Standard Bank Base Metals Monthly Oct 2009
Transcript of Standard Bank Base Metals Monthly Oct 2009
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Commodities Research
Base Metals Monthly
Walter de Wet* CFA
+44 (20) 7815 2759
Leon Westgate*
+44 (20) 7815 4090
Manqoba Madinane*
+27 (11) 378 7220
10 November 2009
In general, base metals prices have held up at high levels so far in the fourth quar-
ter. Indeed, zinc prices have run off to set new multi-month highs in recent weeks,
and other metals have attempted to push higher too. Overall, however, prices are
now struggling on the upside, and the uptrends that have been in place for most of
the year now appear to be rolling into sideways trading ranges.
We maintain our view that the markets may end the year on a weaker note and at
lower price levels. For most, stocks are still rising, China is well supplied and buying
interest from this source, temporarily at least, has largely dried up. Meanwhile the
demand pick-up in the West remains subdued and patchy, and investors are likely tobe squaring their books into the year-end.
Therefore, fundamental support and investor appetite for higher prices seems to be
fading, at least in the short term. Meanwhile, dip buying has been a prominent and
recurring presence in the market all year, and we think this will remain the case,
especially on dollar weakness, as long term commodity bulls are likely to continue to
view lower prices as good buying opportunities on a 2-3 year horizon.
In aluminium, prices have struggled to breach $2,000/tonne, though it is becoming
apparent than the market is now in balance. While there seems no stopping Chinese
production growth, the key to a further revival in prices is a clearer pick-up in Euro-
pean and North American demand, something we expect to emerge next year.
In copper, although the risks to the short-term price outlook are to the downside, in
the medium to longer term the risks are firmly to the upside. We reiterate that copper
could be at new record highs in the 2011-2012 period.
In nickel, we had forecast at the start of the year that the nickel market would be
much tighter in the second half of the year, even returning the deficit, after a large
surplus in the first half. This transition to balance/deficit been confirmed by the latest
INSG data and we believe a generally balanced market is likely both for the remain-
der of 2009 and for the duration of 2010.
In zinc, we remain concerned about the abundance of smelter restarts that have
been announced in recent months, and whether the fragile demand recovery in the
West can absorb the extra supply yet.
Short term price risks to the downside
Table of content
Economic trends 2
Aluminium 3
Aluminium alloys 5
Copper 6
Lead 8
Nickel 10
Zinc 12
Tin 14
LME Cash Price Analysis and Forecasts
Actual Prices Forecasts
$/tonne Oct 09 Ytd Ave. Ytd Range 2007 2008 2009 2010 2011
Aluminium 1,879 1,595 1,254 - 2,035 2,639 2,576 1,635 2,190 2,390
Copper 6,288 4,871 3,051- 6,676 7,126 6,969 4,982 6,175 7,700
Lead 2,241 1,624 992 - 2,448 2,595 2,090 1,671 2,200 2,450
Nickel 18,525 14,319 9,405 - 21,070 37,181 21,074 14,802 19,500 23,200
Tin 15,009 13,303 10,055 - 15,850 14,536 18,539 13,560 16,825 20,200
Zinc 2,072 1,549 1,060 - 2,331 3,250 1,873 1,592 2,150 2,550
Aluminium Alloy 1,693 1,399 1,011- 1,820 2,192 2,375 1,447 1,640 1,804NASAAC 1,727 1,363 902 - 1,845 2,183 2,384 1,419 1,590 1,749
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Economic trends
12 months on
Twelve months on from the banking crisis that precipitated
the global economic downturn, the economy is continuing
to stabilise, albeit propped up by a bewildering array of
fiscal and monetary stimuli. Central banks remain ex-
tremely reluctant to tighten monetary policy for fear of its
impact on deleveraging consumers, while many govern-
ments are continuing to run huge deficits in an effort to prop
up consumption and, by extension, industrial output.
risks abound
The effectiveness of these measures is best illustrated bywhat happens when they are removed. In the US, new car
sales plunged during September after the government-
backed cash-for-clunkers incentive was wound down at
the end of the previous month. October sales were better,
but concerns remain.
Worryingly, a similar incentive measure in the US housing
market the federal tax credit of $7,500 for home buyers
is scheduled to finish in November, which could nip this
sectors recent tentative (and perhaps somewhat artificial)
recovery in the bud.
US out of recession
At face value, recent macroeconomic data is pointing to an
economy getting back on track. Manufacturing and indus-
trial output is expanding and new orders are rising, capacity
utilization is recovering, and housing and construction data
is generally moving inline with or better than expectations.
This recovery pattern was topped off late last month with
the release of Q3 US GDP growth at 3.5%, which was
above forecasts and confirmed that the US has emerged
from recession.
but not out of the woods yet
However, on closer inspection, the recovery is patchy and
heavily reliant on government spending. The latest Federal
Reserve Beige Book observed that Reports of gains in
economic activity generally outnumber declines, but virtu-
ally every reference to improvement was qualified as either
small or scattered. It also noted that wages were falling in
some areas, with consumer demand remaining weak.
Income and confidence down, unemployment up
According to the latest Census Bureau data, real median
household income declined by 3.6% in 2008, to $50,303, its
steepest year-on-year drop in four decades. It is likely to be
even worse for 2009. Meanwhile, consumer credit fell by a
larger-than-expected 5.8% year-on-year in August, suggest-ing that consumers are still de-leveraging, as unemployment
continues to rise and foreclosure filings continue to exceed
300,000 a month, now for six consecutive months.
This pessimism is also evident in the consumer confidence
index, which eased back from 54.5 in August to 53.1 during
September, with the present situation index falling from 25.4
to 22.7. This suggests that the strong rally in sentiment wit-
nessed during the second quarter has petered out.
Manufacturing PMI data shows growth
October PMI data from China, Europe, the US and Japan all
signalled manufacturing activity had returned to growth, with
all readings above the key 50 expansion/contraction thresh-
old. Especially encouraging were gains in the forward-looking
new orders indices. In general the data is painting a bullish
picture of a synchronized expansion in global manufacturing
activity unfolding over the next six months.
European business, consumer confidence rises
In Europe, a run of positive data on manufacturing, industrial
orders and exports has boosted the confidence of both busi-nesses and consumers, with the IFO index rising for the sixth
consecutive month during September, to 91.3. Consumer
confidence is also recovering, rising from a reading of 3.8 in
September to 4.3 in October, driven in part by a decline in
consumer prices during the same month.
