Special Base Metal - 1.
SPECIAL REPORT ON
BASE METALS
Presented By: Sandeep Joon
July 2010
HOUSE VIEW JULY 2010 Performance of HOT pick of the Month for June 2010 -----Aluminum
Fundamental sell call was given in Aluminum (June) contract in MCX around 95 levels and first target of 86 was met.
HOT pick of the Base Metals for July 2010-----Lead
Investors can take fundamental sell position in Lead (July) contract in range of Rs 82-84 levels for lower targets of Rs 78 and Rs 73.
1
HOUSE VIEW JULY 2010 PERFORMANCE CHART (31st May 2010 to 30th June 2010) % Change
Commodity Copper
Zinc
Aluminum
Nickel Lead
Exchange
Unit
Month high (June)
Month low (June)
LME
USD/TONNE
6895
6050
MCX
INR /1KG
322.50
284.10
SHFE
YUAN/TONNE
54880
48900
LME
USD/TONNE
1935
1580
MCX
INR /1KG
89.05
74.35
SHFE
YUAN/TONNE
15980
13200
LME
USD/TONNE
2040
1835
MCX
INR /1KG
95
85.90
SHFE
YUAN/TONNE
15310
13800
LME
USD/OUNCE
21050
17425
MCX
INR /1KG
984
921.20
LME
USD/TONNE
1860
1540
MCX
INR /1KG
85.90
72.55
2
HOUSE VIEW JULY 2010
Base Metal Overview After plunging in the month of May base metals tried to consolidate in the month of June and witnessed some short covering. On the economic front the below the expectations US housing and GDP data capped the upside to greater extent. Euro zone debt crises have calmed down to greater extent but still the uncertainty over the financial situation in Greece and Spain persists which has curtailed the base metals recovery. The news of Yuan revaluation during the end of June month have supported the base metal complex as if the Yuan is appreciated that will increased the imports of base metals in China. During the end of June 2010 leaders of the G20, rich and developing nations agreed to take different paths to cut budget deficits and make their banking systems safer, a reflection of the uneven and fragile economic recovery in many countries. The positive statement from the G20 meeting will give some support to base metal prices. One can notice the steep fall in the Baltic dry index indicating slowing of shipping activity. Commodity-shipping costs, which have dropped for 21 straight days last month may fall as much as 20% in the third quarter because of an expanding fleet of dry-bulk vessels and slowing Chinese demand for iron ore. The fall in Baltic dry index can keep the base metals upside limited.
Copper Copper after testing the low of below Rs 285 in second week of June recovered to some extent in second half of the month on China Yuan revaluation news and fall in greenback. Slowing manufacturing growth in China and the euro zone dented sentiment in initial part of last month. But concerns over the momentum of global economic recovery continued to weigh on the sentiments. Recent data showing Japan's output of rolled copper product rose 50.4 per cent from a year earlier to 72,627 tonnes in May. While Japan's refined copper exports fell 28 percent in April from a year earlier to 47,645 tonnes. The weaker than expected economic growth in US also limited the upside in base metals. First-quarter economic growth in the U.S. was slower than previously estimated in the first quarter due to estimate of business and consumer spending. Meanwhile Russia is planning to restore an export tariff on copper and adjust a 5 percent export tariff as metal producers recover from the downturn. On the mining front Codelco, Chile's giant copper miner, plans to expand production in the next five to six years to 2.1 million tonnes from current annual output of 1.7 million tonnes to address what it sees as growing global demand. Chile, the world's No. 1 copper producer output of the metal rose 6.4 percent in April from the same month a year earlier. The increase in production by Codelco will infuse more supply in the market. China's production of refined copper rose 4.7 percent from a month earlier in May thanks to steady domestic demand and new capacity. In long run it is expected that copper will outperform aluminum and zinc over the next few months because of “a substantial global deficit this year.
Copper prices may trade in range of Rs 280-325 in MCX and in range of $ 6100-6900 in LME in July 2010.
In the July month copper prices are expected to trade in range on mixed fundamentals. One the one hand expectation of china demand will support the prices while on the other hand skeptic about pace of global recovery and growing output will limit the upside.
