LME Metals, Nickel, Aluminum, zinc, Tin, Copper

Elliott’s BHP acquisition: Dividends Yes; Total Victory – Not yet;

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Who lightened the area?

Firstly, if we observe the subject closely, it is inviting to consider BHP Billiton as the one who gouged into demands by Elliott Advisors. As well they seem to have together agreed about selling BHP’s U.S. onshore oil & gas business.

The main thing to mention is that in an official letter from April, Elliott had 3 major points. Two of which were depriving the U.S. shale assets and pushing up the shareholder returns.

But the thing we ask ourselves is, whether the BHP’s decision was firmly inspired by Elliott.. Or it would have happened either way.

Observing the dividends, it is clear that BHP would follow it’s bigger fellow Rio Tinto moves. Trying to return as much cash as possible to their investors. In particular the huge boost of free cash flow coming from higher prices of their base: Iron ore and Coal.

 

Overview

Last Tuesday BHP said that it would triple its final dividend to $0.43 a share. Which is slightly below the expectations of analysts.

”The world’s largest mining company also posted a five-fold rise in annual underlying profit to $6.7 billion for the year to June 30, which was below the market consensus for earnings of around $7.4 billion. (Reuters)”

It could be argued the increase in the dividend was generous.

Second thing worth mentioning, is that BHP decided to pay down net debt. The debt was at the beggining reduced at $10 billion, and this move is definitely to strengthen the company’s balance sheet.

Furthermore, it is possible that Elliott would have preferred the FCF being generated by BHP & used for a share buyback. Makes it much more effective than being used in cutting debt.

“We have determined that our onshore U.S. assets are non-core.”

“We are actively pursuing options to exit these assets for value.” BHP said in its results presentation (Reuters)

Elliott definitely deserves credits for finding a way to enter BHP’s underperforming assets. It is also clear that at some point they saw that $20 investment in shale, made 6 years ago, was not the greatest move they made.

 

Investors Aims

What is likely to be of more relevance to Elliott, and other investors, is how sustainable are BHP’s increased dividends.

When making a commentary, the company was very cautious. Stating that Crude Oil prices will trend higher. Steel demand will slightly grow. While the cost curve for the iron ore is going to continue flattening.

BHP is seeing a slight uncertainty in China’s metallurgical coal; but the outlook for overseas market is in all positive.

In tanto, it seems that BHP isn’t expecting the prices of its major commodities to rally strong. But, it equally it is not forecasting any important declines.

In conclusion, the company should remain a strong generator of cash.  Adding & assuming it remains committed to capital discipline. Returns to main shareholders can increase. But, it’s highly unlikely that the massive jump in dividends, as the one from June 30th will repeat soon…

 

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Base Metal Market News, August the 21st

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Top 5 things to know today – global markets:

  1. War games start on Korean peninsula
  2. Renewed U.S.-North Korea tensions causing global stocks slide
  3. Dollar still remains defensive on U.S. political tensions
  4. Oil started the week a few percents lower
  5. Maersk sells oil unit to Total for $7.5B as M&A heats up

For detailed info on these subjects visit: http://www.investing.com

Some useful analysis: https://www.reuters.com/article/global-metals-idUSL8N1L22ES

 

Last Three months – overview:

Lately, there has been some really crazy movement happening in the base metal markets. Observing the All-along summer period, we see few metals hitting their highest level in a decade.

Firstly we must pay our attention to the period of may/juni/july/august 2017. During the whole  summer period, base metal markets trade showed some astonishing positive trends.

Secondly, along with the huge volatility which took place in july, the base metal prices now are hitting the great record levels.

Current prices :

Today, the Zinc price is peaking to the level of 3180.50 ! These levels were not seen since the far 2007.

Furthermore, observing the copper and aluminium prices.. Due to cutted supply in energy markets, their prices are hitting the highest prices since 2014 and 2015. This is definitely a very positive incline in all the base metal prices. Which also makes investors confident about further buying\selling steps.

All of this rallies are happening due to tightened supply. And certainly growing demand in the markets. Global demand is supporting the price rallies and this is spreading fast.

