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Pricing on fear or fundamentals?
Feature article
As prices for exchange traded metals and related resource equities sink
into the morass of the recent melancholy macro-economic news flow, it is
important to note that prices for bulk commodities, which are not widely traded on
exchange if at all, remain fairly steady and in some cases have actually risen.
The question is whether the former are pricing on fear or properly reflecting
poor market fundamentals to which the latter have yet to react?
Latest news
LME base metals fell heavily on Monday under the weight of deepening
worries over the world economic outlook, with the latest burden added to be
the S&P’s decision to downgrade the US federal government’s credit rating.
Copper closed below $4/lb for the first time in almost three months, down by
2.8% on the day. Most other metals fell harder, from 5.1% in the case of zinc to
7.6% in the case of tin. The exception was aluminium, which lost less than
1% with reports of some fund money switching out of other metals and into
this market.
Precious metals prices were mixed. Gold vaulted to a new record high of over
$1,700/t.oz (although the PM fix was a little below this level). Silver rose by
1.6% to within a whisker of $40/t.oz once more. Platinium also picked up but
was nonetheless overtaken by gold late in the day for the first time since
December 2008. As outlined in the latest edition of the Precious Pulse we
think the platinum price offers investors better upside than gold looking
beyond the uncertainty of the next one or two months.
State-owned Indian iron ore miner NMDC has been permitted to restart
operations at its 5mtpa Donimalai mine in the Bellary district of Karnataka,
a week after an initial blanket mining ban took effect. Meanwhile, the
Supreme Court is reported to have directed the Indian Council of Forestry
Research and Education to conduct an environmental impact assessment
of mining in Bellary within three months. During this period, the ban on
smaller iron ore mining operations will remain in force. There remains
potential for the ban to be extended, with mining in the Chitradurga and
Tumkur regions still under review. However shipments do tend to be
limited during the monsoon season with the result that any incremental
impact on the market is likely to be limited.
Vietnam's Ministry of Finance has announced plans to increase the export
tax on coal from 15% to 20% as of 11th September in order to preserve
domestic reserves. Vietnam's overall coal exports have been declining in
recent years, but still totalled 20mt in 2010, much of which was anthracite
material shipped to China for use as either thermal or PCI coal.
China Nonferrous Metals Industry Association (CNIA) is reported to be
discussing a review of VAT rebates on exports of semi-finished aluminium
products. While no decision has yet been taken, key officials are quoted
as saying that a reduction of the current rebate of 13% to perhaps 9%
can be expected. China's exports of aluminium semis have increased by
48% YoY to 1.52mt in 1H 2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pricing on fear or fundamentals?
Feature article
As prices for exchange traded metals and related resource equities sink
into the morass of the recent melancholy macro-economic news flow, it is
important to note that prices for bulk commodities, which are not widely traded on
exchange if at all, remain fairly steady and in some cases have actually risen.
The question is whether the former are pricing on fear or properly reflecting
poor market fundamentals to which the latter have yet to react?
Latest news
LME base metals fell heavily on Monday under the weight of deepening
worries over the world economic outlook, with the latest burden added to be
the S&P’s decision to downgrade the US federal government’s credit rating.
Copper closed below $4/lb for the first time in almost three months, down by
2.8% on the day. Most other metals fell harder, from 5.1% in the case of zinc to
7.6% in the case of tin. The exception was aluminium, which lost less than
1% with reports of some fund money switching out of other metals and into
this market.
Precious metals prices were mixed. Gold vaulted to a new record high of over
$1,700/t.oz (although the PM fix was a little below this level). Silver rose by
1.6% to within a whisker of $40/t.oz once more. Platinium also picked up but
was nonetheless overtaken by gold late in the day for the first time since
December 2008. As outlined in the latest edition of the Precious Pulse we
think the platinum price offers investors better upside than gold looking
beyond the uncertainty of the next one or two months.
State-owned Indian iron ore miner NMDC has been permitted to restart
operations at its 5mtpa Donimalai mine in the Bellary district of Karnataka,
a week after an initial blanket mining ban took effect. Meanwhile, the
Supreme Court is reported to have directed the Indian Council of Forestry
Research and Education to conduct an environmental impact assessment
of mining in Bellary within three months. During this period, the ban on
smaller iron ore mining operations will remain in force. There remains
potential for the ban to be extended, with mining in the Chitradurga and
Tumkur regions still under review. However shipments do tend to be
limited during the monsoon season with the result that any incremental
impact on the market is likely to be limited.
Vietnam's Ministry of Finance has announced plans to increase the export
tax on coal from 15% to 20% as of 11th September in order to preserve
domestic reserves. Vietnam's overall coal exports have been declining in
recent years, but still totalled 20mt in 2010, much of which was anthracite
material shipped to China for use as either thermal or PCI coal.
China Nonferrous Metals Industry Association (CNIA) is reported to be
discussing a review of VAT rebates on exports of semi-finished aluminium
products. While no decision has yet been taken, key officials are quoted
as saying that a reduction of the current rebate of 13% to perhaps 9%
can be expected. China's exports of aluminium semis have increased by
48% YoY to 1.52mt in 1H 2011.
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