EDWARD MEIR: + 1-203-656-1143

Senior Commodity Metals Analyst

Email: emeir@mfglobal.com

TUESDAY, FEBRUARY 22, 2011

LME DAILY METALS REPORT

As of LME STOCKS VOL O/I 10 40 100
HIGH LOW CLOSE CSH/3 3’S/15 (CH)
SUP RESIS RSI
Feb. 21 (000) (000) MAV MAV MAV
CU 9825 9805 9810 +4 +118 411,750 (+275) 9650 10190 52 101 298 NA NA NA

AL 2580 2566 2580 -31.75 -62.75 4621350 (+25) 2470 2570 64 256 691 NA NA NA

PB 2675 2656 2675 -7 +46 295,650 (-1100) 2420 2712 63 25 107 NA NA NA

ZN 2596 2574 2596 -27 -43 708,675 (+498) 2320 2600 67 50 235 NA NA NA

NI 29300 29050 29300 -19 +1150 129,720 (+498) 23600 30000 73 34 100 NA NA NA

SN 32350 32150 32350 -47 +300 17,530 (-10) 30000 35000 75 2.9 19.9 NA NA NA

NAA 2585 2535 2590 -15 -41 136,880 (-80) NA NA 69 0.1 7.6 NA NA NA
Shanghai Nearby Last (YUAN) 73,580 (-1050) 17,170 (-175) 19,740 (-680) LME/SHAN CU
Shanghai Stocks as of Feb 18 CU: 161,062 MT(+16865) AL: 426,978 MT (-4378) ZN: 332,302 (+5682) ARB: +1544

CU AL PB ZN NI SN
2011 HIGH/LOW 10190 / 9235 2575 / 2360 2712 / 2325 2547 / 2220 29095 / 23822 32799 / 25725

2010 HIGH/LOW 9728 / 6035 2500 / 1828 2690 / 1535 2736 / 1577 27250 / 16975 27500 / 14850

Explanations for our table: High/low/close are official LME prices for the day prior; cash/3’s and the 3’s/15 spreads is the spread between the respective
periods, with a positive number reflecting a backwardation and a negative numbers reflecting a contango. Stocks (in MT) show inventories on hand for the
current day, along with changes from the day prior. Volume and open interest data are for the day prior, while the MAV refers to the 10, 40, and 100-day
moving averages. Shanghai prices are as of close of trading from the day priori; Shanghai stocks are in MT for the week indicated; please contact this writer for
any further questions. *Arb differential number is derived as follows: LME 3-m copper in Yuan, including 17% VAT, minus SHFE third month;
(+ would mean LME is over).
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This market comment was written at 8:00 a.m. on February 22nd, US east coast time...

We has a mixed session on Monday in the metals, as copper slipped slightly, while most of the others managed to carve out
decent gains, with nickel and aluminum each hitting 34 and 29-month highs respectively. Markets were primarily focused on
one thing only for much of the day yesterday, and that was the deteriorating situation in Libya, along with its potential impact
on about 1 million barrels a day of crude oil exports. Brent hit $108.70 at one point yesterday, as investors braced for oil
companies sending their staff out of the country (which most did) while reducing production as well (with only one doing so
thus far). Another potentially serious supply bottleneck could be forming in Libya's Nafoora oilfield, which provides the bulk of
the country's oil output, and where workers are apparently are on strike, this according to Al-Jazeera. Reuters could not
immediately confirm the report, but that was apparently enough for oil traders to hear.