Chinese output and investment continue to soar
Year-on-year growth in Chinese IP accelerated in August,
rising from 10.8% in July to 12.3%. Investment in fixed assets
rose by 33% year-on-year during the same month (up 0.1
percentage point from July), with investment in primary indus-try up by a stunning 60.4%.
Meanwhile, year-on-year GDP growth accelerated from 7.9%
to 8.9% between Q2 and Q3. The economy expanded by
7.7% during the nine months to September, and it is on target
for 8% growth during 2009 as a whole.
Indian IP also booming
Indias IP expanded at its fastest rate in almost two years (at
10.4%) during August. The production of consumer durables,
including cars, jumped 22.3%. Meanwhile, Indias monsoonseason, which ended last month, was the driest since 1972,
which will weigh on GDP somewhat during the third quarter.
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Aluminium Prices hit a ceiling on the threat of increased supply
After LME Week, the aluminium price tested $2,000/tonne
for the second time this year. This came as the market fo-
cused strongly on both US dollar weakness and crude oilprice strength. However, this rally faltered amid the threat of
increased aluminium supply and continued fears of a delay
to the demand recovery outside of China.
Nevertheless, while the upside seems capped, the downside
also seems to be protected by investor demand in the dips.
While demand seems to remain stubbornly strong in China,
higher prices have been negatively affecting the expected
demand recovery in North America and Europe.
Chinese demand strength has been helping the SHFE main-
tain its $2,200/tonne price level and providing support for theincreased level of aluminium production in the country. Sep-
tember output was a new record high, and it is likely that the
growth will continue. Elsewhere, there has been a very minor
increase in production from non-Chinese smelters, suggest-
ing their production levels have now reached a bottom for
this downturn.
Combining the demand and supply pictures together, along-
with the levelling out of LME stocks, it is becoming increas-
ingly apparent than the market is in balance. While Chinese
production will continue to increase, the key to a further re-
vival in prices is the pick up in European and North Americandemand, something we expect will start to emerge next year,
and the impact this will have on exchange inventory levels.
Western world demand sees little improvement
Aluminium demand in the major economies of North America
and Europe remains pretty stagnant. Underlying demand has
only picked up slightly, while the lack of new builds to re-
placed finished projects is casting doubt on how sustainable
current demand is. However, the scrappage schemes have
been helping demand for aluminium from Central and East-
ern European extruders.
The situation in North America is similar. While demand has
clearly hit a bottom, the recovery is being hampered because
downstream fabricators are still struggling to pass on LME
price increases to consumers. In turn this is serving to cap
demand for aluminium further upstream.
Chinese demand remains robust
Surprisingly high net Chinese import data in September sug-
gests that demand from extruders and rolling mills in the
country is stronger than expected. This is especially true ifwe consider the lack of an apparent build up in stocks and
LME cash and 3-month aluminium price
Sources: LME; Standard CIB Research
Monthly change to LME aluminium stocks vs. cash price
Sources: LME; Standard CIB Research
Month-end LME aluminium stocks vs. cash price
Sources: LME; Standard CIB Research
1,000
1,600
2,200
2,800
3,400
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
Cash 3-month
USD/tonne
-200
0
200
400
600
Oct 04 Aug 05 Jun 06 Apr 07 Feb 08 Dec 08 Oct 09
50
75
100
125
150
Stock change Cash average
Thousands of tonnes USc/lb
50
75
100
125
150
0 1 2 3 4 5 6 7
October 09
January 96
USc/lb
Weeks consumption
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the continued production increases.
while China continues to ramp up production
Month-on-month Chinese production increased by 4.9% in
September, following a 6% increase in August and a 4.7%
gain July. Chinas September production was a record high
of 1.21m tonnes for the month and 14.76m tonnes on an
annualised basis. However, China still has an estimated
19.9m tpy of capacity, leaving a potential 5.14m tpy or
420,000 tonnes per month available for future production
increases. We expect 15.1m tpy of the industry's capacity
will be utilized by the end of the year.
While it is possible that the Chinese government will suc-
ceed in its goal to block new greenfield capacity until after
2012, there is both enough installed capacity and already-
approved projects for further production ramp-ups and as
such we expect to see more growth in output in 2010.
Outside of China production is essentially flat
Non-Chinese smelters around the world collectively pro-
duced 64,200 tpd in July, 64,400 tpd in August and 64,600
tpd in September. These are minor increases and are
largely due to new smelters coming online in Central Asia
and the Middle East. It is now clear that, forgoing another
demand collapse in the medium term, the July daily produc-
tion level for non-Chinese smelters marked the bottom for
this downturn, and May was the bottom globally.
With the Chinese restarts, we are currently just above the
same level of daily production as in November last year. For
the remainder of 2009 we expect the small monthly gains in
non-Chinese production to continue. Should prices hold
above $2,000/tonne for a sustained period, we may see
smelters elsewhere look to re-start as swing capacity.
Annual Global Supply/Demand Balance for Aluminium, 2001-2011
Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Production
Africa 1,369 1,372 1,428 1,711 1,752 1,864 1,815 1,715 1,688 1,884 1,854
North America 5,222 5,415 5,495 5,109 5,375 5,332 5,642 5,783 4,850 4,620 4,523
Latin America 1,991 2,229 2,275 2,356 2,391 2,493 2,559 2,660 2,536 2,588 2,714
Asia (ex. China) 2,099 2,113 2,317 2,585 2,944 3,296 3,504 3,700 4,239 4,850 5,995
Western Europe 4,196 4,260 4,425 4,667 4,741 4,541 4,664 4,840 3,862 3,666 3,383
Australasia 2,121 2,170 2,198 2,246 2,252 2,274 2,314 2,296 2,175 2,112 2,120China 3,385 4,420 5,465 6,589 7,743 9,349 12,607 13,129 13,550 14,895 16,600
CIS and Eastern Europe 4,049 4,141 4,345 4,569 4,643 4,749 5,021 5,182 4,583 4,473 4,460
Total 24,432 26,120 27,948 29,831 31,840 33,898 38,126 39,305 37,482 39,088 41,649
Year-on-year % change 0.0% 6.9% 7.0% 6.7% 6.7% 6.5% 12.5% 3.1% (4.6%) 4.3% 6.6%
Consumption
North America 6,251 6,595 6,829 7,500 7,567 7,653 7,526 6,913 5,043 5,446 5,712
Asia (ex. China) 5,304 5,473 6,001 6,646 6,780 6,960 7,100 7,140 6,675 7,020 7,240
Western Europe 5,720 6,038 6,192 6,603 6,717 7,055 7,244 7,256 5,900 6,074 6,403
China 3,599 4,189 5,148 6,086 7,091 8,480 11,497 12,934 14,100 15,720 17,800
Others 3,202 3,243 3,408 3,637 3,855 4,098 4,187 4,288 4,065 4,191 4,643
Total 24,075 25,538 27,577 30,473 32,009 34,246 37,554 38,531 35,784 38,451 41,541
Year-on-year % change (3.3%) 6.1% 8.0% 10.5% 5.0% 7.0% 9.7% 2.6% (7.1%) 7.5% 8.0%
Implied surplus (deficit) 357 581 371 (641) (169) (348) 571 773 1,699 637 109
Stocks analysis
IAI 1,740 1,660 1,629 1,788 1,797 1,621 1,553 1,676
LME 821 1,241 1,423 693 644 698 929 1,338
COMEX 270 340 213 61 160 122 40 35
SHFE 34 11 27 60 46 19 89 207
Total 3,873 4,455 4,826 4,184 4,016 3,667 4,239 5,012 6,711 7,348 7,457
Stocks as weeks of consumption 8.4 9.1 9.1 7.2 6.5 5.6 5.9 6.8 9.8 9.9 9.3
LME cash prices
Historical & base case ($/tonne) $1,443 $1,350 $1,431 $1,716 $1,898 $2,567 $2,639 $2,576 $1,635 $2,190 $2,390
Historical & base case (cents/lb) 65.5c 61.2c 64.9c 77.8c 86.1c 116.4c 119.7c 116.8c 74.2c 99.3c 108.4c
Sources: IAI; WBMS; LME; COMEX; SHFE; Standard CIB Research
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Aluminium alloy
After hovering at just above $1,700/tonne since the middle
of September, the LME aluminium alloy contract embarked
on a gentle rise in October that saw it gain over 2% lastmonth.
