Thursday, August 1, 2013

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COLUMN-China's moves to cut metal capacity just getting started China's plans to force more than 1,900 companies to cut excess capacity in bloated industries including aluminium, steel and copper have met with an underwhelming response from the market.
Clyde Russell is a Reuters columnist. The opinions expressed are his own

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BASE METALS: London copper reached its highest level in almost a week after the Federal Reserve gave no indication of an imminent reduction in monetary stimulus and as Chinese manufacturing data beat expectations.

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UK watchdog considers investigation of metals warehousing -sources

The Fed on Wednesday said the U.S. economy continues to recover but is still in need of support, offering no signs that it is planning to curb its bond-buying stimulus at its next meeting in September. "Fifty is still not a great number, but it tells you things are at least stabilising and that deceleration is in the process of coming to a halt," Schnider said. PRECIOUS METALS: Gold reversed early gains on Thursday as the dollar crept off six-week lows on brighter U.S. economic data and investors fretted about a pull-back in monetary stimulus despite dovish comments from the Federal Reserve. The Fed on Wednesday said the bank will continue to support the U.S. economy but gave no indication of an imminent end to its bond buying programme, which has supported the metal's inflation-hedge appeal. "I think people might be hard pressed to come up with really a compelling reason to put new positions on gold based on that one statement," said one Hong Kong-based precious metals trader. FOREX: The U.S. dollar wallowed near six-week lows against a basket of major currencies after the Federal Reserve gave no fresh hints that it was preparing to scale back stimulus at its next meeting in September. "The Fed seems to have downgraded their overall economic assessment, thus capping the dollar," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

Goldman blinks but no relief for Wall Street's commodity

Nickel, aluminium still swamped by excess output despite cutbacks

First Quantum quarterly profit falls as metals prices drop


Goldman to offer Metro customers immediate access to
aluminum NICKEL/STEEL:

ArcelorMittal cuts 2013 outlook on weaker demand U.S. Steel's locked-out Canada workers reject contract

Steel price revival brings respite to suffering producers

--Clyde Russell is a Reuters market analyst. and now stands at 8 percent. And. But what the market missed is that the Indian authorities were determined to act to lower the current account deficit. even if this takes years.900 companies to cut excess capacity in bloated industries including aluminium. copper and steel outside China. It's much the same story with steel. This has major implications for producers of aluminium. Certainly. but more in the political and social sphere. the moves to make China's heavy industries more efficient will have little immediate market impact.China's plans to force more than 1. The edict to close some capacity by September will do very little to end surpluses in aluminium and steel production in China. because these decisions often take long periods of time to take effect. as they will impact less than 1 percent of capacity. but also moving production steadily lower on the cost curve. but the China steel association says there is 300 million tonnes of surplus capacity. but what analysts and investors may be shrugging off a little too lightly is that once trends and processes start. some 654. second only to crude oil. India's efforts to limit gold imports are a case in point. it could be argued that a clear trend is developing. if gold imports should regain momentum. With gold accounting for 11 percent of imports by value. not so much in the market of various metals. It would be unrealistic to expect China to make huge. However. which also saw record gold imports of 162 tonnes. or whether they will stall? Investors and analysts tend to focus on each announcement in isolation. I would expect the government to continue to take steps until it gets the desired result. the market is right to be sceptical about the impact of the July 25 announcement. uneconomic capacity is closed. This trend is toward China limiting overall growth in capacity for industrial metals. steel and copper have met with an underwhelming response from the market. 2013 FEATURE COLUMN-China's moves to cut metal capacity just getting started By Clyde Russell LAUNCESTON. The same sort of process may be underway in China. The market is often slow to recognise that government policies can and do affect supply and demand for commodities. after all. sweeping changes in what are.8 percent of gross domestic product in the year to March 2013. which is already about 28 percent higher than demand of about 21 million tonnes. When the government first raised the tax on gold imports last year. The point is that the market didn't really believe the Indian government was serious about curbing imports. The views expressed are his own-- 2 . largely from provincial governments more focused on keeping jobs. For steel. and it's possible the government will continue to implement measures until it achieves its goals. and first-half production was almost 11 percent higher than for the same period last year. the ruling may result in about 7 million tonnes of annual output being idled.INSIDE METALS August 1. where mills would rather run at a loss than idle capacity and surrender market share. Much more likely is a fairly lengthy process in which steps are gradual and aimed at creating minimal upheaval. industries vital to economic development. a fraction of the existing capacity of about 27 million tonnes. with the last hike of 2 percentage points coming in May. The market dynamic at work in China appears to be that new. Aluminium output rose to an annualised rate of 22. and it has taken repeated steps to make the point.000 tonnes of production may be closed. But the question to ask is whether Beijing's moves to trim excess and inefficient capacity will continue. TREND DEVELOPING Taken together with moves by Beijing to limit pollution. which reached 4. much of the production that sits higher on the cost curve is being kept active through subsidies on power. the move was largely dismissed as insufficient to curb the appetite of the world's largest bullion importer. The increased tax and a ruling that one-fifth of all gold imports should be exported as jewellery appears to have crushed the appetite of India's buyers. more efficient capacity is coming on line at a faster pace than older. which is insignificant when compared with the existing idle capacity of more than 7 million tonnes. the government kept taking steps to curb imports. To make matters worse. rather than viewing them as part of a process. Australia.000 tonnes of annual capacity may be shut. they tend to gather momentum. Aug 1 (Reuters) . In aluminium. drive energy efficiency and rein in over-investment. The import tax has been raised twice more this year. about 260. On these numbers alone. according to trade sources. June imports dropped sharply to around 32 million tonnes and July's to around 45 to 50 million.42 million tonnes in June. In copper.

