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ANZ Commodity Daily 705 140912

ANZ Commodity Daily 705 140912

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09/14/2012

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ANZ RESEARCH
COMMODITY DAILY
 
Contacts: Mark Pervan +613 9273 3716 | mark.pervan@anz.com Nick Trevethan +65 6681 6714 | nicholas.trevethan@anz.comNatalie Robertson +613 9273 3415 | natalie.robertson@anz.com David Xu | david.xu@anz.com
MARKET HIGHLIGHTS COMMODITY WRAP
September 14, 2012
 
!
 
Crude up on US stimulus and more geopolitical risk
!
 
Gold rises, hits our target flagged on Thursday
!
 
Metals react strongly in early morning trade
!
 
Newc lower, iron ore slips
KEY THEMES
 
!
 
Overnight themes
– Risk assets rose again after the FOMCannounced a new Large Scale Asset Program (LSAP, akaQE3). The Fed will purchase agency mortgage-backedsecurities (MBS) at a pace of USD40bn per month for anopen-ended period. Combined with the continuation of  ‘Operation Twist’, this will increase the FOMC’s holdings of longer-term securities by USD85bn per month through to theend of December 2012. Bernanke committed to continuingpurchases of MBS and may “undertake additional purchasesand employ other policy tools” until a substantialimprovement in US unemployment rates is achieved, within astable price environment. The FOMC also extended its long-term guidance regarding the period for which the policy ratewill be left unchanged, to “at least through mid 2015” ratherthan late 2014. Unsurprisingly, US equities finished higher,with the S&P 500 reaching its highest since 2007, while goldand oil also rallied strongly, as the US dollar fell.
 OVERNIGHT RANKED PRICE MOVES (%)
 
0.91.61.72.22.24.31.30.90.60.3(2.1)(2.0)(0.8)(0.6)(0.3)(4.0) (2.0) 0.0 2.0 4.0 6.0TinIron oreCoal (NEWC)USD (DXY)CopperBaltic FreightNickelZincAluminiumWTI OilS&P 500LeadGoldPlatinumSilver
Note: Coal (NEWC) refers to front month futuresSources: Bloomberg, ANZ Commodity Strategy
!
 
Crude benchmarks rose
, with US WTI hitting USD98.58/bbl,a four-month high. The expiring Brent front month contractalso gained, to hit a five-month high of USD117.48/bbl. Brenthas rallied over 30% since hitting an 18-month low of USD88.49/bbl in June, against the 25% gains in US crude inthe same period. The US stimulus announcement was a keydriver for the higher prices overnight, but spreadinggeopolitical tension across the Middle East was alsosupportive. Demonstrators attacked US embassies in Yemenand Egypt in protest over a US film considered blasphemousto Islam and American warships headed to Libya after thedeath of its ambassador there. Protests have also erupted inBasra and Baghdad in Iraq, threatening US interests andmarket concerns are that tensions and risks to oil supplycould escalate further before the US elections in November.
 
!
 
Gold rose to USD1,772.29/oz early Friday
fromUSD1,732.08 this time yesterday. The Fed’s MBS buyingprogramme lifted prices to the USD1,768.00 target wehighlighted on Thursday and we think the strongerperformance could extend into Friday. Our next upside level isUSD1,783.00 and above that, USD1,800.00. There is risk of some profit taking after the 11% surge to a new six monthhigh since mid August, but the downside appears limited toUSD1,725. Silver rose 5% to USD34.89/oz in the past 24hours. On charts, silver’s trajectory looks very powerful andcould target the late February high at USD37.46. But thesteepness of the uptrend is worrying. If the gains falter, wecould see prices slip to USD33.00, the 61.8 Fibonacciretracement level of the move from the February highs to thelows in June.
 
!
 
Base metals rose 3.4%
on average early on Fridayfollowing the US stimulus plans. Copper rose USD275 toUSD8,350/t. Copper has pierced resistance at USD8,170,which could form the base of a new trading range thatextends to USD8,450. Our strategy remains to sell intostrength. Aluminium continued its gains, rising 1% on Fridayto USD2,124/t. The market is yet to convincingly breakthrough resistance we peg at USD2,120, but the chances of that are looking increasingly probable and could open achannel to USD2,200.
 
!
 
Newcastle September coal futures slipped 0.8% toUSD90.0/t
. Korea East West Power (EWP) has issued a spottender for 130kt thermal coal, along with two 5-year termtenders for 260kt each. In Indonesia, buying activity isexpected to pick up following the conclusion of several Indianutility tenders as they prepare for the end of Monsoon season.Spot iron ore fell 2% to USD96.1/t. There are further reportsthat Chinese steel producers have begun reducing prices.Steel billets prices in the key region of Tangshan are said tohave been cut by RMB160/t to RMB2,800/t.
 