Although the upward trend has been very much in line with
the trend observed in the LME primary aluminium contract,
it has still lagged behind. However, supply is still tight and
LME stocks declined by 1,540 tonnes (or by 1.8%) in Octo-
ber.
This relative underperformance by the alloy is not surpris-
ing, given the overall state of the transportation markets in
Europe. Although the stimulus schemes are certainly help-
ing car sales in the region, alloys demand is still not re-
flected in the figures. Once again, this brings us to the
question of customers stocks. If they are as low as we be-
lieve, extensions to the regions scrappage schemes may
well see alloy demand increase significantly over the next
few months.
Automotive production in mainland Europe finds itself at a
crossroads, as the money for the government-funded mini-
boom runs out. Calls for an extension to Germanys scrap-
page scheme have been mooted, but there are doubts that
the government will respond. Surprisingly, the UK incentive
scheme has been extended until early next year, and there
are hints that Italys scheme will also run into 2010.
In China, car output increased by nearly 80% year-on-year
in September. However, although sales have also in-
creased substantially, they grew at a much lower pace than
production, raising the question of whether alloys demand
in the country will continue to increase in the coming
months.
LME cash and 3-month aluminium alloy price
Sources: LME; Standard CIB Research
The North American Alloy contract outperformed the Euro-
pean alloy equivalent contract in October, with NASAAC
rising by 2.5% to just over $1,800/tonne currently. NASAACtherefore managed to preserve its premium over the Euro-
pean alloy, which has been a feature of the last couple of
months.
Both alloys received support from a higher primary alumin-
ium price, but the fundamentals of NASAAC look slightly
stronger than those of its sister alloy. Indeed, the supply of
scrap and alloyed ingot in North America remains tight, with
LME NASAAC stocks declining by 4,920 tonnes (or by
2.6%) in October.
Looking forward, predictions for the automotive build rate
for Q4 remain hazy, but not entirely pessimistic. However,
judging by car sales for the first month after the cash for
clunkers scheme ended, output may fall back towards pre-
vious levels. Toyota, which had the largest number of sales
related to the scheme, suffered a drop in sales of 13% in
September compared to August, while General Motors
sales dropped by 37% month-on-month.
Car makers stocks are widely reported to be low, but it is
not certain that they will restock to previous levels main-
taining a low level of stocks seems to be the default posi-
tion for everyone at the moment. It was thought that the
ending of the auto finance scheme might introduce a sub-
stantial restocking scenario but, despite anecdotal evidence
that there is indeed a slight improvement, this appears not
to be the case just yet. We are more optimistic for 2010
however, and can see restocking activity picking up more
concertedly from the second quarter onwards.
LME cash and 3-month NASAAC price
Sources: LME; Standard CIB Research
NASAAC
800
1,400
2,000
2,600
3,200
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
3-month Cash
USD/tonne
800
1,400
2,000
2,600
3,200
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
Cash 3-month
USD/tonne
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Copper Near term weakness offering entry points to long term bulls
LME cash and 3-month copper price
Sources: LME; Standard CIB Research
Monthly change to LME copper stocks vs. cash price
Sources: LME; Standard CIB Research
Month-end LME copper stocks vs. cash price
Sources: LME; Standard CIB Research
Copper prices have so far held up better than previously ex-
pected in the final quarter. Investor demand has provided
support in the dips, though prices have also struggled to ex-
tend this years rally with any convincing breakout to the up-
side. This is in spite of a run of generally upbeat macroeco-
nomic data, a weak dollar, and supply disruptions.
Demand is still subdued in the West and China is still well
supplied; even though imports blipped higher again in Sep-
tember the trend for the coming months should be downward.
Given this short-term outlook, we maintain that prices could
come under pressure between now and the year end, espe-
cially if labour contracts at Codelco are settled without strikes.
In the longer term we remain concerned about supply short-falls that we see occurring once the global economy gets
back on track over the course of the coming year. The global
mine supply pipeline looks insufficient to keep up with the
expected pace of the demand recovery, and this will yield a
deficit in H2 2010 and through 2011.
Therefore, although the risks to the short-term price outlook
are to the downside, in the medium to longer term the risks
are to the upside. As such, any price weakness that occurs in
the coming few months is likely to be viewed by many as a
good buying opportunity.
We maintain our price forecasts this month at $4,982/tonne
this year, $6,175/tonne in 2010 and $7,700/tonne in 2011 and
we reiterate that copper could be at new record highs in the
2011-2012 period.
Mixed picture painted by latest Chinese data
Recent data from China showed that refined copper produc-
tion rose to a new record high of 395,000 tonnes in Septem-
ber. Taken together with the unexpected rebound in imports
in the same month (up 29% to 282,828 tonnes) and very
strong Q3 GDP growth of 8.9%, demand would appear to be
much stronger than expected. Indeed, our apparent con-
sumption calculations put Septembers growth at more than
50% year-on-year and still above 40% for the year to date.