and two lawmakers questioned whether power regulators were tough enough. allowing them to avoid year-long waits and high premiums. a partner at New York-based Eaton & Van Winkle LLP. In its first major effort to appease consumers." said American Beverage Association spokesman Christopher Gindlesperger. its commodities trading arm. typically a slow month for the markets and also a fiveweek hiatus for legislators in Washington. which is in the midst of its third effort to resolve the issue. an about-face from the past few years when the agency said it did not have authority to delve beyond derivative markets into the physical trade. anti-trust lawyer Robert Bernstein. with Senator Sherrod Brown expected to call Federal Reserve and bank officials to another hearing of the powerful banking committee. Democrat CFTC commissioner Bart Chilton said the "the larger issue of banks owning physical commodities. where they do everything from stockpiling metal for clients to shipping gasoline to New York. After two weeks of increasingly frenetic activity and vocal debate. In London. But Goldman's Chief Operating Officer Gary Cohn defended the bank's role in commodities and J Aron. where a handful of lawmakers are pressing regulators including the Federal Reserve and the Commodity Futures Trading Commission (CFTC) to bring banks to account. warehousing and delivery mechanisms" remained unresolved. Aug 1 (Reuters) . that would be a different story. "Commodity hedging is a core competence and one of the most important things we do in the firm and our clients really need us to be in that business. The lengthy waits to receive metal shipments are "a systemic problem which goes broader than Metro International. calling it a "core" business. including Glencore Xstrata and JPMorgan Chase & Co that have bought warehouses in the past three years.S." said U. quitting a sector it paid billions of dollars over five years to build. But it may again reach fever pitch in September. "It sounds to me like they're offering ice in the winter. They also took issue with the bank's decision to limit the offer to end-users. excluding the hedge funds and other traders who are believed to account for most of the stockpiled metal. with lawmakers questioning why financial banks are so deeply involved in commercial activity and metal users including American brewer MillerCoors calling for a clampdown. saying none of its customers had yet taken up the offer. One source at a competing warehousing company was critical of Goldman's offer: "If they had said we're going to deliver out faster. who once ran J Aron." Cohn. Two weeks of escalating criticism of banks that own commodity assets and trade raw materials has shaken executives and the industry. In practice industrial clients needing metal sometimes have to queue for up to a year while warehouse companies . sources said. The move is the latest effort by Wall Street's biggest banks to fend off a barrage of criticism of their role in the raw materials supply chain. said on CNBC. Goldman offered on Wednesday to immediately swap aluminum for any endusers holding metal at its Metro International warehouses. While welcoming Goldman's effort as "great news". copper fabricators. which critics say have stoked prices. lawmakers are also looking more broadly at whether banks should be allowed in the commercial business of crude oil cargoes and power plants. and also the London Metals Exchange itself. "We are staying in the commodity hedging business. 2013 GENERAL NEWS Goldman blinks but no relief for Wall Street's commodity traders By David Sheppard and Susan Thomas NEW YORK/LONDON. Years of growing frustration over long waiting times and rising prices at metals warehouses across the world spilled into Washington this month. Britain's financial watchdog is considering its own investigation of metals warehouses.increasingly owned by banks or trading houses . Last week JPMorgan Chase & Co said it was getting out of the physical commodity business. with little sign of the pressure relenting.Goldman Sachs' effort to diffuse intensifying pressure over its commodity business by throwing open its metal warehouse doors likely comes too late to head off further scrutiny of Wall Street's commodity trade.S." It is unclear whether the measures will ease pressure from Washington. the Financial Conduct Authority (FCA) is weighing whether to launch a probe of the London Metal Exchange (LME) warehousing system. DOUBTS Goldman's move will intensify scrutiny of other merchants and banks. many industry officials expect the din to subside during August.INSIDE METALS August 1. It also refuted the notion that it was causing a shortage of metal. who works on behalf of U. 3 ." WHEN SEPTEMBER COMES While the commotion over commodities trade has focused most intensely on the warehousing issue.benefit from rents they charge during the wait or traders focus on using metal in finance deals rather than providing it to clients. But the effort met with a skeptical response among some traders who said the bank had failed to address the big financial incentives paid by warehouses to attract metal into their facilities. That month also marks the end of a five-year grace period granted to Goldman Sachs and Morgan Stanley to comply with commercial banking regulations after they gave up their independence at the height of the financial crisis.