3
HOUSE VIEW JULY 2010
Analysis: In the graph China imports of copper is been shown and the aggregate copper imports (refined, alloy, anode and products) have risen in the first four months of 2010 to 1.61 million tonnes from 1.34 million tonnes in the same 2009 period. Refined copper imports have now been lagging marginally compared to year earlier levels, reflecting increases of anode and product imports.
Analysis: In the chart shown above the net positions of non commercials in COMEX copper are shown and it can be observed that the net positions of non commercials are showing declining trend which indicate that non commercials expect further fall in the prices.
Analysis: From the graph shown it is evident that the scope of arbitrage between LME and SHFE is been narrowed down and due to that the imports have fallen down considerably.
4
HOUSE VIEW JULY 2010
Analysis: In the graph the implied demand has shown increase in May month as compared to April while the refined copper imports have gone down. Copper consumption came was just over 700,000 tonnes in May versus 650,000 in April 2010.
Nickel Nickel prices traded on volatile path in June month as prices after testing low below Rs 825 recovered to above Rs940 in middle of the month but shed most of the gains in latter part of the month due to concerns about global economic recovery. In some key economic releases U.S. consumer sentiment rose in June to its highest since January 2008 which supported prices in middle of last month but weak housing data exerted pressure on the prices. China's move to make its Yuan currency more flexible should give support to all base metals including nickel because it will boost China's purchasing power thereby increasing imports. Restocking in OECD economies appears to be slowing, while China is currently in destocking mode as stainless steel production has outpaced demand. With China's net imports of nickel down 22% year-on-year in the first four months of 2010, to 42,257tonnes, it is expected that some destocking has taken place, coupled with the near 60% increase in China nickel production, to 114,000 tonnes. The slowdown in the imports is a matter of concern for nickel demand. This has been aided by a sharp rise in China's nickel pig iron (NPI) production in the first four months of 2010. While on the supportive side for nickel prices the rising demand leading to falling exchange stocks and weaker than expected supply due to In July 2010 nickel prices may trade in delays at Vale's new Goro project on New Caledonia and the ongoing range Rs 820-980 of in MCX and $ strike at Vale's Sudbury operations in Canada will keep the downside 18000-21000 in LME. limited in Nickel. In the July 2010 nickel prices may trade on mixed note as Chinese nickel pig iron supply is now at a record high will keep nickel demand limited while the continued disruptions at Vale's Sudbury operations will support the prices.
5
HOUSE VIEW JULY 2010
Zinc and Lead Both Lead and Zinc prices traded in tight range in June month on mixed clues from LME. Surplus stocks of both metals and improved demand kept the prices on choppy note. Both Lead and Zinc prices after testing low of below Rs 75 in MCX showed some bounce back in middle part of the month but shed most of the gains during end of the month due to concerns about recovery in global economy. The supply situation of both the lead and zinc appears to be in surplus. According to ILZSG's global zinc and lead market were in surplus by 180,000 and 46,000 tonnes respectively in January-April 2010. On the consumption part the global zinc use was 3.941 million tonnes compared with 3.197 million in January-April 2009, while global lead use was 2.795 million tonnes compared with 2.701 millions. This consumption figures indicates improved demand scenario. Zinc prices will be driven by the amount of surplus and rise of consumption levels. Zinc prices now drifting close to marginal costs of production and miners and smelters may be forced to make cuts. This is likely to occur in China first as costs are higher and that will create reduction of supply in the market. Furthermore Chinese lead imports have declined rapidly in the first four months of 2010 compared with year ago levels which indicates declining demand in China. Refined lead production in China is meanwhile up 7.5%, to 1.4 Mt in the first five months of 2010. But as the cancelled warrants in LME of lead has shown some increase from third week of June and this surge has been across several LME warehouse locations, including Singapore, Antwerp and also in the US, implying some demand is ebbing back. Chinese car sales and e-bike sales will continue to offer support to
In July 2010 Zinc may trade in range of Rs 72-92 in MCX and$1850-2000 in LME respectively.
prices, despite some slowdown due to government efforts to tighten lending, while improving US car sales up 17.4% in the first five months of 2010, to 2.37m units will limit the downside. On the other hand the supply surplus and doubt about recovery will keep the prices on back
In July 2010 Lead may trade in range of Rs73-93 in MCX and$ 1650-1900 in LME respectively.
foot.