 
 
COMMODITY DATA
Close1 Day1 Wk1 Mth3 MthClose1 Day1 Wk1 Mth3 Mth
LME BASE METALS
(US$/t)
LME BASE METALS
(kt)
Aluminium 2101 0.9 6.9 16.5 10.9 Aluminium 4,971 2.4 2.2 1.6 2.6Copper 8059(0.3)4.8 8.3 7.5 Copper 216 0.3 1.5(8.0) (13.3) Nickel 16704 0.6 4.4 8.0(0.5)Nickel 121 0.1(0.2)5.1 16.7 Zinc 2005 0.9 6.2 13.8 4.7 Zinc 927(0.3) (1.9) (5.5) (2.3)Lead 2147 1.7 5.2 17.5 12.3 Lead 296(0.9) (2.9) (7.8) (14.2)Tin 20380(2.1)3.3 12.6 3.3 Tin 12 0.2 0.3 0.4(4.0)
PRECIOUS METALS
(US$/oz)
Close1 Day1 Wk1 Mth3 Mth
Gold 1,769 2.2 4.1 9.5 8.7Gold (A$/oz) 1,690 2.1 2.3 10.0 4.6 S&P 500 1,460 1.6 1.9 3.1 8.7Silver 35 4.3 6.2 22.9 20.9 VIX Volatility Index 14(11.1) (9.9) (1.7) (33.4)Platinum 1,684 2.2 6.4 16.8 13.5 CRB Index 317 0.6 2.8 5.0 16.6Palladium 689 1.6 6.6 18.0 9.9 LME Metals Index 3,460 0.2 5.2 10.4 7.1
ENERGY
(US$/bbl)
Close1 Day1 Wk1 Mth3 Mth
WTI Oil* 98.31 1.3 2.9 2.8 17.0Brent Oil* 116.90 0.8 3.0 0.0 19.8 Baltic Freight Rate 663 0.3(1.8) (7.9) (28.2)Sing Gasoil 0.5% 132(0.1)0.0 0.3 18.5 Baltic Capesize 1,198 1.0 1.0 8.4 4.4Sing Fuel Oil
180cst
 
(US$/t)
697(0.3)0.3 1.8 12.7 Baltic Panamax 527(3.3) (14.6) (34.2) (50.5)
OTHER 
(US$/t)
Baltic Handysize 475 0.8 3.9(5.4) (27.3)China HR Coil (RmB/t) 3,406(0.4)4.4(5.9) (18.3)
Close1 Day1 Wk1 Mth3 Mth
Richards Bay Coal API4 86(0.6) (3.8) (4.7)3.9Newcastle Coal* 90.0(0.8) (1.3) (1.9)5.9 DXY - USD Index 79.3(0.6) (2.2) (3.8) (2.9) Australia Coking Coal** 153 (5.4) (13.5) (30.5)AUD/USD - Aussie 1.0 0.1 1.7(0.4)3.9 Iron Ore Spot 96.1(2.0)10.5(14.1) (28.8)NZD/USD - Kiwi 0.8 0.7 2.9 1.8 4.8
CommoditiesInventories% Change% Change% ChangeCurrencies% ChangeKey Indices% ChangeFreight
 
8090100110120130Sep Nov Jan Mar May Jul
NEWCASTLE COAL
US$/t
1,5001,5501,6001,6501,7001,7501,8001,8501,900Sep Nov Jan Mar May Jul
GOLD
US$/oz
707580859095100105110Sep Nov Jan Mar May Jul
WTI OIL
US$/bbl
0.940.971.001.031.061.09Sep Nov Jan Mar May Jul
AUD
A$14,00016,00018,00020,00022,000Sep Nov Jan Mar May Jul
NICKEL
US$/t6,5007,0007,5008,0008,5009,000Sep Nov Jan Mar May Jul
COPPER 
US$/t1,7001,9002,1002,3002,500Sep Nov Jan Mar May Jul
ALUMINIUM
US$/t
1,7001,8001,9002,0002,1002,2002,300Sep Nov Jan Mar May Jul
ZINC
US$/tUS$/t
25.030.035.040.045.0Sep Nov Jan Mar May Jul
SILVER 
US$/oz
 
Notes: *Front-month futures **Weekly prices ***US on holidays, 1 day prices unchangedSources: Bloomberg, McCloskey, ANZ Commodity Strategy
 