However, high SHFE stocks, reports of significant off-market
stocks, and falling spot premiums (down to around $55-60/
tonne from $80/tonne previously), and a local forward price
curve in contango, all continue to fan fears of an oversupplied
market. We share those fears and maintain our view that im-
ports should continue to fall away in the coming months.
Slower Chinese import demand in the final quarter has led to
a pattern of copper prices tending to tail off in November andDecember in recent years. We expect to see the same trends
2,000
4,000
6,000
8,000
10,000
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
3-month Cash
USD/tonne
-160
-80
0
80
160
Oct 04 Aug 05 Jun 06 Apr 07 Feb 08 Dec 08 Oct 09
50
150
250
350
450
Stock change Cash average
Thousands of tonnes USc/lb
0
1
2
3
4
0 1 2 3 4 5
October 09
January 96
USD/lb
Weeks consumption
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this year, and our price forecasts reflect this.
Labour contract settlements may trigger price fall
Supply disruptions may be keeping dip buyers interested.However, although the Vale Inco strike in Canada and the
Spence strike in Chile are ongoing, and a vote for strike
action has been announced at Antamina in Peru, workers at
Escondida have agreed their new contract. If Codelco work-
ers follow suit (as many suspect, now that Escondida has
set a precedent), then the majority of the labour-related sup-
ply risks hanging over this market will have been removed.
With stocks rising on both the LME and SHFE indicating
well-supplied markets in China and the West, there would
appear to be little fundamental reason for prices to remain
well bid into the year end.
No respite for TC/RCs
The latest data from the ICSG showed that global mine cop-
per capacity utilisation fell to just 76.1% in July its lowest
level of the year. Although Escondida has since come back
on line, the strikes in Chile and Canada, the accident at
Olympic Dam and problems in Indonesia and elsewhere are
still likely to be keeping utilisation below 80%. In this context
we are not surprised that TC/RCs have stuck to, and remain
at, extremely low levels reportedly $10-20/tonne and 1-2/
lb on a spot basis in China.
Annual Global Supply/Demand Balance for Copper, 2001-2011
Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Mine production
Total 13,626 13,578 13,785 14,607 14,921 15,020 15,580 15,440 15,240 15,580
Year-on-year % change 3.1% (0.4%) 1.5% 6.0% 2.1% 0.7% 3.7% (0.9%) (1.3%) 2.2%
Refined production
Africa 413 447 454 508 513 563 627 680 770 860
North America 2,793 2,326 2,074 2,198 2,162 2,155 2,175 2,210 2,060 2,080
Latin America 3,595 3,564 3,608 3,566 3,549 3,553 3,595 3,535 3,600 3,660
Asia (ex. China) 3,362 3,358 3,489 3,541 3,831 4,200 4,330 4,340 4,030 4,100
China 1,510 1,613 1,836 2,199 2,600 3,047 3,497 3,779 3,950 4,108
Australasia 560 543 484 490 469 429 442 502 480 505
Europe 3,411 3,420 3,309 3,449 3,533 3,605 3,620 3,710 3,560 3,610
Total 15,644 15,271 15,254 15,951 16,657 17,552 18,286 18,756 18,450 18,923
Year-on-year % change 5.5% (2.4%) (0.1%) 4.6% 4.4% 5.4% 4.2% 2.6% (1.6%) 2.6%
Refined consumption
North America 3,310 2,971 2,900 3,101 2,967 2,863 2,805 2,720 2,610 2,665
Latin America 533 432 494 541 552 554 568 580 560 570
Asia (ex. China) 3,864 4,196 4,216 4,564 4,522 4,680 4,900 4,860 4,500 4,600
China 2,357 2,774 3,097 3,371 3,540 3,820 4,525 4,930 5,520 5,962
Europe 4,732 4,651 4,754 5,031 4,814 5,208 5,155 5,050 4,615 4,700
Others 295 337 332 333 355 343 350 352 340 345
Total 15,090 15,361 15,793 16,941 16,750 17,468 18,303 18,492 18,145 18,842
Year-on-year % change (1.8%) 1.8% 2.8% 7.3% (1.1%) 4.3% 4.8% 1.0% (1.9%) 3.8%
Implied surplus (deficit) 554 (90) (539) (990) (93) 84 (17) 264 305 81
Stocks analysis
LME 799 856 431 49 92 191 199 341
COMEX 244 362 255 44 6 31 14 31
SHFE 94 75 121 32 58 31 26 15
Producer 290 240 238 233 238 283 259 256
Merchant 27 19 23 20 17 18 21 26
Consumer 181 161 145 141 135 149 154 135
Total 1,636 1,712 1,212 519 546 703 673 804 1,109 1,190
Stocks as weeks of consumption 5.6 5.8 4.0 1.6 1.7 2.1 1.9 2.3 3.2 3.3
LME cash prices
Historical & base case ($/tonne) $1,577 $1,558 $1,780 $2,866 $3,684 $6,730 $7,126 $6,969 $4,982 $6,175
Historical & base case(cents/lb) 71.5c 70.7c 80.7c 130.0c 167.1c 305.3c 323.2c 316.1c 226.0c 280.1c
Sources: ICSG; WBMS; LME; COMEX; SHFE; Standard CIB Research
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Lead Short term risk to prices are to the downside
Chinas lead poisoning crisis that flared up in late August
continues to be one of the main focuses of the lead market.
However, also important is identifying any signs of a pick-up in consumer interest as we approach the high-demand
winter replacement auto battery season, especially after a
disappointing summer season this year.
Both factors supply disruptions and seasonal demand
have the potential to be bullish influences on lead prices.
However, both are proving to be a disappointment to lead
bulls, at least so far. Production losses in China are looking
minimal and demand remains stubbornly subdued.
Therefore, we see a lack of fundamental support for prices
at the moment. That said, the fundamentals are not the
main driving force currently; investor money flows and cur-
rency markets are setting the tone. But if the fundamentals
start to reassert themselves, the risks for lead prices in the
near term appear to be to the downside.
Moreover, if runaway Chinese production growth, particu-
larly from the secondary sector, is not reined in one way or
another, the upside to prices may start to become limited
next year too.
About 700,000 tpy of Chinese capacity suspended
There continues to be a trickle of news emanating fromChina about the ongoing crackdown on lead smelters sus-
pected of causing pollution. There have been a few more
closures over the past month, and we think the total capac-
ity affected amounts to around 700,000 tpy.
Market still well supplied...