In July 2010 the spread is expected to Lead and Zinc spread
remain in range of -4 to +4. In June 2010 the spread between lead and zinc varied between -3 and 1.75.
6
HOUSE VIEW JULY 2010
Aluminum Aluminum, like other base metals after testing 86 in initial part of June recovered to some extent but shed its gains in latter part of the month. On the supply front, Brazil's primary aluminum output fell slightly in the months of March and April compared to the same period last year while decision by some smelters in China to idle 700,000 tonnes of annual aluminum capacity by 13 smelters in Henan province of the world's top manufacturer China could result in supply tightness in the market. Meanwhile China's aluminum output was almost 1.42 million tonnes in May, an increase of 42% year-on-year and 26% on the same month in 2008. On the demand side, Chinese demand for primary aluminum is likely to nearly triple to 43.6 million tonnes in 2020 from an estimated 15.5 million tonnes this year. While India's top aluminum maker, Hindalco Industries, sees domestic demand posting double-digit growth in the current fiscal year, outpacing a modest rise in North America and Europe. China is also the world's top aluminum consumer and producer. Its imports of the metal may decline slightly this month from last month given Chinese buyers cancelled and delayed some contracted shipments of primary aluminum from May due to the fall in LME aluminum prices , which lost nearly 10 percent in May alone. In July month, aluminum prices will remain volatile as on the one side weak US key economic indicators like housing and employment figures will keep prices under pressure whereas on the other side the news about china Yuan revaluation and production cut in some mines in China may limit the downside.
Analysis: In the above graph it can be observed that the China production declined in month of May as compared to April 2010 month but total global production increased in month of May as compared to April 2010.
In July 2010 Aluminum prices are expected to trade of Rs82-96 in MC X and $1850-2050 in LME.
Analysis: According to the above chart the quarterly premium has been declining in the first two quarter along with the LME aluminum prices. But these premiums are considerably higher as compared to last year.
7
HOUSE VIEW JULY 2010 Global Zinc stock position of LME and SHFE
Analysis The total stock position of zinc have shown the gradual increase in this year .The LME and SHFE both have shown steady increase in month of June 2010 as compared to previous months .
Global Copper stock position of LME, SHFE and COMEX
Analysis Copper global stocks have shown decline in month of June as compared to previous months thus indicating tight supply. Stock position in all the three key exchanges have shown gradual decline.
Global Aluminum stock position of LME and SHFE
Analysis Global aluminum stocks have shown gradual decline in global stocks in recent months. Both LME and SHFE have shown marginal dip in their stocks in May and June 2010.
8
HOUSE VIEW JULY 2010
LME Lead Stock Position
LME Nickel Stock Position
Analysis Analysis:LME stock of nickel are in continuous downtrend while LME stocks of lead has shown some recovery in later part of June 2010.
Analysis In the above chart the change in LME stocks in second quarter is shown in graphical form and it is evident that only zinc and lead stocks have shown positive increase while others base metal like Copper, nickel and aluminum have shown decrease in stock piles in second quarter of 2010.
9
HOUSE VIEW JULY 2010 MOVEMENTS OF CANCELLED WARRANTS IN LME LME Aluminum Cancelled warrants
LME Copper Cancelled warrants
LME Nickel Cancelled warrants
LME Lead Cancelled warrants
10
HOUSE VIEW JULY 2010
LME Zinc Cancelled warrants
Analysis of LME Cancelled Warrants According to the above charts LME cancelled warrants of aluminum, nickel and lead declined in second half of June 2010 . Copper cancelled warrants have shown steep rise which indicates firm demand and that will support the prices in near term. Zinc cancelled warrants have also shown some strength in last week of June month.
