Week Ahead: Forecasts and Expectations

Short recollection of the past week:

Firstly, “Things have been fairly quiet today and for the last few days, but it is starting to pick up as we head into May.”

Friday: “Copper hit highs of 5,750 per tonne today and finished trading up $43 on yesterday’s close. Nickel bounced back from a decline earlier in the week with a price hike of $120 per tonne, while tin sits just $100 shy of the $20,000 per tonne mark.

Secondly, “Over the past month, copper inventories [on the LME] have fallen over 16%, while zinc is down 9%, lead 8% and aluminium 6%. All have had recent supply disruptions which may have impacted this.”

Thirdly, “Base metals bounced overnight with volumes improving compared with earlier this week, although lead and nickel are the only metals to register above average turnover.” (inspired by Metal Bulletin)

Next Week:

Following, this is the list of next Week’s happenings along with the dates they will happen on.(inspired by www.investing.com )

 

Monday, May 1:

  • The US Commerce Department reports personal spending. Economists project an increase since March, as they expect improvement in demand at the end of a disappointing quarter.
  • ISM Manufacturing: Economists anticipate a report that US manufacturing growth slowed in April, after doing so during March as well. That’s after rapidly advancing to a 2.5 year-high in February. Could equities follow?
  • US Treasury Secretary Steven Mnuchin will be interviewed by Fox at the Milken Institute Conference. Note: Mnuchin has been partially responsible for the dollar’s decline this year. Also he repeatedly expressed that too strong a dollar may hurt short-term economic growth in the US.

 

Tuesday, May 2:

  • The Reserve Bank of Australia will announce its monetary policy decision. Its benchmark interest rate has remained unchanged since September
  • Russian President Vladimir Putin and German Chancellor Angela Merkel meet for talks on economic sanctions. This meeting has the potential to create wild fluctuations in the Russian ruble.
  • The FOMC begins its two-day monetary policy meeting.
  • The BOJ releases the minutes of its March policy meeting
  • Economy: US auto sales
  • Energy: American Petroleum Institute oil inventory weekly report.

 

Wednesday, May 3:

  • The FOMC is expected to keep the Federal Funds rate unchanged within a target range of 0.75-1.00 percent.
  • Economy: ADP employment for April, Markit Services PMI (April final) and ISM NON-Manufacturing Index for April
  • Energy: US Energy Information Administration weekly crude oil report

 

 

Second Half of the following week:

 

Thursday, May 4:

  • UK local elections. Following, Results may indicate the outcome of the general elections in five weeks.
  • However, ECB President Mario Draghi will speak at event in Lausanne, Switzerland. The euro is very sensitive to anything he says.
  • Also, Bank of Canada Governor Stephen Poloz speaks at CanCham Mexico and Club de industrials in Mexico City.

Friday, May 5:

  • Commodities: Commodity Futures Trading Commission report on futures and options weekly positions, Baker Hughes US weekly rig count.

Saturday, May 6:

  • Berkshire Hathaway annual shareholder meeting.

 

In conclusion, the beginning of May is holiday in Europe, while U.S. market functions as usual. This is going to be an exciting Week, and we will witness the outcomes of important situations together.

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How North Korea gets its oil from China

CNPC

 

UN Security Council decides whether to tighten the sanctions screws on North Korea. The country’s increasingly isolated government could lose a lifeline provided by state-owned China National Petroleum Corp (CNPC).

For decades, the Chinese oil giant has sent small cargoes of jet fuel, diesel and gasoline from two large refineries in the northeastern city of Dalian. And also some other nearby plants across the Yellow Sea. All to North Korea’s western port of Nampo. Nampo serves North Korea’s capital, Pyongyang.

Firstly, CNPC controls the export of crude oil to North Korea, an aid program that began about 40 years ago. Crude goes through an ageing pipeline that runs from the border town of Dandong to feed North Korea’s oil refinery. The Ponghwa Chemical factory in Sinuiju on the other side of the Yalu river. It splits the two nations. The plant makes low-grade gasoline and diesel.