 

China’s demand:

Despite China’s industry showing a slight fade in the metal demand in July, the IMF made average growth forecast for period regarding 2018-2020. As China’s zinc production fell in July, lead output rose by couple percent in this period. Currently Chinese infrastructure now is developing and is kept at solid activity showing strength. 

Aluminium output in China fell 8.2 percent in July as capacity cuts started to take their actions. China makes more than half the world’s aluminium, and it is obviously putting China in the most important world’s suppliers.

 

Copper price movements:

Observing the copper prices and their movement, we also notice the important inclines. From may’s high of about 5786, to august’s high of 6596. Freeport power plant in Indonesia was currently hardly affected by floods taking place there. Due to these floods, one of the workers is missing.

Benchmark copper finished 2.4 percent higher in Friday the 18th of august, at $6,532 having touched $6,576.50, the highest since November 2014.

 

Nickel & lead:

Nickel is currently trading at $11,305,  which is the record level regarding the whole summer period, which is then the highest ever since 2014!

Observing the current lead prices, it is trading at $2376.

In all, having observed the summer 2017 period, we can bring the fine conclusion that base metal markets are quiet recovering.

“Momentum funds are buying the strength, piling in as the price rises.” (Reuters)

“The rallies had been supported by expectations of strong global demand and tight supplies.” (Reuters)

 

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Western Australia state asks Iron ore Miners to pay cash in advance

 

Important to know on May 29th:

  • Global stocks drift in thin trade; U.S., U.K., China closed
  • Dollar steady in quiet trade; British pound jumps
  • Oil dips as traders weigh U.S. drilling, OPEC cuts
  • Mario Draghi takes center stage
  • North Korea fires another ballistic missile

 

Iron Ore Market

Western Australian state officials are going to ask BHP and Rio Tinto to pay in advance multi-billion dollar fee. In order to exchange the cancelling ongoing intrude on their Iron ore outputs.

Australian state is firmly convinced it will succeed with the current intentions, but miners are not likely to agree. In fact, if they win significant benefits they can possibly consider the option. The mineral-rich state has had more than $23 billion in debt following the end of a mining boom.

Considering all the options, the BHP and Rio Tinto are ready to pay about $3 billion in exchange for cancelling a A$0.25 a tonne ongoing levy. This iron ore levy in their mines could last for further 50 years.

Ben Wyatt won a state election in March this year. The state treasurer supports left Labor party, and he said the proposal is still in very early stages.

“It’s an option that could only be close to crystallizing if you had a range of things in play, one, obviously the engagement and agreement of the miners.” (Wyatt)

 

Miner comments

Rio Tinto spokesman said that the company rejected the payout proposal, and that it does not want to reconsider it. While the BHP spokesman refused to comment on this subject.

The miners will meet with government officials this week. But there are some rumors, that the proposal could possibly inspire some unwelcome precedent.

“The last thing Rio and BHP want is to become the state’s go-to ATM every time there’s a financial crisis.”  (Reuters source)

The A$0.25 a tonne levy raised around A$150 million for Western Australia last year, based on the two company’s combined output of about 600 million tonnes of iron ore. The state earns far more from a 7.5 percent royalty based on the value of their sales, which contributes well over $2 billion a year to state coffers. (Reuters)

 

The conditions

Miners will accept the proposal only if they benefit substantially.

“There would have to be a motivation from the miners’ point of view unless they were feeling philanthropic.” Said Pietro Guj, the university professor.

The current plan follows a proprosal by a rival party in the lead up to the March election.  It said  the levy should be raised to as much $5 a tonne, but this proposal was condemned by the miners.

Only Rio Tinto and BHP pay the rental fee which applies to mature projects. The other projects, including those owned by Fortescue Metals Group and Gina Rinehart’s Hancock Prospecting would be liable to pay it from 2023.

 

 

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Short Overview of main Weekly deals & economic events

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United States

Nasdaq and S&P 500 overcame the last week’s losses. They were at the record levels on Friday’s closing, observing the period of two weeks. Strongly supported by the surge in tech stocks, as well as the political unrest which is taking place in U.S. these days.

