6,722/t, while zinc (down 5.4% on the day) and aluminium (down 4.5%)
broke down below critical technical support levels. Tin fared relatively well,
but still fell 3.3%. Precious metals prices also fell, with gold giving up 2.0%,
silver sliding by 3.7% and palladium plunging by 4.6% to close below $595/t.oz.
Meanwhile, spot iron ore prices continue to sink and are now well below
$150/t CIF China. Prices are under pressure across the board from worries
over slowing growth in China and the eurozone debt crisis.
 Financial markets may fear the worst for metals markets, but physical market
price signals remain more constructive. Shanghai copper premiums remain
high, with latest quotes at $115-135/t CIF, from $115-145/t a week ago, and
another 15,000t of LME copper stocks were cancelled in Singapore on
Wednesday. However, European aluminium premiums are coming under
some softening as some of the carry trades come under pressure.
 The US Federal Reserve Bank of Philadelphia’s general economic index
rose to 8.7 from minus 17.5 in September, the biggest one-month rebound in
31 years. The weak reading a month ago contributed significantly to the
market sell-off seen at that time.
 Brazil's local media has reported that the proposal for the country's
new mining code to be submitted to congress before the end of 2012
plans to double the royalty rates on iron ore fines to 4% but the royalty
rate for pellets will remain unchanged at 2% in an effort to encourage
more value-add mineral processing within the country. As of yet, there
is no timetable for the introduction of the new royalty system.
 Even within Europe's ailing steel industry, the differences between
different product markets are highly visible from recent company releases.
Finland's Rautaruukki, a flat steel producer with significant exposure to the
construction sector, operated at only 80% of its total capacity in Q3 2011,
producing just 392,000t, with net sales down 15% QoQ. Meanwhile,
strong energy markets led French seamless pipe manufacturer Vallourec,
a world leader in its sector, to operate at 95% of capacity, helped by the
fact that a large part of its sales are made outside of Europe.
 Coal prices in Qinhuangdao have risen recently and are now reportedly
trading at ~RMB860/t (basis 5,500 kcal/kg), compared with previous lows of
RMB825/t, but it is thought that this may already be reflected in prices in
Guangzhou. Chinese thermal coal demand has been good, with coal fired
power generation rising by 21% YoY in September, while hydro-power
generation fell by 25% on the same comparison. However, supplies of
seaborne thermal coal available for import into China have been very
strong, which may lead to some pressure on index prices in the short term
and paper markets are already seeing a pullback in API2 versus API4.