 
ANZ FORECASTS
ANZ Forecast Table
1
 
COMMODITY
UnitJun-12Sep-12Dec-12Mar-13Jun-13Sep-13Dec-13Mar-14Jun-14Sep-14Dec-14BASE METALS
Aluminium US$/lb 0.90 0.86 0.89 0.94 0.99 1.02 1.03 1.02 1.01 0.99 0.99Copper US$/lb 3.57 3.81 3.65 3.85 4.05 4.05 3.85 3.68 3.63 3.50 3.30Nickel US$/lb 7.78 7.76 8.18 8.63 9.13 9.58 9.70 9.63 9.55 9.40 9.23Zinc US$/lb 0.88 0.86 0.87 0.92 0.98 1.02 1.04 1.06 1.07 1.09 1.11Lead US$/lb 0.90 0.85 0.93 1.01 1.05 1.06 1.07 1.08 1.09 1.10 1.12Tin US$/lb 9.34 8.26 8.25 8.80 9.30 9.55 9.55 9.45 9.38 9.33 9.25
PRECIOUS METALS
Gold US$/oz 1,612 1,639 1,700 1,750 1,800 1,810 1,770 1,710 1,670 1,650 1,635Platinum US$/oz 1,501 1,474 1,525 1,585 1,655 1,705 1,720 1,710 1,695 1,685 1,673Palladium US$/oz 629 606 665 720 765 810 828 823 817 808 793Silver US$/oz 29.5 28.2 30.0 32.0 33.8 34.8 35.2 35.2 34.5 33.3 31.9
ENERGY
WTI NYMEX US$/bbl 93.4 89.0 95.5 101.0 107.0 110.5 110.5 110.0 109.5 108.5 107.0Dated Brent US$/bbl 109.0 102.0 109.0 113.0 116.5 118.0 117.0 115.5 114.5 113.0 111.0Uranium US$/lb 50.9 52.4 55.0 56.0 57.0 59.0 61.5 64.0 66.5 69.0 72.5
BULKS
Iron ore Spot (CIF China, fines) US$/t 140.8 131.0 131.5 137.5 144.0 149.0 147.5 142.5 140.0 139.0 136.5Iron ore Contract (FOB Aust, fines) US$/t 132.1 125.0 120.0 126.0 133.0 139.0 137.5 132.5 130.0 129.0 126.5Coking coal - Premium hard US$/t 210.0 225.0 200.0 210.0 220.0 225.0 220.0 215.0 205.0 205.0 200.0Coking coal - Hard US$/t 205.0 220.0 190.0 200.0 205.0 210.0 205.0 195.0 185.0 185.0 180.0Coking coal - Semi-soft US$/t 147.0 150.0 135.0 150.0 165.0 175.0 170.0 175.0 165.0 165.0 160.0Newc Thermal Coal (Spot) US$/t 96.2 85.6 87.0 92.5 98.5 103.0 105.0 106.5 108.5 110.5 112.0Newc Thermal Coal (JPY Contract) US$/t 115.0 115.0 115.0 115.0 105.0 105.0 105.0 105.0 110.0 110.0 110.0
OTHER METALS
Alumina US$/t 248 237 245 258 271 281 282 280 277 273 271Molybdenum US$/lb 13.5 13.5 14.2 14.6 14.9 15.3 15.8 16.3 16.5 16.3 16.0Cobalt US$/lb 14.0 14.1 15.1 15.8 16.5 17.0 17.3 17.5 17.3 16.8 16.5
EXCHANGE RATES
AUD/USD US$ 1.01 1.00 1.00 1.02 1.06 1.07 1.07 1.07 1.06 1.07 1.05NZD/USD US$ 0.79 0.79 0.79 0.81 0.84 0.85 0.85 0.85 0.85 0.85 0.84EUR/USD US$ 1.28 1.28 1.32 1.34 1.35 1.34 1.32 1.32 1.32 1.32 1.31USD/JPY ¥ 79.31 77.26 76.00 76.00 76.00 76.00 76.00 76.00 72.67 74.22 73.33USD/CAD C$ 1.01 1.01 1.02 1.04 1.06 1.08 1.10 1.09 1.10 1.10 1.10USD/CNY Yuan 6.35 6.28 6.20 6.15 6.10 6.07 6.02 6.03 6.00 6.01 6.00
 Note 1: Average prices Note 2: Thermal coal prices are for JPY year starting April 1 Note 3: Historical data are actualsSources: Bloomberg, ANZ Commodity Strategy, ANZ FX Strategy
 

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