Bulletins

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2011-August

MARKET COMMENTARY


There is often a pick-up in physical demand around September, as metal consumers return to the market after the slower summer period. The deep sell-off in early August has actually brought many consumers back earlier and with greater appetite than usual to take advantage of the lower prices, which in some cases are 20-30% below the late-July levels.

In August, the copper price traded in the wide range between $8,446-$9,905 a metric ton and its monthly average went down 6.0 percent to $9,041.

Today three-month copper on the London Metal Exchange traded up at $8,725 in official rings, compared with $8,635 a tonne at the close on 14th of Sep when it fell to its lowest in more than a month at $8,590. Copper has now dropped by 15 percent from record highs of $10,190 a tonne hit in February, with calls for it to revisit records this year receding, given an increasingly uncertain economic climate.

"The (metals) market is very much driven by the bigger uncertainties in the macro environment," analyst Stefan Graber of Credit Suisse Private Banking said. Helped by signs that euro zone leaders are committed to keeping Greece afloat for now, lending a calmer tone to metals. But high costs for European banks to obtain dollar funding may yet lead them to cut credit lines, forcing institutional investors to scale back exposure to risky or cyclical assets, he said.

French and German leaders urged Greece's prime minister in a conference call late on 14th of Sep to meet the terms of its new bailout and said they were determined to keep the country in the euro zone. Suggesting metals may see further selling, the euro has been under pressure as market players, spooked by fears that a possible debt default in the euro bloc could unleash a major financial crisis, remain ready to sell the currency and risk assets into any rally. A stronger dollar provides headwinds for commodities because they become more expensive for holders of other currencies.

Copper supply remains tight and eroding at the edges due to declining ore grades, long lead times before new projects are ramped up and increasing incidences of industrial action as workers seek higher rewards from the copper price bonanza. Production and shipments ground to a halt at Freeport McMoran's Grasberg copper mine in Indonesia after thousands of workers began a month-long strike on 15th of Sep, stoking fears of a global shortage following similar action at a major Peruvian mine. Activity at Grasberg, the world's third-biggest copper mine which also has the world's largest gold reserves, has been paralysed while concentrate shipments have been halted.

"Supply disruptions are likely to increase tightness in a market facing significant shortages in the coming year or more," ANZ bank said in a note. "Some commentators are looking for a slide towards $7,000 in the near term before recovering. We think such a dramatic downside move is unlikely. "Appetite from merchants and Chinese consumers is likely to limit the downside to around $8,300-$8,400 and as the market begins to feel the impact of these disruptions, prices should move higher again."


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2011-July

MARKET COMMENTARY

In July, the copper price traded in the wide range between $9,350-$9,900 a metric ton and monthly average went up 6.5 percent to $9,619. After the decleration of US debit limit increasing, all metals started to go down except precious metals. Copper decreased from $9,700 to $8,446 deep level of the year.

LME copper steadied today, after dropping more than 2 percent in the previous session as lingering worries about euro zone debts and lacklustre U.S. data continued to weigh on sentiment. Three-month copper on the London Metal Exchange CMCU3 edged up 0.4 percent to $8,805 a tonne, after falling as low as $8,700, the lowest since Aug. 11.

"The LME copper market seems to be taking a pause to digest yesterday's global rout," said Jinrui Futures analyst Zhao Kai. "I think if ShFE copper doesn't fall below 65,500 yuan in the near term, there may be some upside soon," he added.
European stocks are slated for another fall on Friday after Asian stocks slumped on growing fears the U.S. economy was sliding into recession and as some European lenders faced short-term funding strains, raising fears of a systemic banking crisis on the continent. “Copper is still range-bound today, with support seen at $8,500 on the LME. Copper did not fall by that much overnight despite a rout in stocks, which shows that there is a bit of disconnect between base metals and equities now,” CIFCO Futures analyst Zhou Jie. “But when the macroeconomic environment is bearish, copper will move towards its support, and when things calm down, it’ll move towards its resistance level of $9,000 again.”