There are some unreported details about CNPC’s deals with Pyongyang. About how it came to dominate that business. Explaining the two countries’ relationship. What’s at stake, as decades of close ties sour badly because of growing concerns about North Korea’s missile and nuclear programs.

 

 

Donald Trump’s administration

 

U.S. President Donald Trump’s administration is focusing its North Korea strategy on tougher economic sanctions. Possibly including an oil embargo. Also a global ban on its airline, intercepting cargo ships. Finally punishing Chinese banks doing business with Pyongyang.

Secondly, North Korea imports all its oil needs, mostly from China and a way smaller amount from Russia.

It bought about 270,000 tonnes of fuel last year, according to China’s customs data.

 

 

Oil Embargo & North Korea trade

 

In North Korea, diesel is critical for farming, especially at this time of year. Ahead of the planting season and also around October for harvesting. Gasoline is mainly used by the transport industry and the military.

The Global Times, a Chinese magazine whose stance does not necessarily reflect official policy, earlier this month raised the possibility of cutting oil shipments to North Korea if it were to conduct another nuclear test.

  • “China could potentially be convinced to cap volumes like they did with coal. At the United Nations Security Council as part of a new sanctions resolution following another nuclear test.” (Reuters)

“CNPC has all along been really politically minded among state energy firms, aiming for that role of North Korea’s dominant supplier even if the business makes little money.”

Any loss of the North Korea trade will have only a tiny effect on Dalian. Dalian’s two refineries having a combined capacity to process over 600,000 barrels of crude oil per day. Which is about 40 times North Korea’s requirements.

Pyongyang’s increasing nuclear and ballistic missile tests have already put the brakes on the trade. Beijing quietly suspended a decades-long aid program of 50,000 tonnes annually of aviation fuel in 2013. The government officially announced a ban on jet fuel only, last June.

Russia appears to have replaced China as the top supplier of jet fuel.

 

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Last week summary

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Sunday news:

  • China Manufacturing PMI fell to actual 51.6 (while forecast was 51.6)
  • Tomorrow is the International Holiday. Labor Day, May the 1st.

 

Last Week’s Trade

Base metal prices on the London Metal Exchange were highly up at the end of trading in Friday April 28, with aluminium the only one to see a decline in price.
After steady increases across the board during premarket trading in Friday, base metals on the LME saw little change as it heads in to a three-day weekend.
One trader said: “Things have been fairly quiet today and for the last few days, but it is starting to pick up as we head into May.”

Friday: Copper hit highs of 5,750 per ton and finished trading up $43 on Thursday’s close. Nickel bounced back from a decline earlier in the week with a price hike of $120 per ton, while tin sits just $100 shy of the $20,000 per ton mark.

“Over the past month, copper inventories [on the LME] have fallen over 16%, while zinc is down 9%, lead 8% and aluminium 6%. All have had recent supply disruptions which may have impacted this.” (ANZ)

“Base metals bounced overnight with volumes improving compared with earlier this week, although lead and nickel are the only metals to register above average turnover.” (Marex Spectron)

The exchange will resume trading on Tuesday May 2 because of the May Day holiday on May 1.

Copper price – upwards trend 

The three-month copper price rose $43 to $5,735 per ton at the close of trading.

“Copper is starting to look up. Much of the overhang of speculative longs has been sharply reduced; this means it can react to news as it comes in.” (Ole Hansen)

Copper inventories fell a net 2,775 tons to 259,728 tons. Major copper producers BHP Billiton, Freeport-McMoRan and Antofagasta lowered their production forecasts for 2017 amid operation disruptions.(Metal Bulletin)

BHP Billiton has cut its copper production guidance for the 2017 financial year again because of the 44-day long strike at its Escondida mine in the first quarter, following a 2% reduction on its guidance in the fourth quarter of last year.