 

OPEC & Oil

OPEC and non-OPEC countries have made a deal to extend production cuts for a period of nine months, until March. The deal was made on Thursday. The idea of extending the glut came after the output cuts agreed in November last year failed to rein in the glut in supply. Which has pressured oil prices for nearly three years.

Most of the market participants were expecting deeper cuts. So when the meeting started, prices sharply fell right away, which did not leave the traders impressed. The expectations on Cartel were a bit firmer & OPEC was expected to announce deeper cuts.

However, in order to rebalance the market, OPEC must take wise further steps. Also, observing it relations with with non-member countries, they should become closer.

 

Base Metals

 

Firstly, copper prices on LME closed the day on Friday May 26 below their previous closing prices. They have fallen back from three-week highs earlier.

Three-month copper closed the day at $5,657 per tonne. Coming from its previous closing price of $5,724.

Secondly, copper prices rose earlier on news of the escalating 2 month long strike at the Grasberg mine – the world’s second largest for copper. Where strikes are set to roll into a second month over June. But prices fell back again by the close.

Thirdly, aluminium prices traded loosely flat throughout the day. They dipped at the close to $1,951 per tonne after closing the day on Thursday at $1,960. Aluminium stocks saw a 31,975-tonne injection in South Korea on Friday. Such a move could see prices trade lower, despite the spectre of Chinese cuts hanging over the market.

“While questions remain around the efficacy of proposed Chinese capacity cuts, with the bears pointing to high semi exports as signs that production has actually increased, there is no questioning the buy momentum,” (Alastair Munro)

At friday’s close, the three-month prices of base metals were:
Nickel closed the day at $9,080 per tonne, from its previous closing price of $9,040. Zinc closed at $2,640 per tonne, up from $2,633. Lead closed the day higher at $2,122 per tonne, from $2,084. Tin prices closed at $20,425 per tonne, from $20,400 in Thursday.

 

Brazil’s Vale plans to diversify

 

Fabio Schvartsman, CEO of Vale SA, said that world’s largest iron ore miner plans to resume growth with diversification. And some acquisitions also.

Reporters and market analysts explained that Friday said Schvartsman means to avoid keeping “all eggs in one basket.” Speaking about the firm’s strong reliance on iron ore.

The company is doing a detailed analysis to decide on which operations to expand. For example, its nickel business is not gaining enough profit returns.

Schvartsman has set up working groups in Company, to find out the risks and returns which every of these units gain. The first assessment is to happen in 60 days.

For advises on cost-cutting efforts, Vale has also found a solution. It hired Brazilian consultancy firm Falconi to advise them and help them deal with cost-reduction.

 

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Base Metals forecasts, China’s demand; Weekly overview

U.S. GDP Statistics & Data

By the official info which came out today, the U.S. economy grew faster than initially reported. Observing the period of the first three months of 2017, statistics data show that U.S. economy actually reached the levels among expected. It eased concerns about a potential slowdown in the U.S. trading & economic movements.

According to the Bureau of Economic Analysis’s, GDP went up at an annualized rate of 1.2% in the first three months of 2017. Which makes it well above the previous reading of 0.7%. The 0.7%  was the slowest period of economic growth since 2014.

 

Currencies & commodities

The dollar peaked to a four-day high. Meanwhile it pressured commodity prices across the broad. Mostly as expectations for a June rate hike rose to its highest level this week .

Commodity prices went up, lead by strong dollar’s growth. Which gives the support to the opening markets in Tuesday. Having in mind that Monday is the Memorial Day, and the trading is closed. Tuesday will hopefully be the green light for most of the base metals. Supporting their prices and giving the traders green light for doing businesses.

The GDP growth, which was stronger than expected, can easily lead to the higher commodity prices on Tuesday. The construction power in U.S. as one of the world’s most important economies, could definitely lead to higher demand for base metals.

More than 80% of market participants expect the Federal Reserve to boost its benchmark rate in June, compared to below 70% of traders in the previous week.

The U.S. dollar index rose by 0.20% to 97.34. Which is a very positive movement compared to the previous couple days. When dollar index was facing a downward trends, and that way causing the negative market ambience.

