Commodity reported that the metals fell sharply with Tin down the most dropping 3% on the day. The metals were by far the worst affected of the commodity sectors though in a market where sentiment has become king and perceptions of the macro outlook have taken a turn for the worst. SHFE Copper and Lead inventories both increased this week up 1.1 Kilo tonne and 2.2 Kilo tonne respectively while aluminum and zinc inventories both fell down 23.6 Kilo tonne and 235 tonnes.
Aluminum inventories have fallen by a whopping 283 Kilo tonne since the beginning of the year to the lowest since June 2009 and we believe this reflects wider trends of inventory draw downs along the supply pipeline. Even though smelter production is running at a record, high consumption has been exceptionally strong with semis production rising over 25% YoY.
This tightness in spot market conditions is further illustrated by price spreads with the SHFE flat price premium to the LME rising to USD 380 per tonne and the cash to 3 month and cash to 6 month spreads have tightened to above USD 60 per tonne. The copper supply side continues to face disruption with protests halting production at 120 Kilo tonne per year Batu Hijau copper mine in Indonesia as locals blocked access for workers after a recruitment drive went wrong with calls of inequality.
The mines owners, Newmont Mining, have stated that they expect lost production to be recouped later in the year. In positive supply news the 15 day long strike at 905,000 tonne per year Escondida has come to an end as workers have voted to accept BHP Billiton’s bonus offer and will return to work later.
The force majeure called on shipments from the mine together with a host of other supply disruptions has clearly tightened the spot market for concentrates with Chinese TC and RCs falling to USD 50 per tonne and 5¢ per lb from USD 120 per tonne and 12¢ per lb in May.
Elsewhere on the supply side there have also been cuts to Zinc mine production with Minerals and Metal Group, the Australia subsidiary of Minmetals, reducing its annual zinc production guidance due to a sharper than expected decline in ore head grades at Golden Grove and Rosebery mines which contributed to a 12.6% YoY drop in the company’s output in the year to June. Output guidance at Golden Grove has been reduced to 70 kilo tonne per year to 77 kilo tonne per year from 83 kilo tonne per year to 87 kilo tonne per year while guidance at Rosebury has been reduced to 77 kilo tonne per year to 82 kilo tonne per year from 80 kilo tonne per year to 83 kilo tonne per year.
( Source: www.steelguru.com )