 

Aluminium price falls

 

The three-month aluminium price fell $12.50 but remained above the $1,900 per ton mark. It finished trading at $1,911 per ton. Aluminium stocks fell again by 7,325 tons to 1,945,357 tons. Nickel is starting to recover from sharp declines earlier in the week. It rose $105 per ton at Thursday’s finishing and saw an increase of $125 per ton in Friday. Nickel’s three-month price finished trading $120 per ton higher than Thursday’s end at $9,450. Inventories for nickel slipped 30 tons to 379,644 tons.

Zinc saw an increase of $26 to $2,623 per ton. Stocks rose 875 ton to 349,050 tons. The three-month lead price rose $44 to $2,249 per ton. Stocks fell 125 tons to 165,275 tons.

 

The three-month tin price increased by $75 to $19,900 per ton – it has been fluctuating between $19,800 and $19,900 per ton over the past month. Inventories rose 65 tons to 3,015 tons.

 

 

 

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Norilsk Nickel is about to sue Botswana’s government for $277 million

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Today, The Norilsk Nickel said they would start a legal law action against Botswana’s government, due to their imprudent trading that goes beside their deals.

Norilsk Nickel Group is going to initiate legal proceedings in Botswana. Seeking to collect more than $277 million from the country’s government over asset selling transaction. For its involvement in the “reckless trading” of BCL Ltd and BCL Investments Proprietary Ltd.

 

The announcement

It plans to sue the government for $277 million. Plus adding damages and other costs owed to the company in relation to the sale of a 50% interest in the Nkomati mine in South Africa. It also intends to claim a further $6.4 million in relation to the sale of the Tati mine in Botswana.

“Norilsk Nickel will ask for a court order making the government responsible for paying all of the liabilities due from BCL under its agreement with Norilsk Nickel and the costs of the intended court proceedings.”

“It would appear that the Government of Botswana is in negotiations with potential investors about a possible sale of BCL. Norilsk Nickel reiterates its rights in relation to the Nkomati and Tati transactions and will continue to seek the repayment of the outstanding debts due to Norilsk Nickel by all legal means.” (Metal Bulletin)

 

The agreements dating from 2014

The company agreed to sell its operations in Africa to BCL for a total price of $337 million. It happened in October 2014. This amount was later reduced. Due to an agreed price concession requested by BCL and Botswana’s government.

They designed Nkomati mine deal to guarantee the long-term future of BCL’s operations. By securing the supply of concentrate to its smelter in Selebi Phikwe, Botswana. 

“BCL always relying historically on financial support from the government to survive. And, in view of BCL’s financial position, most, if not all of the funding for the Nkomati deal was coming from government. Or  the government had to be guarantee it.

When it became an obligation for BCL to buy Nkomati on 13 September 2016, BCL and the government didn’t made attempts to complete the deal. In clear breakthrough of the agreement with Norilsk Nickel.

 

Botswana’s officials notified

 

In October 2016, they imparted that BCL had been put  into provisional liquidation by the government. So it no longer had any obligations in the front of Norilsk Nickel.

The company “tried on numerous occasions, and through numerous channels, to reach a satisfactory and amicable resolution, but none has been forthcoming. Therefore they have been left with no other option but to purse a resolution through legal channels.”

According to Norilsk Nickel, they served the notice of legal proceedings on Botswana’s attorney general, minister of mineral resources, green technology and energy security, and the minister of finance.

The Government of Botswana is the ultimate shareholder of BCL through its corporate vehicle MDCB. (Metal Bulletin)

 

Facts about Norilsk Nickel

 

Norilsk Nickel is a diversified ore mining and smelting company. Also the world’s leading nickel and palladium producer. It operates industrial facilities in the Norilsk industrial region. And on the Kola Peninsula in Russia, Finland, the United States, Australia, Botswana and South Africa. Norilsk Nickel has its own global network of representative and sales offices in Russia, the UK, China, the U.S. and Switzerland.