11
HOUSE VIEW JULY 2010
SOME KEY US ECONOMIC INDICATOR WHICH EFFECT BASE METALS COMPLEX US New home sales and recessions
Analysis In the chart given the poor state of US housing market is shown and the new home sales have been steeply falling from 2006 from nearly 1400k to below 400k in 2010. Some recovery was seen in 2009 but again it fell in 2010. The vertical shaded position is the phases of recession.
Analysis In the chart above the blue bars indicate the amount of money spent by China to import the products like crude, iron ore copper etc. The large chunk is being used to buy crude and iron ore followed by copper. Recently China announced that it would allow more flexibility for the Yuan, also known as the renminbi or RMB, signaling it was ready to snap a 23-monthold peg to the U.S. Dollar. Gradual changes in the Yuan should only marginally boost China's strong copper demand as the country continues infrastructure development. While Chinese consumers would enjoy more purchasing power with a stronger Yuan but its exports would become more costly and could cool long-term growth.
12
HOUSE VIEW JULY 2010
Analysis U.S. economic growth was slower than previously reported in the first quarter on lower consumer spending on services, raising concerns that the recovery would be too sluggish to bring down unemployment. Gross domestic product expanded at a 2.7 percent annual rate instead of the 3 percent pace reported in last estimates.
CONCLUSION Given the current gloomy outlook of US economy as indicated by recent economic releases the recovery process started in 2009 has taken a jolt. All the indicators like US GDP,housing and jobs data including the PMI figures are indicating towards the fear of another slowdown. Altough base metals tried to remain in range in past weeks but given the ugly global macro outlook including US,Europe and China all are showing that cracks are again resurfacing in their economy which recoverd during 2009 aided by massive stimulus packages.So considering all the above factors base metals are likely to remain subdued in near term.
13
HOUSE VIEW JULY 2010
Bibliography: Reuters Bloomberg NW18 www.kitcometals.com www.metalplace.com Your valuable feedback will be appreciated For further queries Pls. Contact Sandeep Joon Phone E-mail
Research Analyst 011-30111000 Extn -6942 [email protected]
Supportive team Pramod Chhimwal Simmi Chibber
Graphic Designer Research Executive
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BASE METALS
Presented By: Sandeep Joon
July 2010
HOUSE VIEW JULY 2010 Performance of HOT pick of the Month for June 2010 -----Aluminum
Fundamental sell call was given in Aluminum (June) contract in MCX around 95 levels and first target of 86 was met.
HOT pick of the Base Metals for July 2010-----Lead
Investors can take fundamental sell position in Lead (July) contract in range of Rs 82-84 levels for lower targets of Rs 78 and Rs 73.
1
HOUSE VIEW JULY 2010 PERFORMANCE CHART (31st May 2010 to 30th June 2010) % Change
Commodity Copper
Zinc
Aluminum
Nickel Lead
Exchange
Unit
Month high (June)
Month low (June)
LME
USD/TONNE
6895
6050
MCX
INR /1KG
322.50
284.10
SHFE
YUAN/TONNE
54880
48900
LME
USD/TONNE
1935
1580
MCX
INR /1KG
89.05
74.35
SHFE
YUAN/TONNE
15980
13200
LME
USD/TONNE
2040
1835
MCX
INR /1KG
95
85.90
SHFE
YUAN/TONNE
15310
13800
LME
USD/OUNCE
21050
17425
MCX
INR /1KG
984
921.20
LME
USD/TONNE
1860
1540
MCX
INR /1KG
85.90
72.55
2
HOUSE VIEW JULY 2010
Base Metal Overview After plunging in the month of May base metals tried to consolidate in the month of June and witnessed some short covering. On the economic front the below the expectations US housing and GDP data capped the upside to greater extent. Euro zone debt crises have calmed down to greater extent but still the uncertainty over the financial situation in Greece and Spain persists which has curtailed the base metals recovery. The news of Yuan revaluation during the end of June month have supported the base metal complex as if the Yuan is appreciated that will increased the imports of base metals in China. During the end of June 2010 leaders of the G20, rich and developing nations agreed to take different paths to cut budget deficits and make their banking systems safer, a reflection of the uneven and fragile economic recovery in many countries. The positive statement from the G20 meeting will give some support to base metal prices. One can notice the steep fall in the Baltic dry index indicating slowing of shipping activity. Commodity-shipping costs, which have dropped for 21 straight days last month may fall as much as 20% in the third quarter because of an expanding fleet of dry-bulk vessels and slowing Chinese demand for iron ore. The fall in Baltic dry index can keep the base metals upside limited.