Most noteworthy, copper price saw a downwards trend today, falling for 1.14% to $2.568. Observing the natural gas volatility, it actually rose by 0.76%. Gaining levels of  $3.30.

 

China’s Base Metals Demand

Based on the numbers which show China’s statistics & base metal imports, as well as its use of the base metals in industry, it is likely possible that Q2 & Q3 global base metals market is going to be impacted by China’s strong demand.

Industrial metals markets slightly improved in China, which could possibly lead to the price trends to become higher.

The prices of base metals today were in an upwards trend. Both base metals prices and ferrous metals prices have been positively affected.

China’s role in the industrial metal markets is clear. China has a huge stake in the global output, which depends on its production. But it also has a huge impact in markets if it shows that China’s capacities need more of commodities to cover its needs in terms of demand. Therefore, monitoring trends in the Chinese economy is very relevant.

Beijing is providing its policy of recovering the environment & gaining lower levels in production of base metals if possible. That is causing China to import more of the metals from overseas, in order to fulfill its capacities. Which will probably lead to the higher base metal prices at the start of Tuesday’s ”journey”.

As mentioned before, Monday the 29th is Memorial Day. It is the United States Holiday. It is holiday also for China, due to Dragon Boat Festival. While the U.K. celebrates the Bank Holiday.

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Oil price drops; Base Metals down

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Main economic events in Market Today:

  • U.S. Core Durable Goods Orders (MoM)(Apr) fell to actual -0.2% while forecast was 0.4%
  • U.S. Gross Domestic Product (GDP) QoQ fell to actual 0.7% while forecast was 1.2%
  • U.S. GDP Price Index QoQ rose to actual 2.2% while forecast was 2.0%
  • U.S. Michigan Consumer Expectations came to actual 88.1 while the forecast was 87.0
  • European Central Bank Coeure Speaks

 

Base metals were mostly lower during Asian morning trade today. The Oil price impacted even the base metals movement, and it put a cap on copper price.

“On Thursday, base metals prices had rallied then dropped after the OPEC [Organization of the Petroleum Exporting Countries] announcement and after the dollar strengthened. LME copper prices were supported by issues at Grasberg but gains were checked by concerns over Chinese demand.” (Mailyard Futures, China)
SHFE copper prices will probably continue fluctuating around 46,000 yuan per tonne.

OPEC countries agreed on May 25th about extending the output cuts. However, this had a huge fast impact on Oil prices in negative way. The hedge funds reacted right away, and the global oil price went lower than predicted.
“Since May 15, when the Saudis and Russians announced their intention to extend the cuts for nine months rather than six, prices gained more than $2 in anticipation of an agreement today. Now, prices have roughly returned to May 15 levels,” SG added.

The Brent crude oil price dipped as low as $51 per barrel on Thursday, the lowest since May 15.

Grasberg copper mine strike

Freeport McMoRan Inc said Thursday that mining and milling rates at its Grasberg mine are affected by the extended strike. Also by a “large number” of approximately 4,000 absentee workers. Who were deemed to have resigned.

Increasing labor tension is a further disruption for Freeport. Involved in a long dispute with Indonesia over rights to the giant mine, which has cost both sides hundreds of millions of dollars.

Copper prices leveled three-week highs yesterday.  Concerns about extended disruptions at Grasberg triggered these movements.

“As a result, a large number of these workers were deemed to have resigned, consistent with agreed industrial relations guidelines and prevailing law…”

”When asked to comment, the Union officials were not available.” (Reuters)

The most of Freeport’s 30,000-strong Indonesian workforce is “productively and safely” working.

On May 15, Freeport said the strike is not legal and “voluntary resignation is the consequence” for workers ignoring demands to return to work. The workers who were absent for five consecutive days. (Reuters)

Workers now considered “resigned” are in addition to an estimated 2,000-3,000 workers Freeport placed on absence as of mid-April. At that time, approximately 10 percent of its 32,000 member workforce was “demobilized” under aims to cut the costs

The SHFE September nickel contract fell down for 700 yuan or 0.9% to 75,220 yuan per tonne. It happened  due to concerns over escalating nickel ore exports from the Philippines and Indonesia. And slower demand from the Chinese stainless steel sector.