 

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Shanghai Futures Exchange Today: 2nd week that copper inventories fall; Zinc stocks down 26%

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Important to know of Today’s flashing news:

  • United Kingdom Gross Domestic Product (GDP)QoQ fell to actual 0.3% (while forecast was 0.4%)
  • UK GDP year on year fell bellow the forecast to actual 2.1% (2.2% forecast)
  • European Consumer Price Index (CPI) YoY grew to actual 1.9% (while forecast was 1.8%)
  • Russian Federation Interest Rate Decision fell to actual 9.75% (while expected was 10.00%)
  • Canada GDP MoM rose to actual 0.6% (while expected was 0.3%)
  • US GDP QoQ rose to actual 2.1% (forecast was 2.0%)

 

Shanghai Futures Exchange

Shanghai Futures Exchange: Zinc inventories, approved stockrooms fell 40,312 tons – or 25.9% – over the past week to 115,040 tons. As of Friday April 28, the biggest reduce between the SHFE base metals happened. 

The most exterior deliveries this week were in Guangdong district. With 29,982 tons, while Nanchu saw the most stock exit from a single repository – 29,177 tons left its sheds this week.

Growing expectations of tightening supply in the base metals could be behind the fall downs seen in SHFE and London Metal Exchange stocks.

“In the opinion of the International Lead and Zinc Study Group (ILZSG), the global zinc market will see a high supply deficit for the second consecutive year in 2017. The ILZSG puts this deficit at 226,000 tons. Which is only a little lower than the figure predicted six months ago. As with lead, supply and demand for zinc are expected to grow by the same amount [namely 2.6%]. If so, the zinc market will be significantly undersupplied for the fourth time in the last five years.” (Commerzbank) (Metal Bulletin)

Past month recollections & positive future expectations

“During the past month, all base metals have had recent supply disruptions. Copper inventories [on the LME] have fallen over 16%. Also, zinc is down 9%, while lead 8% . Finishing with aluminium failure for 6%. Recent supply disruptions  maybe had impact on this.”

“Still, economic data has also been relatively positive. Predicting that this drop is likely to be only a short-term phenomenon.”

 

 

 

Aluminium and nickel stocks up; others see a decline 

SHFE copper stocks fell 10,830 tons or 4.5% over the past week to 229,361 tons with Shanghai district seeing the most stock – 10,183 tons – leave its sheds, while SIPG Logistics saw the most red metal exit a single warehouse with 7,832 tons.

At the same time Aluminium stocks rose. 12,544 tons to 391,578 tons in the week ended April 28.
Lead stocks at SHFE dipped 218 to 72,070 tons as of Friday.
Nickel stocks at SHFE-bonded warehouses rose 439 tons to 84,334 tons as of Friday.
SHFE tin stocks fell 19 tons to 2206 tons over the past week.

 

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U.S. refiners expect that strong export will boost margins and alleviate high product inventories

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Refiners

U.S. refiners have come out of sustention season, betting that big exports to Mexico and South America will help alleviate high product inventories. And backup margins as the critical summer driving season is close.

The first page of profits results from several large independent U.S. refiners. Which showed that they are not chasing U.S. gasoline profits. They already posses high inventories and steady-but-not-spectacular demand. They are actually taking advantage of demand from places like Mexico and South America, where sputtering local refineries cannot meet customer needs.

The biggest Companies

Marathon Petroleum Corp (MPC.N) expects to process more crude than ever in the second quarter, the company said on Thursday.

“The export book continues to be strong.” Gary Heminger, Marathon CEO said Thursday. Taking notice that he expects company exports to grow from about 200,000 bpd earlier this year to 300,000 bpd in the second quarter. They expect it to process about 1.82 million bpd in the second quarter.

– Valero Energy Corp (VLO.N), the largest U.S. independent refiner by capacity, said it expected its 15 refineries to run up to 96 percent of their combined capacity of 3.1 million barrels per day (bpd) in the second quarter. (Reuters)

There is a worry, however, that high run rates may overstep the ability of refiners to export products. U.S. gasoline inventories, which had been drawing down, have rebounded to uncommonly high levels for the season, sapping refining margins.

CEO of CVR Energy Inc (CVI.N), Jack Lipinski, said he fears a repeat of last year. When high inventories crushed margins. The company’s two refineries are landlocked and have no direct access to export markets.