Lead prices had rallied strongly in September of the back of
supply shortages potentially caused by this crackdown, and
prices have largely held on to those gains as concerns
have persisted. However, as noted in previous reports,
Chinese production is unlikely to be severely affected over
the long term, with the market seemingly well enough sup-
plied at the moment to ride out any production cutbacks.
with September data supporting that view
In the official production and trade figures for September
the first full month of data after the crackdown started in
late August, output was reported to have been 335,153
tonnes, which is only 8% lower than Augusts level and still
11% above the year-to-date monthly average of 301,949
tonnes. We will wait to see how much of a further decline, if
any, occurred in October. Based on September's data it
LME cash and 3-month lead price
Sources: LME; Standard CIB Research
Monthly change to LME lead stocks vs. cash price
Sources: LME; Standard CIB Research
Month-end LME lead stocks vs. cash price
Sources: LME; Standard CIB Research
800
1,600
2,400
3,200
4,000
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
3-month Cash
USD/tonne
-40
-20
0
20
40
Oct 04 Aug 05 Jun 06 Apr 07 Feb 08 Dec 08 Oct 09
0
50
100
150
200
Stock change Cash average
Thousands of tonnes USc/lb
0.0
0.5
1.0
1.5
2.0
0.0 0.4 0.8 1.2 1.6 2.0
October 09
January 96
USD/lb
Weeks consumption
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seems we were correct to warn that Chinese output would
prove to be resilient.
Meanwhile, net imports of refined lead into China in Sep-
tember continued their declining trend from Aprils all-time
high, which is again indicative of a market feeling no ill ef-
fects of the clampdown.
No seasonal demand pick-up yet
The summer replacement battery season was disappoint-
ing in the Northern Hemisphere this year, as motorists
tended to use their vehicles less and defer maintenance
costs. Now in the run-up to the winter battery season, the
indicators are again looking disappointing. LME lead stocks
continue to rise, cancelled warrants have faded away to
almost zero again, physical premiums are largely stagnant,
and high prices are deterring restocking by keeping poten-
tial buyers at bay.
Vehicle production in Europe and the US has ramped up in
recent months, which is helping original equipment battery
demand, but with consumer confidence still poor and un-
employment still rising, potential buyers are still putting off
purchases of big-ticket items like new cars. That said, we
note that some weather forecasters are now starting to
predict that the US East Coast will see its coldest winter in
10 years, so this could provide a boost to the replacement
battery market in North America in the coming months.
Annual Global Supply/Demand Balance for Lead, 2001-2011Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mine production
Total 3,032 2,831 3,120 3,138 3,437 3,540 3,685 3,890 3,800 3,960 4,150
Year-on-year % change (0.5%) (6.6%) 10.2% 0.6% 9.5% 3.0% 4.1% 5.6% (2.3%) 4.2% 4.8%
Refined production
Africa 132 144 138 100 111 114 90 97 100 110 130
North America 1,866 1,848 1,854 1,745 1,775 1,806 1,802 1,827 1,720 1,780 1,760
Latin America 229 244 238 270 270 266 265 270 180 220 300
Asia (ex. China) 1,014 1,036 1,066 1,058 1,093 1,106 1,152 1,315 1,330 1,360 1,410
China 1,196 1,325 1,564 1,934 2,391 2,715 2,757 3,106 3,440 3,740 4,150
Australasia 280 311 315 281 277 253 252 275 252 260 270
Europe 1,905 1,762 1,589 1,569 1,702 1,655 1,747 1,794 1,680 1,730 1,740
Total 6,622 6,670 6,764 6,957 7,619 7,915 8,065 8,684 8,702 9,200 9,760
Year-on-year % change (0.3%) 0.7% 1.4% 2.9% 9.5% 3.9% 1.9% 7.7% 0.2% 5.7% 6.1%
Refined consumption
North America 2,003 1,861 1,823 1,816 1,891 1,923 1,777 1,848 1,720 1,740 1,780
Latin America 191 205 207 224 237 236 221 241 240 244 250
Asia (ex. China) 1,359 1,458 1,535 1,585 1,533 1,566 1,610 1,620 1,540 1,580 1,643
China 720 957 1,183 1,510 1,973 2,213 2,543 2,890 3,260 3,749 4,311
Europe 2,054 2,027 1,933 2,007 1,998 1,968 1,944 1,855 1,690 1,700 1,740
Others 149 134 153 153 142 145 140 142 140 142 144
Total 6,476 6,642 6,834 7,295 7,774 8,051 8,235 8,596 8,590 9,155 9,869
Year-on-year % change (0.2%) 2.6% 2.9% 6.7% 6.6% 3.6% 2.3% 4.4% (0.1%) 6.6% 7.8%
Implied surplus (deficit) 187 34 (10) (282) (119) (117) (170) 88 112 46 (107)
Stocks analysis
LME 98 184 109 40 44 41 45 45
Producer 188 142 138 127 145 137 97 114
Consumer 149 156 159 132 118 130 138 146
Merchant 1 1 1 1 2 2 2 1
Total 436 483 407 300 309 310 282 306 418 464 357
Stocks as weeks of consumption 3.5 3.8 3.1 2.1 2.1 2.0 1.8 1.9 2.5 2.6 1.9
LME cash prices
Historical & base case ($/tonne) $476 $453 $516 $887 $976 $1,288 $2,595 $2,090 $1,671 $2,200 $2,450
Historical & base case (cents/lb) 21.6c 20.5c 23.4c 40.2c 44.3c 58.4c 117.7c 94.8c 75.8c 99.8c 111.1cSources: ILZSG; WBMS; LME; Standard CIB Research
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Nickel Market balanced now
We had forecast at the start of the year, and discussed in recent
reports that the nickel market would be much tighter in the sec-
ond half of the year, even returning the deficit, after a large sur-plus in the first half. This transition to balance/deficit been con-
firmed by the latest INSG data which shows demand exceeding
supply in August for the first time in well over a year.
Whether the tighter fundamentals persist to the year-end is be-
coming less certain, but overall we still think a generally bal-
anced market is the most likely outcome, both for the remainder
of 2009 and for the duration of 2010. This should be supportive
to prices, though the ongoing relocation of Russian metal onto
LME warrant in Rotterdam is masking the underlying balance at
the moment.
The short term risks to this balanced market outlook include the
resolution of labour disputes in Canada, the continuing rise in
Chinese nickel pig iron production, the possibility of restarts to
previously idled mine capacity, and patchy demand.
Our price forecasts remain unchanged this month at $14,802/
tonne for 2009 and $19,500/tonne for 2010, rising to $23,200/
tonne in 2011 with the arrival of the first annual deficit in 5 years.