 

Other base metals lower

Firstly,  July aluminium contract fell 10 yuan or 0.1% to 14,080 yuan per tonne. Secondly, The SHFE July zinc price slipped 40 yuan or 0.2% to 22,205 yuan per tonne.  Following, the SHFE July lead price increased 50 yuan or 0.3% to 15,980 yuan per tonne.

Finishing, the SHFE September tin price decreased 510 yuan or 0.3% to 145,490 yuan per tonne.

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Base metals on LME edge higher today

Main events in today’s market:

  • Oil volatile on expectations of OPEC’s final decision
  • Rate hike odds drop after Fed signals gradual tightening
  • Global stocks move higher after Fed minutes, OPEC in focus
  • K. economic growth revised lower in first quarter
  • Bitcoin rally keeps going; tops $2,600

For further info on these subjects, visit: http://www.investing.com

LME Morning trade

In comparison with yesterday, LME base metal prices went up in today’s morning trade. Those were the slight improvements in prices after yesterday’s weakness.

Yesterday, LME Prices closed down an average of 0.7%. It happened mainly due to Moody’s downgrade of its rating on China. Nickel survived the strongest hit with a 2.4% drop. However later it has marginally recovered, right this morning, trading $45 per tonne higher.
Nevertheless yesterday’s slight lift in dollar price, it has again fallen. And it is currently trading at 96.91. The lower dollar prices are giving back up to the base metal prices.

Most noteworthy, the US Federal Open Market Committee’s (FOMC) May meeting minutes are currently showing some uncertainty over the outlook for US rate increases after June.

“As always, China sentiment this afternoon remains key but assuming that there isn’t [a] complete meltdown. I feel the macro tone will see some demand creep into the base complex on the open of Europe with some key resistance within reach on many metals here just above current levels.”  (Matt France at Marex Spectron.)

Copper, aluminium and tin retrieved upwards momentum. Later, the lead was little changed at $2,077 per tonne. The only anomaly was a minor decline in zinc as it slipped $4 lower this morning.

Copper price stabile

Observing the LME three-month copper price, it was up $16 to $5,898 per tonne. Later the concerns over Chinese copper demand have gained higher levels once more, following a 30% slump in the country’s red metal imports. It happened during the first four months of the year.

China imported 202,626 tonnes of refined copper in April. China April imports saw a decrease 40.7% year-on-year. Observing copper trade and production, the Grasberg mine workers are planning a strike for a month longer. Extending it until July this year. Copper stocks fell a net 4,100 tonnes to 321,575 tonnes.

 

Base metals up

Regarding the three-month aluminium price, it rose $11.50 this morning to $1,956.50 per tonne. In terms of stocks, they continued to tumble. Falling a further 9,475 tonnes to 1,470,550 tonnes. Nickel gained some strength after yesterday’s $245 per tonne dive, it was up $45 to $9,145 per tonne. Stocks fell 954 tonnes to 383,844 tonnes.

Observing the zinc prices, they dethroned the trend with a $4 decline; it is currently trading at $2,631 per tonne. Stocks fell 1,525 tonnes to 335,875 tonnes. Lead’s three-month price was little changed. Going up just $1 per tonne to $2,077. Stocks were down 100 tonnes to 183,400 tonnes. The three-month tin price gained $90 to trade at $20,465 per tonne. Stocks were unchanged at 2,060 tonnes.

 

 

 

 

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SHFE: Copper Prices retreat, Other base metals divergent

Base metals prices and trends on the Shanghai Futures Exchange were on different paths this morning. Copper prices leveled higher after the dollar pulled-back on an uncertain outlook for post-June US rate rises.
”The most-traded July copper contract on the SHFE rose 140 yuan ($20) or 0.3% to 45,920 yuan per tonne as of 03:26 BST. Around 115,000 lots of the contract have changed hands so far. ” (Metal Bulletin)

In the meantime, the three-month copper contract on the LME rose $13 to $5,695 per tonne.