as weak prices force firms bleeding red ink to close down or pare output at older." he said in a note. both of Massachusetts. logistics and pipelines business TransMontaigne. "Cost pressures appear to be starting to impact the import of raw material." The penalty is the second-largest ever by the Federal Energy Regulatory Commission (FERC)." said analyst Ryan Belshaw at Macquarie." Nickel. Nickel is forecast to end up with a market surplus of 53. a shock decision that raised the specter of even deeper restrictions than banks had been bracing for. While Keen expects NPI cutbacks to intensify in the second half if prices remain below $14. a veteran banking analyst currently working as an equity research analyst for Garden City. potentially leading to the biggest reshuffling of market power since the 1990s era of the "Wall Street refiners.650 a tonne after touching the lowest levels in four years. aluminium still swamped by excess output despite cutbacks By Eric Onstad LONDON. commercial commodities business in 12 to 18 months from now. Morgan Stanley faces an unknown outcome for its massive global oil business. Senators Elizabeth Warren and Edward Markey. wrote to the FERC chairman. there has been little incentive for firms to halt plans for new plants with much lower costs.000 tonnes. to boost his forecast of NPI output in China this year to 415. The unrelenting expansion of the new NPI smelters using rotary kiln electric furnace (RKEF) technology has prompted Andrew Keen.S. new operations. They also questioned why JPMorgan executives were not punished. 2013 GENERAL NEWS (Continued) While Goldman has already sold its power plants and trades little physical oil.INSIDE METALS August 1." OPENING THE DOOR Separately on Wednesday. NPI output last year of 308. which has seen explosive growth in recent years. The price of both metals has been weighed down as producers churn out more material than needed by industry. CHINA ALUMINIUM OUTPUT HAS QUADRUPLED The scenario in aluminium is similar. if you will. Although the banks say they should be allowed to trade and invest in commodity businesses more broadly than their rivals because of an exemption granted to investment banks in a 1999 law. It is unclear when that review may conclude.800 a tonne in 2007. is the worst performer so far this year among the six main industrial metals traded on the London Metal Exchange. according to Reuters Metals Fundamentals Database. Cutbacks may only trim a fraction of that excessive output. "I doubt that any bank will have any. The benchmark LME price of aluminium . The crack-down is opening opportunities for less-restricted competitors. but is "equal to roughly 1.000 tonnes is more than 10 times the level of 2006. sliding nearly 20 percent to around $13. "The banks went a little bit too far with the Fed's authorization to get into the commercial side of commodities business and I think that the Senate is more than shocked about what they saw when they started investigating into this situation. it is unclear how much the Fed will allow. highcost nickel and aluminium smelters will not be enough to outweigh excess production from a surge of more efficient.500/tonne. two Democratic senators questioned whether a landmark $410 million settlement with JPMorgan earlier this week over alleged power market manipulation had included "adequate refunds to defrauded ratepayers. Chinese imports of nickel ore in June slid 15 percent to 5.3 percent of JPMorgan's 2012 profits". forcing prices lower still.650 tonnes this year while aluminium is expected to have an excess of 825. is a key factor behind nickel's loss of nearly three-quarters of its value since touching a record price of $51. highercost smelters while at the same time building continues of new modern operations. Nickel . global head of mining and metals at HSBC in London. The main focus is on China. referring the country that is the main source of ore for NPI. "A decline in NPI ore imports from Indonesia suggests high-cost producers are cutting capacity. a key component in stainless steel. its 49 percent share in oil tanker firm Heidmar and its cherished U. July 31 (Reuters) . The low price has started to force closures by producers of nickel pig iron (NPI). The Fed announced earlier this month that it was "reviewing" the landmark 2003 decision that first allowed banks to trade physical commodities. NPI is a cheaper substitute for pure nickel. according to the median forecast of analysts polled by Reuters. But while some older plants may be closing after piling up losses.385 tonnes. has shed about 15 percent this year as LME inventories soared to record levels over 5 million tonnes. 4 .000 tonnes from a previous estimate of 353. which accounts for 43 percent of global output and where aluminium production has nearly quadrupled over the past decade.42 million tonnes from the previous month. other analysts say still lower prices are needed to force more drastic cuts since breakeven costs for modern plants are as low as $12.000 a tonne. particularly foreign banks not overseen by the Fed. New York-based Rafferty Capital Markets LLC. especially in China. used as feedstock by stainless steel mills.Cutbacks at loss-making. mainly used in transport and packaging." said Richard Bove. Excess output.

