Summary for the Week ending 07 March 2014

Commodities

  • China has seen its first on-shore default, raising concerns about demand growth prospects for copper and aluminium (and other metals).  Some operating smelters and refineries are seeking support from their parent companies, to fend off financial distress.  About 2 Mtpa of aluminium smelting capacity is expected to be closed in China.
  • Zinc is starting to respond to the expectations of reduced output over the next few years.  However a story of stockpiles (held by Glencore) has yet to unfold.
  • New Nickel production is planned from two new Canadian mines by Vale, at Totten and Copper Cliff Deep.
  • Indonesia is playing a risky game trying to effect a floor price under tin.  Price floors for tin have been tried before, spectacularly unsuccessfully in 1985.
  • Australia has seen the opening of the first large new gold mine for quite some time (Tropicana).
  • Last week producers agreed to develop a platinum refinery in Zimbabwe.  This week one of the reasons for going there flared again … labour strife in South Africa.
  • Meetings to negotiate (quarterly) met-coal contract prices and JFY (annual) thermal coal prices are under way.  The Chinese suggest that a near term floor in coal pricing is approaching for thermal coal.
  • Off-the-Radar production of iron ore from companies other than the big three producers, is being encouraged by China.
  • Demand for Cape-size bulk shipping is increasing again, driven by iron ore shipments.

Economic updates

  • USA Construction Spending, Industrial Production & PMI data for is encouraging.
  • German Industrial Production and Orders to Durable Goods are at the highest levels since the 2008-09 financial crisis.
  • Japan’s Industrial Production recorded good growth and is also at the highest levels since the 2008-09 financial crisis.
  • Parts of the developed world are recovering to pre-crash levels.