“The weaker US dollar has provided SHFE copper prices with support but the decline in Chinese refined copper imports in April will limit how much prices can rebound…”

Observing the dollar index, it again came under pressure falling as low as 96.96 on Thursday. This happened after the US FOMC May meeting minutes showed some doubts over the odds for US rate increases post-June.

In terms of FOMC minutes, they “were interpreted cautiously by the market as confirming the likelihood of a June rate hike. But also showing some uncertainty over the trajectory for rates thereafter.” The main source of uncertainty is coming from the inflation outlook. National Australia Bank said this morning.

Crude oil prices continued to find back-up in expectations that members of the OPEC will agree to extend their supply cut into next year during their meeting in Vienna today.

Copper

 
Observing the Chinese refined copper imports, they fell 40.7% year-on-year to 202,654 tonnes last month. But at the same time, copper concentrate imports rose 7.7% year-on-year. Observed m-o-m, they fell 16.9%-  to 1.36 million tonnes in April.
Later, The SHFE-LME copper arbitrage remained at a loss on Wednesday. Leveling at $112 per tonne.  While the zinc arbitrage was profitable at $119.
Speaking about copper stocks, the total copper stocks at LME stockrooms fell a net 4,200 tonnes. To a level of 325,675 tonnes on Wednesday.

Other base metals mostly lower


Firsly, the july aluminium contract on SHFE fell 30 yuan or 0.2% to 13,955 yuan per tonne.  Secondly, july zinc price gained 65 yuan or 0.3% to 22,450 yuan per tonne. Thirdly, july lead price decreased 60 yuan or 0.4% to 15,870 yuan per tonne. Following, the nickel contract slipped 120 yuan or 0.2% to 76,150 yuan per tonne. And finally the SHFE September tin price increased 450 yuan or 0.3% to 144,740 yuan per tonne.

Currencies & data  

The Brent crude oil spot price rose 1.2% to $54.48 per barrel as of 03:20 BST on Thursday.

This morning, the dollar index was 0.06% higher. At the level of 97.01 as of 03:20 BST on Thursday. Shanghai Composite index stood at 3,070.32 recently, up 0.2% at 10:18 Shanghai time.
Also worth mentioning, the US existing home sales in April reached 5.57 million. It is below both the forecast of 5.65 million and April’s reading of 5.71 million. While U.S. weekly crude oil inventories fell 4.4 million barrels, far more than expectations of a decline of 2.4 million barrels and the previous week’s reading of a 1.8 million-barrel decline.
UK will announce its second estimate GDP while the USA will release unemployment claims, goods trade balance and preliminary wholesale inventory later today.

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Gold dips impacted by macroeconomic factors

Top things to know in today’s Market

  • China downgraded by Moody’s for first time since 1989
  • Metals slump on China downgrade
  • Fed minutes on tap
  • Gold dips, dollar steady ahead of Fed minutes
  • Oil continues bullish run ahead of OPEC meeting

For further info on these 5, visit: www.investing.com 

 

Gold prices

European trade today saw the plummet in Gold prices. It happened as investors are looking ahead to minutes of Fed Reserve’s latest policy meeting. It will bring out the further hints about the timing of next U.S. rate hikes.

Comex gold futures went down for $6.20, or around 0.5%. To the new price of $1,249.21 a troy ounce by 3:25AM ET (07:25GMT). Meanwhile, spot gold was at $1,249.52.

Previously, on Tuesday, gold lost about $6.00 per unit. Due to lower dollar and its six-and-a-half-month lows

 

Fed meeting

The Fed is going to release minutes of its most recent policy meeting at 2:00PM ET (18:00GMT). Currently, the traders are seeking further insight into the likelihood of higher interest rates in the following months.

The Fed’s publication will also provide some details on the Fed’s agreements about shrinking its huge $4.5 trillion balance sheet.

Interest rates of the United States central bank remained unchanged. This way they gave the positive evaluation to U.S. economy. It will probably still be on track for two more rate hikes of the current year.