on average. so we still have at least 1 million tonnes net addition. but if you're using bigger pots and whacking more (electrical) current through them.3 million from $722. some smelters may reopen in Guizhou province after Beijing allowed producers to build power plants to supply electricity directly to smelters. Analysts.was meeting its regulatory obligations. two sources said. Adding to the glut. which has said it regulates the exchange and the futures derivatives market for commodities but not warehousing or the physical markets. earnings fell to $106. said analyst Nicholas Snowdon at Barclays. 5 . The move would mark a change in tack by the Financial Conduct Authority (FCA). First Quantum is betting its hands-on approach to procurement and construction can dent development costs for Cobra Panama that Inmet had pegged at $6.5 and 2 million tonnes but the new capacity due on stream this year is 3 million. from $142. Chalco .000-tonne pot line. cut 380. regulators put banks and big traders on notice of a probe due to complaints of inflated prices. Middle East expansions are also adding to global production. or 18 cents a share.2 billion.0 million. or 30 cents. Goldman Sachs Group Inc said on Wednesday it would offer customers of its Metro International metals warehouse business immediate access to aluminum held up in queues. In a sign of movement over the issue. winning access to one of the world's biggest untapped copper deposits.3 million. "You can have build a smelter with a nominal 250. such as at Emirates Aluminium. is a futures market that oversees a global network of warehouses where its clients should be able to take delivery of metals. which has the potential for even more output.000 by the end of 2014. which is due to boost capacity to 1. On Wednesday. July 31 (Reuters) . TRADING PLACES UK watchdog considers investigation of metals warehousing -sources By Susan Thomas and Douwe Miedema LONDON/WASHINGTON. theoretically you can produce 400. the Cobre Panama project in Peru. a year earlier. and last week Chinese authorities ordered 260. but authorities are keeping many state-owned smelters open with subsidies.benefit from rents they charge during the wait or focus on using metal in finance deals rather than providing it to LME clients. the privately owned capacity in provinces such as Henan and Yunnan has responded to margin negation with closures.INSIDE METALS August 1. In practice industrial clients needing metal sometimes have to queue for up to a years while warehouse companies .Britain's financial watchdog is considering an investigation of the London Metal Exchange warehouse system after U. Production in the quarter was boosted by First Quantum's takeover of smaller rival Inmet Mining Corp. However.Canadian base metal miner First Quantum Minerals Ltd reported a drop in second-quarter earnings on Wednesday as realized copper and nickel prices fell. "The cutbacks in China are probably between 1.000 tonnes of capacity after it suffered steep losses due to low prices.1 million. First Quantum quarterly profit falls as metals prices drop July 31 (Reuters) .2 million. making it one of the biggest single site smelters in the world.000 tonnes. First Quantum said it has already "considerably" slowed cash outflow at the project and plans to give a full update in the fourth quarter. Net earnings attributable to shareholders fell to $71." said Wiktor Bielski at VTB Capital in London.000 tonnes of excess aluminium output to be shut. one of the two sources with knowledge of the matter said that as warehousing and the physical market had an important role in LME operations. prompting accusations from manufacturing companies that banks and traders are artificially inflating prices and distorting supplies and demands for the LME to act. Excluding unusual items. which it completed in early April.increasingly owned by banks or trading houses ." There is about 4 million tonnes of unprofitable capacity in China. Some of the new smelters in China use new technology with bigger pot lines. The queues have caused the price premium on some metals to surge. China's top producer of aluminium.9 million.the world's biggest marketplace for metals such as copper and aluminium . a venerable British institution acquired last year by Hong Kong Exchanges and Clearing . Bielski added. 2013 GENERAL NEWS (Continued) Last month. but average realized prices also dropped. the FCA would want to ensure the LME . Revenue rose to $869. Cash costs per pound fell for both copper and nickel in the second quarter." he said in a note. The LME. had been expecting earnings of 23 cents a share on revenue of $937.3 million tonnes a year from the current 800.S. or 12 cents a share. "While close to half of this capacity is state-owned and hence less likely to close.