Copper Copper after testing the low of below Rs 285 in second week of June recovered to some extent in second half of the month on China Yuan revaluation news and fall in greenback. Slowing manufacturing growth in China and the euro zone dented sentiment in initial part of last month. But concerns over the momentum of global economic recovery continued to weigh on the sentiments. Recent data showing Japan's output of rolled copper product rose 50.4 per cent from a year earlier to 72,627 tonnes in May. While Japan's refined copper exports fell 28 percent in April from a year earlier to 47,645 tonnes. The weaker than expected economic growth in US also limited the upside in base metals. First-quarter economic growth in the U.S. was slower than previously estimated in the first quarter due to estimate of business and consumer spending. Meanwhile Russia is planning to restore an export tariff on copper and adjust a 5 percent export tariff as metal producers recover from the downturn. On the mining front Codelco, Chile's giant copper miner, plans to expand production in the next five to six years to 2.1 million tonnes from current annual output of 1.7 million tonnes to address what it sees as growing global demand. Chile, the world's No. 1 copper producer output of the metal rose 6.4 percent in April from the same month a year earlier. The increase in production by Codelco will infuse more supply in the market. China's production of refined copper rose 4.7 percent from a month earlier in May thanks to steady domestic demand and new capacity. In long run it is expected that copper will outperform aluminum and zinc over the next few months because of “a substantial global deficit this year.
Copper prices may trade in range of Rs 280-325 in MCX and in range of $ 6100-6900 in LME in July 2010.
In the July month copper prices are expected to trade in range on mixed fundamentals. One the one hand expectation of china demand will support the prices while on the other hand skeptic about pace of global recovery and growing output will limit the upside.
3
HOUSE VIEW JULY 2010
Analysis: In the graph China imports of copper is been shown and the aggregate copper imports (refined, alloy, anode and products) have risen in the first four months of 2010 to 1.61 million tonnes from 1.34 million tonnes in the same 2009 period. Refined copper imports have now been lagging marginally compared to year earlier levels, reflecting increases of anode and product imports.
Analysis: In the chart shown above the net positions of non commercials in COMEX copper are shown and it can be observed that the net positions of non commercials are showing declining trend which indicate that non commercials expect further fall in the prices.
Analysis: From the graph shown it is evident that the scope of arbitrage between LME and SHFE is been narrowed down and due to that the imports have fallen down considerably.
4
HOUSE VIEW JULY 2010
Analysis: In the graph the implied demand has shown increase in May month as compared to April while the refined copper imports have gone down. Copper consumption came was just over 700,000 tonnes in May versus 650,000 in April 2010.
Nickel Nickel prices traded on volatile path in June month as prices after testing low below Rs 825 recovered to above Rs940 in middle of the month but shed most of the gains in latter part of the month due to concerns about global economic recovery. In some key economic releases U.S. consumer sentiment rose in June to its highest since January 2008 which supported prices in middle of last month but weak housing data exerted pressure on the prices. China's move to make its Yuan currency more flexible should give support to all base metals including nickel because it will boost China's purchasing power thereby increasing imports. Restocking in OECD economies appears to be slowing, while China is currently in destocking mode as stainless steel production has outpaced demand. With China's net imports of nickel down 22% year-on-year in the first four months of 2010, to 42,257tonnes, it is expected that some destocking has taken place, coupled with the near 60% increase in China nickel production, to 114,000 tonnes. The slowdown in the imports is a matter of concern for nickel demand. This has been aided by a sharp rise in China's nickel pig iron (NPI) production in the first four months of 2010. While on the supportive side for nickel prices the rising demand leading to falling exchange stocks and weaker than expected supply due to In July 2010 nickel prices may trade in delays at Vale's new Goro project on New Caledonia and the ongoing range Rs 820-980 of in MCX and $ strike at Vale's Sudbury operations in Canada will keep the downside 18000-21000 in LME. limited in Nickel. In the July 2010 nickel prices may trade on mixed note as Chinese nickel pig iron supply is now at a record high will keep nickel demand limited while the continued disruptions at Vale's Sudbury operations will support the prices.