U.S. economic data

At the moment, the U.S. economic data is a bit shaken by political turmoil in the White House. So the data combined with possible deepening political unrest is raising doubts over the Fed’s power. And its ability to boost rates as much as it would want. Speaking about the period till the end of 2017.

 

Currencies & data

The dollar index was at 97.32 in London morning trade. It fell to the lowest since November 9. Reaching the level at 96.70 at the start of the week. This happened due to political uncertainty surrounding the President Trump’s administration. It pressured the dollar lower.

Investor sentiment has been hit by fears that the U.S. political system could become swallowed by crisis. It could possibly prevent lawmakers from pushing through tax or spending reforms. Which certainly would not be good for U.S. economy.

On the Comex, silver futures declined 17.3 cent. In percentage that is about 1%, to $16.96 a troy ounce.

Observing the global metals trading, platinum slipped 0.8% to $941.60. While palladium dipped 0.2% to $770.58 an ounce.

Copper futures fell 0.9 cents to $2.587 a pound.

Moody’s Investors Service downgraded China’s credit ratings on Wednesday. And significantly by one notch to A1 from Aa3. Quoting expectations that the financial strength of the world’s second-biggest economy would maybe erode in the coming years.  Because growth slows and are being followed by debt which continues to rise.

 

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BHP enforces to dredge new nickel mines in Western Australia

Today’s Morning trade Global

Base metals prices on the SHFE were mainly lower today. The copper prices were oscillating between slight gains and losses. As consolidation set in following the rally seen since May 19.

The most-traded July copper contract on the SHFE was unchanged at 45,770 yuan ($6,644) per tonne. As of 05:00 BST. Around 163,000 lots of the contract have changed hands so far.

In the meantime, three-month copper contract on the London Metal Exchange fell $45 to $5,669 per tonne.

The existing rally in copper prices since late last week is mostly driven by macroeconomic factors. For example a weaker dollar, stronger crude oil prices, etc… 

“So far this year, SHFE copper prices have tended to move lower after rebounding for a short while. We think fluctuations will continue for copper prices as it seeks its low for this year.” (Beijing analyst said)

“There has been some supply disruptions. But it was not enough to cause prices to surge. Which means the problem could be with demand.”

 

China’s rating

On Wednesday, Moody’s downgraded China’s rating to A1 from Aa3. Happened on expectations that China’s financial strength will erode somewhat over the coming years. With economy-wide debt continuing to rise as potential growth slows.

“While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt. Also the consequent increase in contingent liabilities for the government.” (Reuters reporting on China’s subject)
After falling to as low as 96.79 on Monday a rebound in the dollar index on Tuesday also checked investors’ appetite for commodities.

Crude oil prices were supported by expectations that members of the OPEC will agree to extend their supply cut into next year during their meeting in Austria on Thursday May 25.

 

BHP – New Nickel Mines

 

BHP Billiton is looking for environmental and ecological approval. In order to dig two new mines to extend the life of its Nickel West unit. The planned mines are located in the state of Western Australia.

One of the world’s top nickel producers – Nickel West, applied for EPA of Western Australia. It is the Environmental Protection Authority. According to info found on their official site, the company asked to clear 842 hectares (2,080 acres) for two open pit mines.

BHP has earmarked about $2 million per month during 2016 and 2017 for making improvements at Nickel West. (Reuters)

Nickel West gets lots of the concentrated ore it uses, to feed its 100,000 tonnes-per-year Kalgoorlie nickel smelter, from its neighbor Mount Keith mines. It also has deals with other miners operating nearby for additional feed.

“At the current rate of production, the resource supporting Mount Keith will need to be sustained from other ore sources at some stage over the next five years.”

“Securing environmental approval for the proposed Mount Keith Satellite Project will help to ensure Nickel West has a strong future and will continue to make a significant economic contribution.” (BHP)

 

Nickel prices

Observing the period of past 6 years, the Nickel prices have fallen nearly 70 percent, due to a global supply glut. The 70% is serious number, and it affected the market firmly.

”BHP booked a $1.25 billion after-tax impairment on Nickel West in 2013. A year later, following an unsuccessful sales process, BHP took Nickel West off the auction block.” (Reuters)

 

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