Gold jumped to a record high and oil fell on Friday on mounting worries the U.S. economy may slip into recession and as Europe's debt crisis pressured short-term funding markets, pushing investors out of riskier assets. Data on Thursday showing factory activity in the U.S. Mid-Atlantic region fell to the lowest level since March 2009 when the world's top economy was in recession fanned fears the U.S. economy could shrink again, pummeling global equities and boosting the appeal of safe-haven assets like gold. Adding to the global uncertainty, some European banks have started paying higher rates for U.S. dollar loans, raising fears the euro zone debt crisis could infect the financial system.


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2011-June

MARKET COMMENTARY

In June, the copper price was steady in the tight range between $8,900-$9,200 a metric ton until acceptance of Greece austerity plan. After the decleration of this plan, the metal prices started to increase to the highest levels of June and the copper month average went up 0,1 percent to $9,045.

In July copper dropped for a third day in London on concern that Greece’s debt crisis may spread and as the Chinese government intensified property curbs, possibly reducing demand in the largest consumer of the metal. The metal for three-month delivery fell as much as 0.9 percent to $9,480 a metric ton on the London Metal Exchange and traded at $9,520. Copper for September delivery on the Shanghai Futures Exchange closed 0.5 percent lower at 71,130 yuan ($10,989) a ton.

“Worries over the European debt crisis linger, especially whether it will spread further, which is weighing on the markets,” said Wang Ning, an analyst at Xiangyu Futures Co. European finance ministers revived the prospect of bond buybacks to ease Greece’s plight, struggling to contain the debt crisis as investors pounded Italy, the continent’s third-largest economy. Prodded by investors and the European Central Bank, the euro’s guardians said a bailout fund set up last year may be used to buy bonds in the secondary market or enable Greece to retire its debt at a discount. They offered another cut in rates on its emergency loans.

In China, Shanghai Mayor Han Zheng said the city will start a trial to cap prices of newly built residential properties in planned urban areas in Pudong New District in the second half of this year, the Xinhua News Agency reported. “If the property market feels further pressure from the government, it is not good for base metals demand,” Wang said. China’s Shanghai Composite Index, which tracks the bigger of the country’s stock exchanges, closed 1.7 percent lower at 2,754.58. The Dollar Index, which tracks the currency against six trading partners, climbed as much as 0.8 percent.

In Chile, contract workers at Escondida mine ended a strike yesterday after reaching a collective labor agreement, union umbrella group Federacion Minera said. Workers at Codelco, the world’s largest producer, held the first companywide strike yesterday in 18 years to protest planned job cuts as management revamps century-old mines in northern Chile. Mining Minister Laurence Golvorne said the government expected the strike to end as planned and production will resume from today. In Indonesia, Freeport-McMoRan Copper & Gold Inc. said it reached an agreement with a union to end a strike at its Grasberg mine that began July 4 and caused the suspension of copper mining and processing. The workers will report to their positions tomorrow, Eric Kinneberg, a spokesman for Freeport, said yesterday.



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2011-May

MARKET COMMENTARY

After decreased to $ 8,503 a tonne in May, copper trimmed its losses during the month and finished above $ 9,000 a tonne, helped by expectations of higher demand from top consumer China, outweighing U.S. jobless claims data that signalled further slowing in the U.S. economy. Today benchmark copper on the London Metal Exchange was $9,024 a tonne at 1603 GMT, from $9,045 a tonne at the close of yesterday. The monthly average also went down 5.9% to $ 8,927.

The metal used in power and construction was also supported by news that nearly half of the contractors in a strike that halved output at the world's No. 5 copper mine, El Teniente in Chile had ended the stoppage. The metal fell to a session low of $8,932 after data showed jobless claims rose unexpectedly last week, and the European Central Bank's Jean-Claude Trichet signalled an interest rate rise is probably only a month away. "The jobs data was a little worse than expected, but I don't think that's a major surprise, we are definitely slowing down and we are going to start seeing poorer numbers over the next few weeks," MF Global analyst Edward Meir said.