In the meantime, the situation in the country seems to be deteriorating quickly. With nothing in the way of press reports
coming out, information gleaned from private citizens reveals a government that is in considerable disarray, having
apparently lost control of Benghazi, while struggling to survive in Tripoli. In the capital, reports surfaced of many civilian
casualties, as soldiers, many of them mercenaries, fired on protesters and on groups of mourners from the back of pickup
trucks and helicopter gunships. Libyan diplomats have started to defect (including the country's UN delegation) as did two
fighter pilots, who flew their jets to Malta after refusing orders to fire on protesters. Libyan leader Muammar Gaddhafi was

The information contained in this report has been taken from trade and statistical services and other sources which we believe are reliable. MF Global
Inc. does not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect
judgments at this date and are subject to change without notice. The principals of MF Global and others associated or affiliated with it may recommend
or have positions which may not be consistent with the recommendations made. Each of these persons exercises independent judgment in trading, and
readers are urged to exercise their own judgment in trading. © by MF Global Inc. (2010) 440 S Lasalle Street Chicago, Illinois, 60605.

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2/22/2011 LME METALS DAILY REPORT

shown getting out of a car late on Monday, saying that he was in "Tripoli and not in Venezuela", but gave no further
indication as to what his intentions were.

We could be just at the start of a major move higher in energy prices, as the unrest in the Middle East will likely continue for
many more weeks, if not months, to come. With so many key producers potentially vulnerable to varying degrees of turmoil,
prices should be able to move higher much more effortlessly, while any corrections will likely prove short-lived. Indeed, flare-
ups in countries like Kuwait and Saudi Arabia may be enough to send prices to their 2008 highs if anything remotely
resembling the unrest we have seen thus far grips either of these countries. But for the short-term, all eyes will be on Libya,
as unlike many other countries that have reported unrest so far, this the only one that has the potential to seriously disrupt
the markets—and it has.

In the meantime, metals are sharply lower today, reacting less to oil prices, which are up yet again, and more to the declines
evident in a number of international equity markets. Zinc and lead are down hard, with the former losing about 6% alone in
the Shanghai session, one of its sharpest declines in some three years. We suspect today’s selling in metals is largely
attributable to the fear that the surge in oil prices, although quite justified, will inevitably lead to bouts of higher inflation and
interest rates, resulting in slower growth down the road. This is certainly a legitimate concern, considering that inflation rates
were already rising in a number of emerging markets, and the latest spike higher in oil will only exacerbate the problem.
Focus in this regard is primarily on China, which has put through a number of interest rates and reserve requirement hikes of
late, and will likely accelerate the schedule going forward as inflation readings ramp-up yet again.

In US macro news, we get February consumer confidence readings (expected at 67), as well as the Case-Shiller 20-city
price index for home prices (expected at -2.4%). Out of Japan, the country’s debt rating outlook was lowered to negative
from stable by Moody’s on concern that the political gridlock evident will constrain efforts to tackle Japan’s enormous debt.
-----------------------
COPPER SUPPORT: $9650 / RESISTANCE: $10190

We are at $9655, down $155, and for the first time in several weeks, chart patterns seem to be deteriorating quite
substantially (as we note below), with prices now breaking the short-term uptrend line that has been in place since mid-
November. The next day or two will therefore be critical, since if we do not bounce back above the line, things could only
deteriorate from here technically. LME stocks were up once again overnight.

The information contained in this report has been taken from trade and statistical services and other sources which we believe are reliable. MF Global Inc.
does not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this
date and are subject to change without notice. The principals of MF Global and others associated or affiliated with it may recommend or have positions which
may not be consistent with the recommendations made. Each of these persons exercises independent judgment in trading, and readers are urged to exercise
their own judgment in trading. © by MF Global Inc. (2010) 440 S Lasalle Street, Chicago, Illinois, 60605.
2/22/2011 LME METALS DAILY REPORT

* The global copper market had a deficit of 400,000 tons in the January to November period of 2010 compared with a surplus
of 98,000 tons in the same period in 2009, the International Copper Study Group said in its latest monthly bulletin. World
refined copper production in January-November of 2010 was 17.37 million tons and consumption was 17.77 million tons.
-----------------------------------
ALUMINUM SUPPORT: $2470 / RESISTANCE: $2570

We are now at $2508 on ali, down $72, with today’s selloff seriously setting back the breakout that was possibly taking root
yesterday.
----------------------------
ZINC SUPPORT: $2320 / RESISTANCE: $2600

We are at $2513 on zinc, down $83, getting hit hard today, and canceling yesterday’s technical breakout to the upside.
Furthermore, the short-term uptrend line (marked in red) is showing signs of deterioration given the extent of today’s sharp
move lower.