Market returned to deficit in August
The latest data from the INSG is noteworthy because it shows
that the global nickel market returned to deficit in the month of
August - for the first time since February 2008. Production de-
clined for the third consecutive month, coming in at 108,200
tonnes, as ongoing cutbacks and the start of the strike at Vale
Incos Canadian operations offset rising nickel pig iron output in
China. At the same time, consumption in August rose to 115,300
tonnes the highest level in 16 months due to stainless steel
mills gradually raising output levels since around mid-year.
As we have noted in our previous reports, a deficit is in line with
our own reading of the market, and we think that demand will
generally match or exceed supply for the remainder of this year
and through 2010.
North America getting tight
With a disappointing demand recovery in Europe so far
(Outokumpu reports no recovery yet and Acerinox is cutting ca-
pacity back again) and oversupply of Chinese stainless steel in
Asia, the main bright spot for demand is North America.
There seems to be more buying activity occurring in this region
and physical premiums are on the rise. Although stainless mills
are ramping up output and are rebuilding nickel stocks, the main
cause of the tightness is the ongoing strike at Vale Incos nickeloperations in Canada. Workers walked out in July and there still
Monthly change to LME nickel stocks vs. cash price
Sources: LME; Standard CIB Research
Month-end LME nickel stocks vs. cash price
Sources: LME; Standard CIB Research
LME cash and 3-month nickel price
Sources: LME; Standard CIB Research
8,000
16,000
24,000
32,000
40,000
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
3-month Cash
USD/tonne
0
7
14
21
28
0 1 2 3 4 5 6
October 09January 96
USD/lb
Weeks consumption
-16
-8
0
8
16
Oct 04 Aug 05 Jun 06 Apr 07 Feb 08 Dec 08 Oct 09
2
8
14
20
26
Stock change Cash average
Thousands of tonnes USD/lb
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appears to be no end in sight to the pay dispute. Moreover,
we note that workers at Xstratas Sudbury operations also
have labour contracts up for renewal in February, so the
disruptions could run well into next year.
Mine restarts may still be some way off
We were interested to note last month that Chinas Minmet-
als says it needs a steady nickel price above $20,000/tonne
to consider reopening its suspended Avebury mine in Tas-
mania. This is a broadly similar figure to the $18,000/tonne
price that Toledo Mining recently said was its breakeven
level at Berong in the Philippines. And although BHP Billi-
tons mothballed Ravensthorpe mine is making headlines
again as potential buyers cast their eyes over it, there are
still serious doubts about its viability at current prices (with
these concerns also casting a shadow over Vale Incos
much delayed Goro mine in New Caledonia)
The high costs relative to current prices for many idled and
next-generation nickel mines underscores our view that
nickel still needs to go higher before the overhang of ca-
pacity starts to become a more pressing risk.
NPI here to stay
It also underscores the fact that Chinese nickel pig iron
(NPI) producers now appear to have a niche in this market
for the long term, as their breakeven price starts from about
$15,000/tonne. Indeed, nickel ore imports surged to a new
all-time high in September some 25% above the previous
monthly record confirming that the sector can operate
viably at current prices and is more competitive than many
conventional producers in the current environment.
Annual Global Supply/Demand Balance for Nickel, 2001-2011
Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mine production
Total 1,224 1,248 1,264 1,327 1,387 1,503 1,595 1,530 1,380 1,415 1,590
Year-on-year % change 4.3% 1.9% 1.3% 5.0% 4.5% 8.4% 6.1% (4.1%) (9.8%) 2.5% 12.4%
Refined production
Africa 53 55 54 57 56 55 50 42 40 45 48
North America 141 145 124 152 140 147 154 168 125 152 167
Latin America 124 146 157 161 168 171 168 137 122 128 146
Asia (ex. China) 164 167 174 177 173 167 180 178 166 176 190
China 50 54 65 73 98 137 219 200 220 225 240
Australasia 174 181 167 166 178 163 156 142 151 158 164
Europe 449 434 451 468 463 512 514 510 450 472 500
Total 1,154 1,181 1,191 1,253 1,276 1,352 1,441 1,377 1,274 1,356 1,455
Year-on-year % change 6.5% 2.3% 0.9% 5.2% 1.8% 6.0% 6.6% (4.4%) (7.5%) 6.4% 7.3%
Refined consumption
North America 147 133 130 139 148 155 145 137 126 136 140
Latin America 23 27 29 26 26 25 26 24 22 23 25
Asia (ex. China) 353 408 422 430 402 429 380 348 299 340 380
China 88 94 125 150 190 245 330 360 405 460 506
Europe 461 476 461 454 447 492 424 400 333 352 380
Others 33 38 48 46 34 46 41 40 36 41 42
Total 1,104 1,176 1,215 1,245 1,247 1,392 1,346 1,309 1,221 1,352 1,473
Year-on-year % change (1.6%) 6.5% 3.3% 2.5% 0.2% 11.6% (3.3%) (2.7%) (6.7%) 10.7% 8.9%
Implied surplus (deficit) 50 (51) 37 8 29 (40) 95 68 53 4 (17)
Stocks analysis
LME 19 22 24 21 36 7 48 79
Producer 74 69 73 72 71 75 70 71
Consumer and merchant 28 18 22 5 4 6 9 6
Total 121 109 119 98 111 88 127 156 209 213 196
Stocks as weeks of consumption 5.7 4.8 5.1 4.1 4.6 3.3 4.9 6.2 8.9 8.2 6.9
LME cash prices
Historical & base case ($/tonne) $5,948 $6,772 $9,640 $13,852 $14,735 $24,287 $37,181 $21,074 $14,802 $19,500 $23,200
Historical & base case ($/lb) $2.70 $3.07 $4.37 $6.28 $6.68 $11.02 $16.87 $9.56 $6.71 $8.85 $10.52
Sources: INSG; WBMS; LME; Standard CIB Research
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Zinc Can the demand recovery keep pace with rising supply?
The run of announcements about smelter restarts since
around mid-year from the likes of Nyrstar, Teck and others
appears to have slowed. However this is largely becausemost previously idled capacity is now back on line. There-
fore, with Western World output rising again and Chinese
output breaking records, the key question for zinc is
whether demand is recovering quickly enough to absorb
the additional material now being produced.
The fact that LME stocks have been flat-to-lower since Au-
gust would suggest that the market is largely in balance. If
Octobers strong rally in zinc prices to more than $2,300/
tonne was driven by the fundamentals, then this return to
equilibrium, between supply and demand is likely to have
been a key factor.
However, our own view is that the price move was more to
do with investment money flows than fundamentals, and
although we remain zinc bulls on a medium to long-term
horizon, the short term fundamental outlook is starting to
get a little clouded by uncertainties.