Antoine Colombani. However. on Thursday cut its 2013 core profit guidance on weaker-than-expected demand and lower-than-expected raw material prices. Goldman Sachs is contacting end users to offer to swap any aluminum currently in the queue for immediately available aluminum so that they have access to the metal they need to make or package their products.Goldman Sachs Group Inc said on Wednesday that it would offer customers of its Metro International metals warehouse business immediate access to aluminum held up in queues through an exchange deal with the bank.5 billion. An LME spokeswoman declined to comment on any potential investigation. Regulators including the U. which sold around 45 percent of its steel in Europe last year. Goldman has come under regulatory and political pressure in recent weeks as major consumers of aluminum have complained about waiting excessive amounts of time to get access to the metal. boosting prices for companies and consumers. He was not immediately available to comment on Wednesday.S. The group sees steel shipments rising between 1 and 2 percent in 2013. tax. said that its net debt fell to $16. The CFTC has written to firms ordering them to preserve emails. Commodity Futures Trading Commission (CFTC).S. it had not ruled out such a process. Commodity Futures Trading Commission have both launched preliminary investigations into Wall Street banks and other large commodity traders who own metal warehouses. said second-quarter EBITDA. has been hit hard by a drop in demand from austerityravaged Europe and signs of slowing growth in China. ArcelorMittal cuts 2013 outlook on weaker demand BRUSSELS. Department of Justice and the U. ArcelorMittal kept its medium-term net debt target of $15 billion. depreciation and amortisation (EBITDA) in 2013 would be more than $6.ArcelorMittal .5 6 . or core profit. The group. WARNING SHOT The notice amounted to a "warning shot" ahead of what is probably a formal CFTC probe. driven by a 3 percent rise of global steel consumption. If there is an investigation. "In light of the concerns that end-users have raised about their access to aluminum they are holding in warehouses. "The question is to what extent the build-up in delays at the warehouses is a competition issue. fell 33. The company believes all regions except Europe will demand more steel than in 2012. documents and instant messages from the past three years.2 billion at the end of the second quarter but that this figure would rise to about $17 billion in the second half of 2013 because of investment in working capital and the payment of the annual dividend. Reuters has reported. the world's largest steelmaker." the bank said in a statement outlining ways to speed up aluminum delivery from London Metal Exchange warehouses. The LME storage network extends across 36 locations and 14 countries. July 31 (Reuters) . Aug 1 (Reuters) .S. which lost its investment grade credit rating last year. it would be the first by a regulator into the lucrative and controversial industry which has become dominated since 2010 by banks also including JPMorgan Chase & Co and merchant traders like Glencore Xstrata Plc and Trafigura AG. versus a previous forecast to beat the $7.1 billion reported in 2012. declined last week to comment on the CFTC's move or whether the European Union antitrust authority was cooperating with the CFTC.INSIDE METALS August 1. four sources who received letters said. Xstrata merger and concluded there was no obvious way to intervene. a gauge of the global economy." the bank said in a statement The first of the two sources said the FCA was in close contact with the LME and the U. A second source said all firms with LME-registered wareshouses in all jurisdictions had received the letter. 2013 TRADING PLACES (Continued) "In light of the concerns that end-users have raised about their access to aluminum they are holding in warehouses. a source with knowledge of the matter said the Commission spoke to the LME in connection with the warehousing issue during the Glencore-Xstrata merger in November last year. and while it was not presently investigating anything in particular at the LME. The FCA said on Monday it was working closely with the LME on the exchanges's efforts to fix its warehousing system. ArcelorMittal. Goldman Sachs is contacting end users to offer to swap any aluminum currently in the queue for immediately available aluminum so that they have access to the metal they need to make or package their products. DG Comp (the directorate general of competition) talked to the LME regarding the issue during the Glencore. but said the exchange had always worked closely with the FCA and the CFTC. The LME itself does not own any of the warehouses. one source said. The European Commission spokesman for competition policy. It said earnings before interest." MARKET NEWS Goldman to offer Metro customers immediate access to aluminium NEW YORK. The $500-billion-a-year steel industry.