"The other shoe will drop tomorrow when we get the Chinese numbers." China, which accounts for about 40 percent of global copper consumption, releases trade data on Friday. Its refined copper imports have slumped this year, but some market participants think underlying demand is still intact. "Base metal prices and especially copper will be supported by Chinese import data, which should be better given the sharp destocking over the last couple of weeks in Shanghai," said Daniel Briesemann, analyst at Commerzbank.

Behind predictions of higher imports are copper stocks in Shanghai bonded warehouses, which are said to have fallen by about 200,000 tonnes from April to between 350,000 and 500,000 tonnes now. "It looks like China is going to need more copper very soon, those stocks will need to be replenished," a LME trader said.


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2011-April

MARKET COMMENTARY


Copper dropped almost 3 percent in April after losing 4.2 percent in March. “China is slowing down,” said Phil Streible, a senior strategist at broker Lind-Waldock in Chicago. “There’s very little demand at the moment. Copper will be drifting lower slowly.”
  
At the beginning of April, copper was focused on inflation news from China. Copper fell in the market, capping the second straight monthly drop in April, on mounting concern that demand will slow in China, the world’s largest metals user. China’s central bank has raised lenders’ reserve requirements 10 times since the start of 2010 and boosted interest rates four times since October to rein in accelerating consumer prices and slow growth. Also, Chinese imports and exports data released on 10th April. “Chinese data looks much stronger than expected,” said Bart Melek, an analyst at TD Securities in Toronto. “There is now a concern that good economic data is actually bad, as it will embolden China’s government to raise interest rates much higher.”  While China’s overseas trade increased overall, imports of copper and copper products by the world’s biggest metals user fell 33 percent from a year earlier, customs data showed.
 
At the end of April, the commodities rout that knocked off $99 billion of market value last week is driving out speculators and leading Goldman Sachs Group Inc., which forecast the plunge, to predict a possible recovery. Commodities advanced, rebounding from the worst weekly plunge since December 2008, on signs that an improving U.S. economy may boost raw-material demand and on speculation that last week’s selloff was excessive.

Copper prices rebounded on 09th May, helped by a weaker dollar and as investors said last week's commodity selloff was overdone, especially in light of positive U.S. jobs data. Copper for delivery in three months on the London Metal Exchange rose 1.1 percent to $8,920 per tonne by, after touching $8,657.50 in the previous session, it’s lowest since Dec. 3.
 
The metal “seems to have reacted very positively to the payrolls data,” said Gayle Berry, an analyst at Barclays Capital in London. “When you tend to see these big sentiment- driven moves, they can reverse just as quickly as they happen.” Prices have slumped amid concern that higher interest rates will slow growth and cool metals demand in India and China, the world’s biggest consumer. “Much of the play in metals is a bet on China,” Edward Meir, a senior analyst at MF Global Holdings Ltd. in Darien, Connecticut, said today in a report. “With the government there tightening the screws in order to get control of inflation, there are legitimate concerns as to whether the authorities will press too hard.”
 
Now, looking ahead into May, Chinese economic data due out over the next two days will also be vital, particularly in terms of trying to gauge the effectiveness of the Chinese tightening measures. The Chinese Import-Export figures and Trade Balance for April, while the morning of the 11th April, sees the release of the CPI, PPI, Retail Sales, IP and FIA numbers. As far as market response is concerned, a combination of high inflation and lower than expected growth looks like being the worst option and would likely trigger further weakness as the government is forced to tighten further at the expense of economic output.



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2011-March

MARKET COMMENTARY

Copper market started to March with Chinese export and import data. London copper fell half percent after data from China  showed a rise in input prices in February and a drop in growth in manufacturing to a seven-month low on March 01. London copper was steady, as oil prices near 2-1/2 year peaks fanned fears of slower global economic growth and technical analysis suggested a period of consolidation between $9,780 and $9,942 at the beginning of month. Traders said high oil prices were keeping a lid on demand and prices below the record high of a couple of weeks ago in the short term. However, expectations of a supply deficit of half a million tonnes or more meant the bull-run was far from over. Oil rose the last day of first week in March as investors eyed growing instability in key Middle East oil producing countries, which could signal another threat to global supplies, after Libya's Muammar Gadaffi ordered airstrikes near Libyan oil facilities.  
 