“Even though we are seeing exports increasing, the increase in production is offsetting that.” (Lipinski)

Refinery crude

Refinery crude hit a record 17.3 million bpd last week and capacity utilization rates hit their highest level since November 2015.

“Right now, we are running at summer peak levels. If we stay at this level for several months, rising inventories will overwhelm exports. If we stay at lower levels, then exports can help balance inventories.” Mark Broadbent said.

The four-week average for exports of finished motor gasoline jumped to 643,000 bpd from 395,000 bpd a year ago while exports of distillate fuel oil climbed to 1.11 million bpd versus 1.01 million bpd a year earlier.

Anyway, while gasoline export loadings to Latin America have been anchored in the 600,000-bpd range for the past couple of months, march’s middle distillate export loadings were at an 11-month low. Matt Smith, who tracks cargoes for New York-announced this.

Gulf & East Coast refiners

U.S. refiners in the Gulf Coast, have cashed in on soaring demand for refined products from Mexico, even as margins CL321-1=R have languished at the lowest levels in about seven years seasonally.

East Coast refiners are stepping up exports of diesel despite a regional deficit of the fuel as strong overseas demand. Particularly in Europe, because it is proving more profitable.

  • “It’s a distillate world out there. Ultimately the narrowing in gasoline’s premium to diesel RBc1-HOc1 should prompt more diesel refining, tightening gasoline supplies.” That spread hit a four-year seasonal low on Thursday. 

 

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Base metals prices closed lower today, while nickel recovered some past lost

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Firstly, Aluminium had the hardest hit at the end of today’s trading. Lead and Nickel prices ended higher, with nickel recovering some lost ground from previous sessions.
Wednesday the 26th  was the Nickel lowest fall since June 2016, which hit it pretty strong. While today, on LME, it finished more than 1% higher.


Aluminium finished failing more than 2% at the kerb. Still, a test of psychological resistance at $2,000 per ton remains in play.

“The USA has opened a trade investigation which could lead to a curb on imports on aluminium and no doubt fuels the rumours of impending potential China capacity cuts,” Marex Spectron’s Alastair Munro said. (Metal Bulletin)

Movement of afternoon selling  wave has been apparent on the LME over the last few weeks; triggering an algorithmic trading. It seems it appeared again this afternoon.

It is possible that the Chinese sellers (with their absence) affected the markets hard today. In fact, they are out until next week because of their May Day holidays.

Copper falls $23/t

After consistent price gains earlier this week, three-month copper price ended $23 lower at $5,692 per ton. Copper inventories fell a net 900 tons to 260,575 tons. BHP Billiton has cut its copper production guidance for the 2017 financial year. Again due to the 44-day long strike at its Escondida mine in the first quarter. Following a 2% reduction on its guidance in the fourth quarter last year.

Meanwhile, due to the significant impact of the strike at Escondida and the production abbreviation at Freeport’s Grasberg, Rio Tinto has also revised its 2017 copper production guidance downward. After reporting a 37% decline in first-quarter copper output.

“Supply disruptions and labor disputes will have the potential to squeeze prices higher still and, with macro tailwinds suggesting robust demand growth, we expect prices to trade on the floor at around $5,550 per ton.” (Sucden Financial forecast)

 

Lead and nickel prices increase, other base metals down

 

Nickel recovered slightly after yesterday’s sharp decline – it rose $105 to close at $9,330 per ton. Inventories slipped 336 tons to 379,002 tons.

The three-month lead price ended $20 higher at $2,205 per ton. Stocks fell 350 tons to 165,400 tons

The three-month aluminium price fell $40 to end at $1,925 per ton. Aluminium stocks fell again but by the smaller margin than in recent sessions, down 3,925 tons at 1,652,200 tons.

The three-month zinc price fell $29 to conclude at $2,597 per ton. Stocks were down 825 tons to 349,925 tons.

The three-month tin price fell $75 to $19,825 per ton – it has been fluctuating between $19,800 and $19,900 over the past month. Inventories fell 20 tons to 3,020 tons.

The dollar index was recently 0.19% higher at 99.14.