5
HOUSE VIEW JULY 2010
Zinc and Lead Both Lead and Zinc prices traded in tight range in June month on mixed clues from LME. Surplus stocks of both metals and improved demand kept the prices on choppy note. Both Lead and Zinc prices after testing low of below Rs 75 in MCX showed some bounce back in middle part of the month but shed most of the gains during end of the month due to concerns about recovery in global economy. The supply situation of both the lead and zinc appears to be in surplus. According to ILZSG's global zinc and lead market were in surplus by 180,000 and 46,000 tonnes respectively in January-April 2010. On the consumption part the global zinc use was 3.941 million tonnes compared with 3.197 million in January-April 2009, while global lead use was 2.795 million tonnes compared with 2.701 millions. This consumption figures indicates improved demand scenario. Zinc prices will be driven by the amount of surplus and rise of consumption levels. Zinc prices now drifting close to marginal costs of production and miners and smelters may be forced to make cuts. This is likely to occur in China first as costs are higher and that will create reduction of supply in the market. Furthermore Chinese lead imports have declined rapidly in the first four months of 2010 compared with year ago levels which indicates declining demand in China. Refined lead production in China is meanwhile up 7.5%, to 1.4 Mt in the first five months of 2010. But as the cancelled warrants in LME of lead has shown some increase from third week of June and this surge has been across several LME warehouse locations, including Singapore, Antwerp and also in the US, implying some demand is ebbing back. Chinese car sales and e-bike sales will continue to offer support to
In July 2010 Zinc may trade in range of Rs 72-92 in MCX and$1850-2000 in LME respectively.
prices, despite some slowdown due to government efforts to tighten lending, while improving US car sales up 17.4% in the first five months of 2010, to 2.37m units will limit the downside. On the other hand the supply surplus and doubt about recovery will keep the prices on back
In July 2010 Lead may trade in range of Rs73-93 in MCX and$ 1650-1900 in LME respectively.
foot.
In July 2010 the spread is expected to Lead and Zinc spread
remain in range of -4 to +4. In June 2010 the spread between lead and zinc varied between -3 and 1.75.
6
HOUSE VIEW JULY 2010
Aluminum Aluminum, like other base metals after testing 86 in initial part of June recovered to some extent but shed its gains in latter part of the month. On the supply front, Brazil's primary aluminum output fell slightly in the months of March and April compared to the same period last year while decision by some smelters in China to idle 700,000 tonnes of annual aluminum capacity by 13 smelters in Henan province of the world's top manufacturer China could result in supply tightness in the market. Meanwhile China's aluminum output was almost 1.42 million tonnes in May, an increase of 42% year-on-year and 26% on the same month in 2008. On the demand side, Chinese demand for primary aluminum is likely to nearly triple to 43.6 million tonnes in 2020 from an estimated 15.5 million tonnes this year. While India's top aluminum maker, Hindalco Industries, sees domestic demand posting double-digit growth in the current fiscal year, outpacing a modest rise in North America and Europe. China is also the world's top aluminum consumer and producer. Its imports of the metal may decline slightly this month from last month given Chinese buyers cancelled and delayed some contracted shipments of primary aluminum from May due to the fall in LME aluminum prices , which lost nearly 10 percent in May alone. In July month, aluminum prices will remain volatile as on the one side weak US key economic indicators like housing and employment figures will keep prices under pressure whereas on the other side the news about china Yuan revaluation and production cut in some mines in China may limit the downside.
Analysis: In the above graph it can be observed that the China production declined in month of May as compared to April 2010 month but total global production increased in month of May as compared to April 2010.
In July 2010 Aluminum prices are expected to trade of Rs82-96 in MC X and $1850-2050 in LME.