The Middle East unrest is unlikely to derail copper's rally this year, but it is certainly putting pressure on prices now," said Guo Yong, an analyst at Jinrui Futures.  Also, he added about metals "Copper fundamentals remain positive, supported by upbeat data out of the United States and Europe. Consumption in China is also pretty good, even though spot prices are still in discount and exchange stocks increased." 
 
The Eastern Japan earthquake which hit northeastern Japan on March 11 is expected to strongly depress economic activities in the near term by way of outage at production facilities in devastated areas, limited power supply due to shutdown in nuclear power plants and parts-supply shortages in areas not directly affected. However, reconstruction demand stemming from earthquake/tsunami damage is likely to bolster the economy especially the metal market in the longer term as reconstruction of housing and infrastructure begins. When the details of earthquake/tsunami released by Japanese government, copper fell to a three-month low on March 15, following blasts at a quake-stricken nuclear plant in Japan which hit market sentiment and prompted liquidation of investments perceived as risky. After the big lost in the metal market, copper climbed for the first time in six days on expectation that reconstruction needs after Japan’s largest quake on record will boost demand in three to six months on March 16.
 
Most commodities are set to post gains for the first quarter of 2011 as political unrest in Africa and the Middle East sent prices soaring on worries about supply disruption and inflation.  However, the earthquake in Japan and resulting tsunami and nuclear crisis caused a sell-off that took many markets down from recent highs.
 
When the markets start to April, base metals fell on the first day in London, down 0.5 percent on average, led by copper's 0.7 percent slide in light trade during a two-day market holiday in China. Copper investors ignored positive U.S. jobs data released on April 01, which cheered equity and energy markets, with a second straight strong monthly read, suggesting a shift in the struggling labour market. The markets will closely follow details on the geopolitical uncertainties in the Middle East and North Africa and also recovery in Japan will be the most significant subject in April for the investors. 



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2011-February

MARKET COMMENTARY

At the beginning of February, London copper edged higher trading around $10,000 a tonne, but an earlier attempt to set a new high was thwarted, and the risk of retracement grew with bullish investors increasingly frustrated by the market's inability to press on. Copper has surrendered more than 3 percent of its value from the highs, as investors began to question whether the sky-high futures price was justified, given the sluggish state of physical market demand.  "There is significant scale-up selling interest each time prices get through $10,000. The market is overheated and there is little appetite in Asia at least to press ahead," said a trader in Hong Kong. 
 
Copper stumbled to three-week lows on February 17, as inflation worries and the demand-stifling effect of prices near record highs kept sentiment in check. Three-month copper on the London Metal Exchange traded at $9,745 a tonne from $9,843 a tonne. It fell to $9,705, its lowest since Jan. 31. "We have seen record highs, but you can clearly see that demand is cooling down a little on the current high prices. This is not just limited to copper but also for the others base metals as well," Commerzbank analyst Daniel Briesemann said.He also cited profit-taking for falling prices.
 
Three-month copper on the London Metal Exchange raised $90.75 to $9,515.75 a tonne on Feb. 24, after having touched $9,365, a near one-month low, in the previous session.  "Metals have decoupled from energy in recent days and the market is obviously worried about the inflationary impact of oil prices," said Edward Meir, analyst at MF Global in New York. "Energy prices are going higher with daily news of falling exports from Libya, but something has to give - either Gaddafi will be overthrown, which seems likely or the Saudis will pump more oil. Either way we should see a dip in oil and rallies in metals." U.S. crude oil futures raised more than $1 on Thursday 24, on mounting fears that unrest in Libya could spread to other oil producers in the Middle East and North Africa, while Brent touched a 2-1/2 year high of $113 a barrel.  The turmoil in Libya continued, as thousands of Libyans celebrated the liberation of the east of the country from the rule of Muammar Gaddafi, who has vowed to crush the revolt.  
 