their union said on Wednesday.S.and prices started to rise for the first time this year only in June after technical issues reduced supply at some major steelmakers such as AK Steel and U. "For the first time in a long time there is no oversupply. Steel's locked-out Canada workers reject contract proposal By Allison Martell TORONTO. This. U." a U.S. Steel . "Right now it is evident that there is a global pick up. Steel's raw steel output in 2012. In a letter to its employees posted online before the vote. Marcegaglia said. "For the first time this year the power is with the mills. "After six months of falling prices inventories were depleted and buyers couldn't wait any longer. after they rejected an earlier contract offer. the U. Russia and Ukraine to curtail output in recent months. U. which had not been endorsed by the union. Lake Erie accounted for about 10 percent of U. "The consequences of this vote for you and your family are enormous. contracts. Ontario. and has the capacity to produce as much of 2. The lockout is the third at a former Stelco facility since U. coupled with a strike this month at Isdemir. July 31 (Reuters) . But how long is this going to last? One month? Two? The increase was triggered by temporary rather than structural conditions. weighing on U. The vote is likely to extend a labor dispute that has shut down raw steel production at the Ontario mill. August and September. They are prepared to pay a bit more now. a major Turkish producer.Stressed steel producers are breathing a sigh of relief as prices bounced unexpectedly from 3 1/2 year lows in recent weeks. is due to rising raw material prices and a mild demand awakening as slightly more confident end-users restock. Prices of the alloy rose.S. facility on April 28.normally the strongest . When U. adding that any sustained price increase for the construction material would lead producers to boost output once again. "But no one can think that the market has radically changed.000 workers at the Nanticoke. Structurally.S. with steel demand often cited as an industrial indicator." A margin squeeze in the last few years has pushed some mills in Europe. because there is still too much production. The supply cuts lengthened lead times for delivery of steel and pushed anxious buyers to put their orders through. At the same time I do think demand has improved as well.S. in what is typically a slow month. Steel's financial results. they would stay locked out. so that gives some room to manoeuvre to domestic producers. Steel price revival brings respite to suffering producers By Silvia Antonioli LONDON. something the union had rejected in bargaining.S. Steel demand however." Spot prices in Europe rose around 5 percent in the last two weeks after over 20 weeks of decline. Steel said that if workers voted "no". Steel locked out about 1. July 31 (Reuters) . Steel reported financial results on Monday it said its performance had been hurt by a drop in shipments linked to the labor dispute. the United States and even austeritystricken Europe. "There is some kind of acceptance among buyers that prices are going up. The increase." a Swissbased steel trader said. traders said. steel market is in better shape than in Europe as it is anchored off stronger economic growth. Domestic producers seized the opportunity to announce price increases. The integrated mill makes slabs and hotrolled coil. POWER BACK WITH THE MILLS After a bleak first half this year.75 billion in a Reuters poll.based steel trader said." a European trader said.S.Workers locked out at United States Steel Corp's Lake Erie works in Canada have voted to reject the steelmaker's contract proposal. while major producers and fabricators such as ArcelorMittal and Italy's Marcegaglia announced prices increases for July.70 billion. has also helped create tension on the supply side. Broad stabilisation of the global economic backdrop and regional supply disruptions are the main catalysts for current gains. especially in China." said Meps steel analyst Jeremy Platt. The proposal replaced a cost of living adjustment with a less generous scheme similar to those in its U. United Steelworkers Local 8782 President Bill Ferguson said 71 percent voted against the contract proposal.6 million tons of raw steel each year. prices in the United States and North America spiked. 2013 MARKET NEWS (Continued) percent year-on-year to $1.S. U. underperformed the economy in the first half . The question is how long is it going to last?" 7 .INSIDE METALS August 1.S. "Export quotations coming into Europe have increased. unusual for the sleepy summer months." it said. but excitement is unlikely to last as oversupply is waiting to crimp the sector.S.S. below the analysts' average forecast of $1. Steel acquired the Canadian company in 2007. in leading producer China.