 

U.S. Tax Code

 

Yesterday, president Donald Trump and his administration introduced a revamped US tax code, which buoyed equity and broader markets. But after closer inspection and evaluating the timetable, market participants grew more hesitant that an overhaul would be a timely affair.
“Tax reforms announced by the Trump administration yesterday have so far failed to bolster price sentiment. Largely because the market is becoming increasingly skeptical about just how “huge” tax reforms and proposed fiscal spending will be for US growth. And also for the metal demand.”

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Small price increases for LME base metals; only zinc declines (27.04.)

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Another morning of wispy price increases today, on the London Metal Exchange. Following average gains of 0.8% on Wednesday.

Zinc was the only base metal to see a decline this morning, falling just $2 per ton. All other metals recorded small increases.

Copper prices were followed by the news that major copper producers BHP Billiton, Freeport-McMoRan and Antofagasta had lowered their production forecasts for 2017 due to operation disruptions. The three-month copper price continued to rise, currently trading at $5,719.50 per ton.

Nickel hit its lowest since June 2016 at the kerb of trading yesterday, but rose $40 per ton during premarket trading this morning.

“On balance, we remain mildly bullish for the base metals’ fundamentals but volume on the LME remains low, so it may take a pick-up in volume before prices become more directional again.” (Metal Bulletin senior analyst William Adams.)

Copper price rallies

 

  • The three-month copper price rose by $4.50 to $5,719.50 per ton – this is the fourth day in a row the copper price has increased.
  • Inventories fell 900 tons to 260,575 tons, a fifth consecutive day of decline. 
  • Sucden Financial noted in its Q2 metals forecast: “Supply disruptions [for copper] and labor disputes will have the potential to squeeze prices higher still and, with macro tailwinds suggesting robust demand growth, we expect prices to trade on the floor at around $5,550 per ton.”
  • BHP Billiton has cut its copper production guidance for the 2017 financial year again due to the 44-day long strike at its Escondida mine during the quarter ending March 31, following a 2% reduction on its guidance in the fourth quarter last year.
  • Rio Tinto has also revised its 2017 copper production guidance downward after reporting a 37% decline in first quarter copper output due to the significant impact of the strike at Escondida and the production curtailment at Freeport’s Grasberg.

All other base metals rise; Zinc decline

The three-month aluminium price continued its premarket trend of the week with a small increase. It rose $5.50 to $1,969.50 per ton.

Aluminium stocks fell again, but by the smaller margin that we have recently been seeing; they dropped just 3,925 tons to 1,652,200 tons.

Nickel rose $40 to $9,265 per tons, as it tries to recover from freefalling prices over the last few days. Nickel stocks were down 336 tons to 379,002 tons.

Zinc was the only metal to see a price decline. The three-month zinc price fell $2 per ton to start trading at $2,624 per ton.

The three-month lead price saw an increase of $6 to $2,191 per ton and Inventories fell 350 tons to 165,400 tons.

Tin rose $10 to $19,910 per ton, and it looks to bounce back above the $20,000 per ton mark. Stocks for tin fell 10 tons to 3,020 tons.

Currency moves and data releases

  • The dollar index was up 0.01 to 98.96.
  • In other commodities, the Brent crude oil spot price was down 0.62% to $51.13 per barrel.
  • The UK FSTE 100 was down 38.22 (0.52%) to 7,250.50.
  • In data, US crude oil inventories saw a decline of 3.6 million. The stronger-than-expected decline is crude oil inventories is boosting oil prices, which in turn exerts upward pressure across the metals complex.
  • The Gfk German consumer climate for April was 10.2, up on the previous rating of 9.8. The Spanish unemployment rate for Q2 of 2016 was 18.8% – higher than the forecasted 18.6%.
  • The economic agenda is busy today with a host of US data out, including on core durable goods orders, unemployment claims, goods trade balance and pending home sales.

 

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Trump Administration sets to checking the national security probe of aluminum imports

Once again, but this time for aluminium, U.S. launched an investigation to see if Aluminium imports from China and other countries damage national security. This step could lead to import restrictions on the metal.