Three-month copper on the London Metal Exchange traded at $9,908.50 a tonne on March 03.On the week, LME copper has 1.5 percent, on track for its first gains since the start of February. “Metals are moving again on oil. The gains in crude are a worry when it comes to growth, but to be honest, no one is taking on any big positions ahead of the jobs numbers," a trader in Singapore said.   "We've been burned too many times. The forecasts point to big numbers but the reports have had a tendency to disappoint. Maybe this time the surprise will be on the upside, but I am not betting on it." 
 
The big jump in the euro was potentially highly supportive for base metals, but there are concerns an interest rate rise, combined with higher oil prices, may be too much for consumers to bear and slow the economic recovery.  Market focus remains on the geopolitical uncertainties in the Middle East and North Africa in March. 


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2011-January

MARKET COMMENTARY

The copper price went from strength to strength in 2010, closing the year at $9,600. Supply disruptions in Latin America and the commencement of physically-backed copper ETFs were the main driving factors of the price gains as the year closed, though profit-taking has predominated in the first week or so of trading in 2011. After reached the record prices for all metals, a sudden drop in commodity prices prompted investors to take profits on Asian stocks while the U.S. dollar held firm ahead of job data due later in the first week of 2011, though the bull market in raw materials was seen as far from over.

When we came to the second week of January, copper opened the week on the downside the rebounded to level off at 9,620 $/ton. Key factors driving prices included European Debts Crisis and Chinese demand. All investors, traders, and analysts were focused on debt auction in Spain, Italy, and Portugal. Chinese foreign trade figures for December showed that copper import shrank 0, 8 percent in 2010.

London copper futures rallied to a record at $10,000 a tonne on 3rd of February, buoyed by bullish chart patterns and positive fundamentals stemming from optimism about China and the United States, which will push demand well above supply.

"Copper is very reluctant to test the waters above $10,000. Every time we get near, we recoil. We need something to kick us up a gear. That for now looks like it may have to come from the dollar, or U.S. data," a trader in Sydney said. On the other hand, the dollar rose versus the euro at $1.3798, trading short of a 2-1/2 month high.

Unrest in Egypt, after pro-government supporters clashed with protesters with deadly results, could help lift the greenback's safe-haven appeal, and cap the upside for many commodities. Trade was thin with many Asian markets closed for holidays some 560 lots of copper done, a quarter of the usual for the time of day, while winter weather in the United States may deplete the ranks of traders later in the day.

Underlying fundamentals for copper are positive, with analysts looking at a supply deficit of 800,000 tonnes, twice the amount of copper currently held in LME warehouses. But investors are concerned that copper's rally up 66 percent since June last year, has run ahead of itself. "Copper will be in short supply later this year and into 2012. The big deficits analysts expect will put pressure on stockpiles, but right now the market is pretty easy. Spreads are not particularly tight and copper is available at pretty low premiums," the trader said.

Mining companies have failed to keep pace with demand because new reserves are harder to find and metal from ore is declining. Copper supplies may lag behind demand by 822,000 tons this year, more than double last year’s deficit, according to Barclays Capital. With concerns about supply deficit in the market, Goldman Sachs Group Inc. predicted in October that copper would trade at $11,000 a ton in a year, while Standard Chartered Plc forecast in August that the metal may rise to $12,000 in the next two years.

Now, looking ahead into February, the price direction of copper will likely hinge on China’s demand after the Lunar New Year. According to some researchers, traders and hedgers, copper most likely will see upside action in February. At this time, there are strong resistance at $10,050 and support at $9,780.
 


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2010 - December

MARKET COMMENTARY


At the beginning of December, driving the market was a step in the right direction by the ECB, generally encouraging economic data and a slightly stronger EUR/USD. Base metals raised across the board on 2nd of December, especially copper were gained strongly. Last days of November, the most important subject (speculation) was reported by Wall Street Journal. According to news on Wall Street Journal, speculation abounds about the identity of the participant who controls 80-90% of the cash warrants on the LME at present.

Copper prices rose during the second week of December supported by Chinese buying and a firmer euro, discounting potential Chinese policy tightening and the end of a strike at a big Chilean copper mine. Moreover, on 7th of December copper broke through the psychological $9,000 mark and reached an all time high at $9,044.