China is starting to look oversupplied
Although LME stocks have flat-lined, suggesting a largely
balanced market, SHFE stocks have started to rising rap-
idly, and this is a concern. The headline total in Shanghai
has jumped by 30% in the last two weeks alone, to a new
all-time high. We have heard reports for some months
about large off-market stockpiles in China following the
surge in imports earlier this year, so it is not a surprise that
the domestic market is starting to look oversupplied, espe-
cially given record high production data recently.
amid record high production
Refined zinc production was reported by the NBS to have
been 410,413 tonnes in September, only fractionally down
from Augusts record high of 415,000 tonnes. Productionhas now risen by nearly 70% since Januarys low, as previ-
ously idled smelters have been quickly restarted and as
new capacity has been commissioned. Moreover, with con-
centrate imports up 38% this year and domestic mine out-
put having more than doubled since the start of the year,
apparent supply of zinc concentrate in China is also at a
record high, which will continue to fuel high refined metal
output, as long as availability remains easy.
The concs market is now tightening up
This may be changing now, however, as many WesternWorld smelters have now restarted and there is more
LME cash and 3-month zinc price
Sources: LME; Standard CIB Research
Monthly change to LME zinc stocks vs. cash price
Sources: LME; Standard CIB Research
Month-end LME zinc stocks vs. cash price
Sources: LME; Standard CIB Research
800
1,400
2,000
2,600
3,200
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
3-month Cash
USD/tonne
-100
-50
0
50
100
Oct 04 Aug 05 Jun 06 Apr 07 Feb 08 Dec 08 Oct 09
20
70
120
170
220
Stock change Cash average
Thousands of tonnes USc/lb
0.2
0.7
1.2
1.7
2.2
0 1 2 3 4 5 6
October 09
January 96
USD/lb
Weeks consumption
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smelting capacity chasing material in the concentrate mar-
ket. Indeed, we estimate that some 466,000 tpy of non-
Chinese smelter cutbacks have been reversed since the
start of H2. This compares with mine supply that has re-
mained little changed in the West, as idled mine capacityhas been far slower to restart than smelter capacity.
The changing balance in the global zinc concentrate market
is already affecting TCs, with spot terms in China dropping
in October by around $10-20/tonne to $180-200/tonne.
They could fall further on rising demand and seasonally
lower Chinese mine output.
Short term demand outlook mixed and uncertain
US spot zinc premiums have eased slightly as consumers
many of which have not yet seen any real improvement in
orders are in no hurry to jump into the market, especially
at recently elevated LME prices. How they react to lower
prices might be a more useful gauge of underlying de-
mand. In Europe, sentiment is more upbeat. Pressure isbuilding on premiums and a rise is expected from the
$100-120/tonne range as a number of steel mills are re-
starting galvanising lines.
However, in both regions there is the threat of Chinese
HDG exports. This is dominating the galvanised steel mar-
ket, threatening price stability and raising the possibility
that mills may have to maintain/resume production disci-
pline through Q4 and Q1 2010 in order to avoid a glut.
Annual Global Supply/Demand Balance for Zinc, 2001-2011Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mine production
Total 8,933 8,904 9,520 9,709 10,146 10,444 11,129 11,680 11,120 11,350 11,680
Year-on-year % change 1.1% (0.3%) 6.9% 2.0% 4.5% 2.9% 6.6% 5.0% (4.8%) 2.1% 2.9%
Refined production
Africa 135 147 197 260 273 257 279 262 266 272 276
North America 1,294 1,438 1,431 1,496 1,401 1,377 1,394 1,404 1,240 1,310 1,360
Latin America 423 465 499 496 482 486 545 565 470 510 560
Asia (ex. China) 1,898 2,034 2,136 2,187 2,280 2,412 2,433 2,670 2,620 2,660 2,730
China 2,038 2,155 2,319 2,720 2,776 3,163 3,743 3,913 4,080 4,240 4,360
Australasia 556 567 553 474 457 466 502 499 495 502 510
Europe 2,877 2,904 2,744 2,720 2,563 2,508 2,516 2,470 2,180 2,220 2,300
Total 9,221 9,710 9,879 10,353 10,232 10,669 11,412 11,783 11,351 11,714 12,096
Year-on-year % change 2.7% 5.3% 1.7% 4.8% (1.2%) 4.3% 7.0% 3.3% (3.7%) 3.2% 3.3%
Refined consumption
North America 1,569 1,634 1,573 1,680 1,496 1,540 1,520 1,478 1,360 1,410 1,480
Latin America 367 389 378 443 414 436 457 471 442 455 474
Asia (ex. China) 2,259 2,359 2,505 2,551 2,525 2,578 2,533 2,510 2,290 2,330 2,510
China 1,500 1,750 2,155 2,690 3,041 3,225 3,597 4,014 4,280 4,622 4,992
Europe 2,817 2,754 2,780 2,833 2,684 2,786 2,850 2,628 2,280 2,320 2,450
Others 405 470 440 457 452 475 480 472 440 470 481
Total 8,917 9,356 9,831 10,654 10,612 11,040 11,437 11,573 11,092 11,607 12,387
Year-on-year % change (1.0%) 4.9% 5.1% 8.4% (0.4%) 4.0% 3.6% 1.2% (4.2%) 4.6% 6.7%
Implied surplus (deficit) 327 357 55 (269) (351) (343) (15) 210 259 108 (289)
Stocks analysis
LME 433 651 740 629 394 91 89 254
SHFE 0 0 0 0 0 0 54 63
Producer 377 315 293 280 308 332 347 356
Consumer 120 115 114 116 111 114 101 105
Merchant 16 14 12 13 15 12 11 12
Total 946 1,095 1,159 1,038 828 549 602 790 1,049 1,157 867
Stocks as weeks of consumption 5.5 6.1 6.1 5.1 4.1 2.6 2.7 3.5 4.9 5.2 3.6
LME cash prices
Historical & base case ($/tonne) $886 $779 $828 $1,048 $1,382 $3,273 $3,250 $1,873 $1,592 $2,150 $2,550Historical & base case (cents/lb) 40.2c 35.3c 37.6c 47.5c 62.7c 148.5c 147.4c 85.0c 72.2c 97.5c 115.7c
Sources: ILZSG; WBMS; LME; SHFE; Standard CIB Research
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Tin Another offensive against illegal mining in Indonesia
The rise in LME tin stocks over the past year has been phe-
nomenal, and on a year-on-year comparative basis even
exceeds the rise seen in aluminium stocks: tin has had aneight-fold increase from 3,000 tonnes last November to
26,000 tonnes currently, while aluminium has merely tri-
pled. Not all of the rise represents a surplus of production
this year over consumption we put that at around 14,000
tonnes in tins case. The rest of the increase in LME stocks
represents the relocation of producer and consumer inven-
tories on to LME warrant, and this trend has now become
clearly visible in WBMS data.