* The global zinc market was in surplus by 264,000 tons in calendar 2010, the latest bulletin from the International Lead and
Zinc Study Group showed on Monday. Global refined zinc use was 12.5 million tons in 2010, up from 10.8 million tons the
previous year. World refined zinc output rose to 12.76 million tons from 11.26 million tons. (See table):

Latest ILZSG global data (in thousand tons):

Dec'10 Nov '10 Jan-Dec'10 Jan-Dec '09
Mine output 1,086.2 1,051.1 12,309 11,315
Refined output 1,118.7 1,098.1 12,764 11,263
Refined consumption 1,074.1 1,112.4 12,500 10,817
Commercial stocks Dec '10 Nov '10 Jan-Dec '10
1,127 1,024 1,127
Source: ILZSG/Reuters

The information contained in this report has been taken from trade and statistical services and other sources which we believe are reliable. MF Global Inc.
does not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this
date and are subject to change without notice. The principals of MF Global and others associated or affiliated with it may recommend or have positions which
may not be consistent with the recommendations made. Each of these persons exercises independent judgment in trading, and readers are urged to exercise
their own judgment in trading. © by MF Global Inc. (2010) 440 S Lasalle Street, Chicago, Illinois, 60605.
2/22/2011 LME METALS DAILY REPORT

* Horsehead Holding has production back up to normal levels, seven months after a deadly explosion at its zinc refining
facility in Monaca, Pennsylvania. "Zinc oxide demand is going to be a little higher this year than it was last year. Overall, we
are going to be about where we were at our peak monthly shipment level in 2010 before the incident, but I think it's going to
take us a few months to ramp up to that level," the company's president and chief executive said.
--------------------------------------------------
LEAD SUPPORT: $2520 / RESISTANCE: $2712

We are at $2567 on lead, down $108/MT, as is getting pummeled, but given recent gains, the short-term uptrend line is still in
place, although just barely.

* The global lead market was in surplus by 48,000 tons in the year to the end of December 2010, a monthly bulletin from the
International Lead and Zinc Study Group showed on Monday. Global refined lead use was 9.353 million tons in 2010, up
from 8.8 million tons in 2009. World refined lead output was 9.401 million tons last year, up from 8.866 million tons the
previous year.

Latest ILZSG global data in thousand tons

Dec '10 Nov '10 Jan-Dec '10 Jan-Dec '09
Mine output (lead
content) 381.9 368.7 4,088 3,847
Refined output 853.7 863.5 9,401 8,866
Refined consumption 867.5 857.1 9,353 8,809
Dec '10 Nov '10 End '10
Commercial stocks (west) 448.4 448.8 432.0
Stocks/cons ratio (weeks) 4.6 4.9 4.7
----------------------------
NICKEL SUPPORT: $23,600 / RESISTANCE: $30,000

Nickel is at $28,800, down $500, and holding up relatively well considering the performance in some of the other metals.

* China's crude steel demand is expected to grow by 2.6-4.6% annually over the next five years, the China Securities
Journal reported on Tuesday, citing the China Iron & Steel Association as a source. CISA is forecasting China's annual
crude steel demand will reach 670-750 million tons for the five years to 2015.
------------------------
TIN SUPPORT: $30,000 / RESISTANCE: $35,000

Tin is at $31,700, down $650, and like nickel, holding up relatively well.

The information contained in this report has been taken from trade and statistical services and other sources which we believe are reliable. MF Global Inc.
does not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this
date and are subject to change without notice. The principals of MF Global and others associated or affiliated with it may recommend or have positions which
may not be consistent with the recommendations made. Each of these persons exercises independent judgment in trading, and readers are urged to exercise
their own judgment in trading. © by MF Global Inc. (2010) 440 S Lasalle Street, Chicago, Illinois, 60605.