The run-up however will be limited by heavy oversupply: while demand growth for the alloy is slowing together with the economy.S. seasonally a slow period for the market.INSIDE METALS August 1. China continues to churn out steel at a record rates. trader said. Prices in top steel producers and consumers in China and in Asia have rebounded in July. 8 . steel pipe makers against imports from nine countries is also supporting prices of domestic flat steel products as importers reduce shipments fearing retroactive duty. "We will see more swings but no sustainable growth until the economy picks up strongly: China will always provide a ceiling to the rest of the world. subduing chances of upturns there. helped by an increase in raw materials and on the back of restocking by end-users which pushed some leading producers to raise prices for July and August. This is mostly because Chinese authorities help state-owned steel plants to maintain strong growth in an effort to keep employment high and avoid social unrest while private steel mills do not want to lose their market share.S." the U. 2013 MARKET NEWS (Continued) A recent trade case launched by U. As Chinese supply still swells it will continue to pour out into other regions when there is a chance.

2013 ANALYTIC CHARTS (Click on the charts for full-size image) Daily LME Aluminium 3-months Daily LME Copper 3-months Daily LME Nickel 3-months Daily LME Zinc 3-months Daily LME Lead 3-months Daily LME Tin 3-months Daily LME Alloy 3-months Daily LME Nasaac 3-months 9 .INSIDE METALS August 1.

Expectations over the timescale for the Fed to begin tapering are now being pushed back to December. "For the second half I'd say acceleration is going to be barely visible and under those circumstances you're not going to seen an attractive return on copper . economic growth unexpectedly accelerated in the second quarter. economy continues to recover but is still in need of support.S.100) a tonne. said analyst Dominic Schnider of UBS Wealth Management in Singapore. keeping premiums high at around $45 an ounce over London prices.46 an ounce by 0658 GMT.917 a tonne by 0325 GMT. Silver fell 1 percent. Logistics firms have not cleared a single shipment since the rule was announced on July 22. but flagged still sluggish demand overall. U. The Indian central bank has still not issued any clarification to importing agencies regarding a rule that ties imports to exports." Schnider said." he added. "Fifty is still not a great number. Physical premiums for copper in China's bonded areas are rising towards four-year highs of $210 hit around a month ago.S. economy but gave no indication of an imminent end to its bond buying programme. a Mumbai-based dealer said.S.2 percent the session before. Physical demand for bullion also remained quiet. Aug 1 (Reuters) . nonfarm payrolls data is due for release on Friday. dollar wallowed near six-week lows against a basket of major currencies after the Federal Reserve gave no fresh hints that it was preparing to scale back stimulus at its next meeting in September. gold imports have come to a halt due to uncertainty in import policy. 2013 MARKET REVIEW METALS-London copper at near one week top on supportive Fed. which has supported the metal's inflation-hedge appeal.1. given a shortage of feed stock scrap metal in the country. "If we see a very strong recovery in the employment situation. that will unsettle the markets.2 percent to $1. the dealer said. In top buyer India.000 a tonne you should consider cutting positions. "I think people might be hard pressed to come up with really a compelling reason to put new positions on gold based on that one statement.S. and were last at $200 a tonne according to China price provider Shmet. after rising more than 7 percent in July to post its strongest month since January 2012.82 percent to 49.INSIDE METALS August 1. Spot gold fell 0. The most-traded November copper contract on the Shanghai Futures Exchange rallied 1." he added.S. Three-month copper on the London Metal Exchange had climbed 0. above market expectations. after gaining 2.London copper reached its highest level in almost a week after the Federal Reserve gave no indication of an imminent reduction in monetary stimulus and as Chinese manufacturing data beat expectations. Adding support to prices. with looser policy for longer helping to cushion commodities prices. he said.The U. offering no signs that it is planning to curb its bond-buying stimulus at its next meeting in September. gold gained as much as 1 percent. data.S. Traders said Chinese copper demand picked up this week in line with a fall in prices to three-week lows.Gold reversed early gains on Thursday as the dollar crept off six-week lows on brighter U.once it is above $7. It earlier hit $6. laying a firmer foundation for the rest of the year.6 percent. while platinum and palladium were higher.968 which was its loftiest since July 26. signs of stabilisation in China's manufacturing sector growth were also lending support. Ananthalakshmi SINGAPORE. The outlook was less rosy in a private survey that showed China's factory activity shrinking for a third straight month in July to its lowest level in nearly a year as new orders fell. but it tells you things are at least stabilising and that deceleration is in the process of coming to a halt. Meanwhile. economic data and investors fretted about a pull-back in monetary stimulus despite dovish comments from the Federal Reserve. PRECIOUS-Gold eases on U. stronger dollar By A. Aug 1 (Reuters) . The dollar index gained 0. Manufacturing growth in China's manufacturing sector picked up slightly in July. and will follow Wednesday's gross domestic product and jobs data that painted a brighter picture of economic growth. The Fed on Wednesday said the U.3 from June's 50.the world's second biggest bullion consumer. U. U.800 yuan ($8. 10 . indicating soft buying in China . Aug 1 (Reuters) . The Fed on Wednesday said the bank will continue to support the U. China PMI By Melanie Burton SINGAPORE.S. though it was still near sixweek lows. Shanghai gold futures turned negative after gaining at the open." said one Hong Kong-based precious metals trader.S. FOREX-Dollar near 6-week low after no tapering hint from Fed By Ian Chua and Hideyuki Sano SYDNEY/TOKYO.319.54 percent to $6. with the official purchasing managers' index (PMI) rising to 50.