However, as the latest (and ongoing) production disruptions
in Indonesia are starting to tighten supply in Asia now, at
the same time as demand is beginning to reaccelerate. Asa result, the LME stock rise finally appears to be topping
out and we think the tin market may be moving back into
deficit.
We have maintained a bullish view on tin prices for some
time and this remains unchanged. We see the market stay-
ing in deficit for much of 2010 and recording a large annual
deficit in 2011 amid consumer restocking, recovering end-
use markets and long-term structural supply constraints.
Accordingly, our 2009 price forecast remain unchanged at
$13,560/tonne, we see an average next year of $16,825/
tonne, rising to $20,200/tonne in 2011.
Indonesian crackdown over, but problems remain
Since late-August when the police crackdown on suspected
illegal mining in Indonesia resulted in the shutdown of the
independent mining and private smelting sectors, supply
issues in the country the worlds largest tin exporter
have rarely been far from the headlines. The crackdown is
effectively over now and, as of late October, most inde-
pendent miners had returned to work. However, bad
weather is apparently hampering attempts to ramp ore pro-
duction back up again. As a result, many of those private
smelters that have restarted furnaces are experiencing ore
shortages and have so far only been able to achieve utilisa-
tion rates of 20-25% at best. With seasonal rains likely to
continue for the next few months, we would expect Indone-
sias ingot output and shipments to the global market to
remain constrained for some time.
PT Timah and PT Koba Tin have been unaffected by the
crackdown and are still aiming for production of 45,000-
48,000 tonnes and 9,000 tonnes respectively, but supply
from the private sector which accounts for around half of
the national total now looks set to finish the year below
expectations.
LME cash and 3-month tin price
Sources: LME; Standard CIB Research
Monthly change to LME tin stocks vs. cash price
Sources: LME; Standard CIB Research
Month-end LME tin stocks vs. cash price
Sources: LME; Standard CIB Research
6,000
11,000
16,000
21,000
26,000
Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09
3-month Cash
USD/tonne
-5
-3
0
3
5
Oct 04 Aug 05 Jun 06 Apr 07 Feb 08 Dec 08 Oct 09
0
300
600
900
1200
Stock change Cash average
Thousands of tonnes USc/lb
0
3
6
9
12
0 2 4 6 8 10
October 09
January 96
USD/lb
Weeks consumption
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The fundamentals have tightened
Data released by Indonesia's trade ministry for tin exports in
September showed a fall of 29.5% year-on-year and 8.2%
month-on-month, to just 7,755 tonnes. This is also the low-est monthly total since April and it clearly reflects the impact
that the police clampdown is having on Indonesian supply.
Exports in October will possibly be even weaker, and we
expect November and December data to be negatively af-
fected too.
The topping out of the LME stock rise in October is likely to
be due in large part to the slowdown in supply from Indone-
sia, and given that tin demand in the fourth quarter is fairly
robust on the back of the seasonal peak in consumer elec-
tronics and a still-healthy tinplate sector, we think the tin
market is now edging into deficit.
The backwardation is starting to narrow
A prominent and unique feature of the tin market all this year
has been the persistent backwardated structure of the for-
ward curve, despite the large and persistent gains in LMEstocks until now.
However, in recent weeks the backwardation has gradually
eased. Cash to three-months averaged $87/tonne in the first
week of November versus $500/tonne a month ago, while
cash to 15-months averaged $332/tonne compared to more
than $1,000/tonne in late September and early October.
LME data has shown that a dominant position holder has
been present in this market most of the year, but the flatten-
ing out of the forward curve suggests that it may finally be
relinquishing its grip.
Annual Global Supply/Demand Balance for Tin, 2001-2011
Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mine production
Total 248 248 255 286 342 335 350 318 305 309 321
Year-on-year % change 1.3% 0.2% 2.9% 11.9% 19.7% (2.0%) 4.5% (9.1%) (4.1%) 1.3% 3.9%
Refined production
Latin America 46 54 59 66 63 65 58 61 63 65 69
Asia (ex. China) 103 114 104 112 153 142 131 134 132 133 140
China 106 84 98 117 122 132 149 129 134 132 138
Europe 14 17 14 15 11 11 11 12 9 10 11
Others 2 2 2 3 3 3 2 2 1 1 1
Total 269 269 278 313 352 353 351 338 339 341 359
Year-on-year % change 2.1% 0.1% 3.1% 12.8% 12.6% 0.2% (0.6%) (3.7%) 0.3% 0.6% 5.3%
Refined consumption
North America 53 51 50 59 48 54 40 33 31 32 33
Latin America 12 12 14 16 10 11 9 10 10 11 12
Asia (ex. China) 75 86 90 97 102 109 100 98 85 87 96
China 62 53 72 93 116 115 134 128 136 148 162
Europe 75 69 72 69 65 71 69 66 59 61 65
Others 7 6 5 6 6 5 6 5 4 5 6
Total 283 277 303 341 347 365 358 340 325 344 374
Year-on-year % change 2.3% (2.1%) 9.3% 12.4% 1.8% 5.2% (1.9%) (5.1%) (4.4%) 5.8% 8.7%
Implied surplus (deficit) (6) 1 (16) (19) 13 (3) (2) 2 14 (2) (13)
Stocks analysis
LME 30.6 25.6 14.5 8.1 16.7 13.0 12.1 7.8
USA 7.7 7.3 6.5 6.1 5.4 5.7 9.1 7.9
Indonesia 4.3 6.7 6.7 3.8 5.3 5.2 4.6 7.2
Brazil 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6
Others 6.1 5.5 6.7 6.4 7.3 6.1 6.0 5.9
Total 52.3 48.7 38.0 28.0 38.3 33.6 35.4 32.4 46.4 44.4 31.4
Stocks as weeks of consumption 9.6 9.1 6.5 4.3 5.7 4.8 5.1 5.0 7.4 6.7 4.4
LME cash prices
Historical & base case ($/tonne) $4,483 $4,062 $4,896 $8,513 $7,370 $8,763 $14,536 $18,539 $13,560 $16,825 $20,200
Historical & base case (cents/lb) 203.3c 184.2c 222.1c 386.1c 334.3c 397.5c 659.3c 840.9c 615.1c 763.2c 916.3c
Sources: WBMS; LME; Standard CIB Research
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