Wilbur Ross, Commerce Secretary says investigation was similar to one announced last week for steel imports.

Firstly, unfairly traded imports were putting on the U.S. aluminum industry, causing several domestic smelters to close production in next few years. Ross told reporters the probe was lead by the extreme competitive pressures. Is this the real national security issue or just something called competitive prices? On which the world economy is based.

 

China’s position

China is seriously concerned by the probe and hopes to resolve the dispute through negotiations. As the world’s largest producer and exporter. Of almost all the base metals. Its economy mainly depends on this.

Secondly, The U.S. move is the latest of several potential U.S. actions. Aimed at stemming a rising tide of aluminum imports. The Commerce Department is investigating inducement that Chinese companies are dumping aluminum foil into the U.S. market below cost and benefiting from unfair subsidies.

Thirdly, Ross said part of the justification for the investigation was that U.S. combat aircraft. Such as the Lockheed Martin F-35 joint strike fighter and the Boeing F/A-18 Super Hornet require high-purity aluminum that is now produced by only one smelter, Century Aluminum Co. (Reuters)

Following, He said that company could probably meet U.S. peacetime needs. But not if the United States needed to ramp up defense production for a conflict. The same high-purity aluminum goes into armor plating for military vehicles. And the production of naval vessels.

“At the very same time that our military is needing more and more of the very high-quality aluminum. We’re producing less and less of everything. And only have the one producer of aerospace- quality aluminum.” Ross told a White House briefing.

 

The investigation aims

 

The investigation will determine if there is enough U.S. aluminum capacity to meet U.S. defense needs. And will also assess the effects of lost jobs, skills and investments on national security.

Although Ross said China was a major contributor to the global excess capacity in aluminum production, he said imports from other countries were also causing problems. The U.S. industry faces these problems because the other countries have lower production costs.

“This is not a China-phobic program, this has to do with a global problem,” Ross said.

Last November, a dozen U.S. senators requested that a U.S. national security review panel reject the $2.3 billion acquisition of Cleveland-based aluminum products maker Aleris Corp by China’s Zhongwang International Group Ltd. (Reuters)

Aleris spokesman Jason Saragian says the aluminum probe announced by the Commerce Department was unrelated to the ongoing review of the merger by the Committee on Foreign Investment in the United States (CFIUS).

“The broad inquiry will not affect the pending acquisition, because the transaction does not involve any imports from China.” (Saragian )

 

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Sucden ‘intently optimistic’ about base metals prices in second quarter

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Positive forecasts for Q2 of 2017 could be dependent on whether US fiscal stimulus delivers.

Sucden’s head of client liaison, Steve Hardcastle, said that fresh announcements will be a driver behind a pick-up in prices.

http://www.sucden.com/

Firstly, at the company’s press briefing Today, he noted: “We are currently at the lower end of the range. Across all base metals, and want to strengthen later in the quarter. Short term, the markets are not brilliant at the moment. But fresh announcements from the US in particular will probably inspire further strength. This is April after all, traditionally a time when things should pick up.”

 

Optimistic about the market

Secondly, intently
optimistic about the market, he reflected on the first quarter of the year. And explained that the global economy started the year “on the front food”. As president Trump was sworn in to office and promised increased fiscal stimulus, looser regulation and taxation, which caused global equity indices to continue impressive rallies.

“Nothing is yet to materialise in terms of Trump’s infrastructure spending. Right now the market is buying the rumour.”  “We’re cautiously optimistic about the market. Let’s see how we perform for the remainder of the quarter. And by the end of the year we should see some real numbers as the Trump administration gets its agenda sorted.” (Kash Kamal, senior analyst.)

 

Aluminium production cuts in China

The announcement of Chinese capacity cuts will help support prices towards the end of 2017. Company expects some volatility in the aluminium market. As any restarts of idled capacity could see prices reverse sharply.

Funds remain bullish as calendar spreads are suggesting a tighter outlook. The cash-to-three-month spread widened to $10.25 per ton contango at the end of March from $4.25 contango at the end of February.