42 yen. All rights reserved. in particular we think Stevens gave the green light for the currency to go lower.3270 with investors wary of getting too carried away ahead of policy meetings at the European Central Bank and Bank of England later on Thursday.8770. but the common currency later eased back to $1. you saw yields in the U.8910 on Wednesday and was on track to end the week down more than 3 percent. lifting Asian shares. Traders said stops were triggered below 88. levels. but a second easing before year-end. flat on the day. "When the euro has risen. the euro reached a six-week high around $1. But many economists still expect the Fed to begin slowing its asset-buying programme as early as next month. The Aussie fell as far as $0. it remained vulnerable at $0.5 percent from late U.35 yen .8949. Traders also say a strong reading in Friday's U. expecting rates to stay at 0. economic growth was not quite as weak as expected in the second quarter. the dollar managed to hold above important support from the Ichimoku cloud bottom near 97.2 percent above late U. continuing to point towards a pick-up in the economy. it lowest level this year. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world. Thomson Reuters shall not be liable for any errors or delays in content.S.00 yen ." said SuLin Ong. "The Fed sounded a bit more dovish on the economy . especially in light of data showing U. The big mover was the Australian dollar.S. off Wednesday's five-week low of 97. "The Fed seems to have downgraded their overall economic assessment. 11 . use and share your personal information please read our privacy statement here To unsubscribe to this newsletter click here For more information: Learn more about our products and services for commodities professionals.407 touched on Wednesday. The Aussie was already having a bad week following dovish comments from Reserve Bank of Australia (RBA) Governor Glenn Stevens on Tuesday. thus capping the dollar. which took the Aussie to 87. reaching its lowest in three years." said Mitsubishi Bank's Uchida.INSIDE METALS August 1. which led the market to not only price in a cut in rates next week. "The Aussie is clearly on its knees. That sell-off weighed heavily on the commodity currency broadly. while calling the pace of economic growth "modest" rather than "moderate". levels but still not far from a low of 81.S. which tracks the greenback's performance against a basket of major currencies. click here Privacy statement: To find out more about how we may collect.585. distribution or redistribution of this content is expressly prohibited without the prior written consent of Thomson Reuters. up 0. I suspect a euro around $1.. So he may try to talk down the euro a bit.50. The ECB is expected to hold off on further stimulus but is seen standing by last month's forward guidance. click here Contact your local Thomson Reuters office. Any copying. This content is the intellectual property of Thomson Reuters and its affiliates. just enough to keep the dollar from going too far on the back of stronger data. senior economist at RBC in Sydney.S.33 would be a burden for euro zone countries other than Germany. employment data could cement expectations of a reduction in the Fed's stimulus in September and thus boost the dollar. as it had consistently for most of the past year. last stood at 81. "When you get that and generally disappointing Chinese data.5 percent or lower for an "extended period".3345 . click here Send us a sales enquiry. The dollar index. Although the currency drew some comfort from the Chinese manufacturing data. senior strategist at RBS in Singapore. 2013 MARKET REVIEW (Continued) The Fed said it would keep buying $85 billion in mortgage and Treasury securities per month and noted the potential dangers of inflation running too low. about 0. ECB Governor (Mario) Draghi often tries to rein it in. cents in thin trade. or for any actions taken in reliance thereon. chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ." said Greg Gibbs. it's a whole confluence of factors that keeps downward pressure on the currency.S.S. The dollar last traded at 98. click here © 2013 Thomson Reuters. It got a further boost after China's official manufacturing data showed a small improvement. Against the yen. TALKING DOWN THE EURO? As the dollar sagged. That leaves us still waiting for other major central banks..884." (Inside Metals is compiled by Pradip Kakoti in Bangalore) For questions and comments on Inside Metals click here Your subscription: To find out more and register for our free commodities newsletters. with the next major level seen at the August 2010 trough of $0. the U. go lower overnight. which skidded towards 89 U." said Minori Uchida. In fact.S.

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