Analysis: According to the above chart the quarterly premium has been declining in the first two quarter along with the LME aluminum prices. But these premiums are considerably higher as compared to last year.
7
HOUSE VIEW JULY 2010 Global Zinc stock position of LME and SHFE
Analysis The total stock position of zinc have shown the gradual increase in this year .The LME and SHFE both have shown steady increase in month of June 2010 as compared to previous months .
Global Copper stock position of LME, SHFE and COMEX
Analysis Copper global stocks have shown decline in month of June as compared to previous months thus indicating tight supply. Stock position in all the three key exchanges have shown gradual decline.
Global Aluminum stock position of LME and SHFE
Analysis Global aluminum stocks have shown gradual decline in global stocks in recent months. Both LME and SHFE have shown marginal dip in their stocks in May and June 2010.
8
HOUSE VIEW JULY 2010
LME Lead Stock Position
LME Nickel Stock Position
Analysis Analysis:LME stock of nickel are in continuous downtrend while LME stocks of lead has shown some recovery in later part of June 2010.
Analysis In the above chart the change in LME stocks in second quarter is shown in graphical form and it is evident that only zinc and lead stocks have shown positive increase while others base metal like Copper, nickel and aluminum have shown decrease in stock piles in second quarter of 2010.
9
HOUSE VIEW JULY 2010 MOVEMENTS OF CANCELLED WARRANTS IN LME LME Aluminum Cancelled warrants
LME Copper Cancelled warrants
LME Nickel Cancelled warrants
LME Lead Cancelled warrants
10
HOUSE VIEW JULY 2010
LME Zinc Cancelled warrants
Analysis of LME Cancelled Warrants According to the above charts LME cancelled warrants of aluminum, nickel and lead declined in second half of June 2010 . Copper cancelled warrants have shown steep rise which indicates firm demand and that will support the prices in near term. Zinc cancelled warrants have also shown some strength in last week of June month.
11
HOUSE VIEW JULY 2010
SOME KEY US ECONOMIC INDICATOR WHICH EFFECT BASE METALS COMPLEX US New home sales and recessions
Analysis In the chart given the poor state of US housing market is shown and the new home sales have been steeply falling from 2006 from nearly 1400k to below 400k in 2010. Some recovery was seen in 2009 but again it fell in 2010. The vertical shaded position is the phases of recession.
Analysis In the chart above the blue bars indicate the amount of money spent by China to import the products like crude, iron ore copper etc. The large chunk is being used to buy crude and iron ore followed by copper. Recently China announced that it would allow more flexibility for the Yuan, also known as the renminbi or RMB, signaling it was ready to snap a 23-monthold peg to the U.S. Dollar. Gradual changes in the Yuan should only marginally boost China's strong copper demand as the country continues infrastructure development. While Chinese consumers would enjoy more purchasing power with a stronger Yuan but its exports would become more costly and could cool long-term growth.
12
HOUSE VIEW JULY 2010
Analysis U.S. economic growth was slower than previously reported in the first quarter on lower consumer spending on services, raising concerns that the recovery would be too sluggish to bring down unemployment. Gross domestic product expanded at a 2.7 percent annual rate instead of the 3 percent pace reported in last estimates.
CONCLUSION Given the current gloomy outlook of US economy as indicated by recent economic releases the recovery process started in 2009 has taken a jolt. All the indicators like US GDP,housing and jobs data including the PMI figures are indicating towards the fear of another slowdown. Altough base metals tried to remain in range in past weeks but given the ugly global macro outlook including US,Europe and China all are showing that cracks are again resurfacing in their economy which recoverd during 2009 aided by massive stimulus packages.So considering all the above factors base metals are likely to remain subdued in near term.
13
HOUSE VIEW JULY 2010
Bibliography: Reuters Bloomberg NW18 www.kitcometals.com www.metalplace.com Your valuable feedback will be appreciated For further queries Pls. Contact Sandeep Joon Phone E-mail
Research Analyst 011-30111000 Extn -6942 [email protected]
Supportive team Pramod Chhimwal Simmi Chibber
Graphic Designer Research Executive
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