“The LME stocks are down to seven-year lows. This is a far cry from the four million tons a few years ago. A lot of the reason behind this is the [production] cut backs in China for environmental reasons and cost.”  (Steve Hardcastle)

Predictions about aluminium prices will range $1,850-2,000 per ton for the second quarter. The company predicts a lower than anticipated 2017 forecast of $1,765 per ton. Easing slightly to $1,740 per ton in 2018.

 

Tighter outlook for copper 


The broker forecasts tightness in concentrates, which will see an increasing appetite for higher prices towards the end of the second quarter.
“Supply disruptions and labour disputes will have the potential to squeeze prices higher still and, with macro tailwinds we expect prices to trade on the floor at around $5,550 per ton.”

It noted that Comex and the LME net speculative positions are showing a bullish outlook for copper, with Comex net spec longs at 60,773 contracts and LME net spec longs at 60,395.

Copper forecast for second-quarter prices is predominately at $5,550-6,200 per ton, with the broker predicting spikes towards $6,400 per ton.

 

Tight concentrates market supports zinc prices 

Meanwhile, a tight concentrates market will continue to support a refined zinc metal deficit and bolster the bullish outlook for zinc in the second quarter of the year.

Fundamentals will continue to support prices, targeting recent highs of close to $3,000 per ton, according to the report. Sucden noted that momentum is starting to build for higher zinc prices as calendar spreads remain tight. Both near dated and long dated. Alongside this, LME and SHFE warehouse stocks continue to decline, adding further support to price hikes.

“As a bullish outlook seems to be dominating 2017 so far and looks set to persist for some time.. In part aided by Glencore’s shuttering of some 500,000 tpy, one key question remains: when will they restart this idled capacity.”

“On the demand side, consumption is expected to grow a steady 2% this year and with a tight outlook for both refined metal and concentrates, the world largest zinc mine could be tempted to bring some of its tonnage back online.”

Predictions about second-quarter price range of $2,500/2,550-3,000 per ton for zinc, with the 2017 price forecast at $3,211 per ton and rising further to $3,875 in 2018.

Supply deficit underpins support for lead prices 

A continuation of a supply deficit underpins support for lead prices, but the current jittery macroeconomic backdrop could pose obstacles to sustaining higher prices for lead.

“There is a shortage of scrap around at the moment which helps. The market is starting to look tight and the outlook from traders is fairly bullish. Looking forward, the source of lead concentrate is declining so we’re reasonably happy about market prices rising,” Hardcastle added.

Sucden’s prediction for lead was $2,200-2,540 per ton in the second quarter, with short-term spikes either side. The 2017 forecast was at $2,292 per ton growing to $2,400 in 2018.

 

Nickel volatile due to Indonesia/Philippines 

Nickel prices were swinging either side of $10,000 per ton since the start of the second quarter. With investor settlement heavily influenced by continuing developments in the Philippines and Indonesia.

“While the market is expected to record a substantial deficit this year, to the tune of 93,000 tons according to Wood Mackenzie data, at the current market price it seems investors remain unconvinced that nickel prices can regain territory back above $11,000 per ton.”

Long-dated calendar spreads are trading with increased volatility and price spikes are anticipated. Sucden also noted that LME warehouse stocks are relatively stable for nickel and there is no indication of immediate tightness.

For the second quarter, SF is predicting a range of $9,000-11,000 per ton for nickel. A potential for spikes on either side on any speculation of supply disruptions in Indonesia and the Philippines. The 2017 forecast is $10,289 per ton, while the 2018 forecast is $9,902 per ton.

 

Tin prices well supported 

In 2Q17 Tin prices are expected to be well supported at $19,000 with a preferred upside outlook for nearer the $21,000 per ton mark, Sucden said.

Warehouse stocks are continuing to fall down, currently staying at 3,095 tons. Cancelled warrants currently only represent 10% of the total and therefore there is no immediate concern of tightness.

In conclusion, The 2017 forecast for tin prices is currently $20,570 per ton, and Sucden’s forecast for 2018 is not much different at $21,700 per ton

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