The most significant data released by the General Administration of Customs of China on 12th of December. Monthly copper imports unexpectedly rose almost 30 percent in November, rebounding after a sharp fall in October and setting the stage for solid inflows in December too. Despite a significant amount of negative news about European zone debt crisis and the USA economy, copper got support from Chinese data, and hit its new record price at $9.211 a tone on 13th of December. Goldman Sachs added metals prices will diverge to follow their own fundamentals during 2011 as emerging market economies drive ahead and demand recovers in developed countries, pushing copper above $11,000.

As did copper in the market, Crude oil hit the record price in December, 2010. Oil steadied above $91 a barrel on 29th of December ahead of U.S. inventory data expected to show a drawdown in crude and distillate stocks due to severe weather in the world's largest oil user. Bullish money managers have stormed into the oil market, setting a fresh record high for net long crude positions on the New York Mercantile Exchange. When we evaluate the global markets, as everyone knows gold is the biggest winner. Gold gained 28 percent in 2010, and gold at $1,421.40 an ounce rose to record settlement price on 31th of December. London copper increased almost 8 percent in December, 2010 at $9.147 a tonne, when compared to LME average of November 2010. Also, LME (London Metal Exchange) copper futures gained 31 percent in 2010. Copper stocks in LME approved warehouses increased by 19.800 mt or %5, 6 during to course of December.

Now, looking ahead into 2011, the price direction of copper will likely hinge on supply, and mostly China demand, but it also depends on a couple of new market factors emerged just within the last year or so. According to some researchers, traders and hedgers, copper most likely will see a correction in the first quarter with some profit taking after the New Year, followed by some buying on the dip. Then, there would be a pullback in summer followed by a run-up towards the end of 2011.
The current level of resistance is $9,560 and support is $9,150. We are on the lookout for consumer price and industrial production index on 14th of January and other data for 2010.
 


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2010 - November

MARKET COMMENTARY

Base metals rose on Thursday, 2nd of Dec, with copper hitting a three-week high, on supportive economic data, supply fears and a weaker dollar. Three-month copper increased almost 2.1 percent in November 2010 at $8,469.89 when compared to LME average of October 2010, on the London Metal Exchange rose to $8,700 a tonne from $8,585 on Wednesday. The metal used in power and construction earlier hit a peak of $8,725, its highest since Nov.12 and about $250 shy of the record $8,966 touched last month.

"Today's moves are on the back of firm global equity markets, the good economic data we have seen from China and the United States and the weaker dollar," Commerzbank analyst Daniel Briesemann said. U.S. private sector payrolls rose by the most in three years in November, and its manufacturing sector showed growth was intact, adding to a slew of strong manufacturing data from China, India and European economies. The payrolls report lifted investor optimism about the U.S. job market ahead of Friday's government employment report. Worries about nearby copper supplies have pushed the premium for cash material over the three-month contract to around $60 a tonne -- its widest backwardation since October 2008.

A looming deficit in the copper market is expected to push copper prices next year above the record high. Bolstering this outlook, LME copper stocks have fallen steadily since February, last down 2,425 tonnes to 352,425 tonnes -- their lowest since October 2009. "Supply problems will play a major role not only in the short term but in the mid-term as well," Briesemann said. Investors were waiting to see if the European Central Bank will take more measures to calm euro zone debt concerns, when it announces the outcome of its policy meeting. The ECB is under pressure to help the euro zone contain a market retreat from one country after another. Hopes that it will rush through new anti-crisis measures, such as expanding its government bond buying, stabilised the euro and lifted stock markets.

In Chile, union leaders and management at the Collahuasi copper mine prepared to reach an agreement to end the longest strike at a major private Chilean copper mine. "Given the proximity to year-end and ongoing development of Exchange Traded funds, the sector and particularly copper will remain sensitive to supply disruptions and signs of a possible squeeze," Basemetals.com said in a note. Talk that physically backed exchange-traded products in industrial metals are imminent has dominated base metals markets, generating speculation about their effect on prices and demand.
 


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