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Market Nuggets: Palladium Strongest Since Sept. 2011 As Supply News, Stronger Euro Lift PGMs

Friday January 25, 2013 12:43 PM

Platinum group metals are bucking the trend in the overall metals complex by trading higher when gold, silver and most of the base metals are lower. Support is coming from currency factors, supply issues and technical considerations. Afshin Nabavi, head of trading with MKS (Switzerland) SA, cites fresh news reports suggesting Russian stockpiles of palladium are nearly depleted. Technically, palladium has been holding support lately, and spot metal went on to $739.30 high that was its most muscular level since September 2011, he adds. “The PGMs overall look positive on the back of supply worries,” he adds. Meanwhile, a U.S. trader says a stronger euro is providing some support. He also cites news reports that the world’s largest producer, Anglo American Platinum, listed a 29% drop in production in the fourth quarter due to labor unrest—although the trader adds that the market was already expecting a decline. As of 12:20 p.m. EST, spot platinum was up $11 to 1,688 an ounce, while palladium was $9.05 higher at $734.75.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Societe Generale: Higher TC/RCs Point Toward Improving Copper Supply

Friday January 25, 2013 12:43 PM

Higher copper treatment and refining charges are pointing to improved supply of copper, says Societe Generale. “Mining companies and smelters have agreed (to) terms for 2013 copper concentrate treatment and refining charges,” the bank says. “TC/RCs have been settled at $70/t and 7c/lb compared to $63.5/t and 6.35c/lb agreed for 2012. The rise of more than 10% in processing fees points to a recovery in copper mine supply after years of deficit. With concentrate production capability of mines expected to rise more quickly than smelter capacity over the coming months, it is likely that spot TC/RCs should be on an upward path.” A number of organizations are forecasting higher production in 2013, Societe Generale says. “However, there remains a certain degree of uncertainty given the much publicized inability of the miners over several years to deliver concentrate as planned,” Societe Generale adds. “This is evidenced by the fact that the 2013 annual TC/RCs has been agreed for only six months instead of the usual full year, as noted by Aurubis, Europe's biggest copper smelter.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Barclays: Platinum Needs More Supply Issues Or Improved Demand To Rally Further

Friday January 25, 2013 12:05 PM

A proposal by Anglo American Platinum to cut production would mean a wider platinum supply deficit for 2013, yet “fragile” demand needs to pick up or supplies fall further for prices to surge, says Barclays Capital. The proposed Amplats restructuring would widen Barclays 2013 forecast of the platinum deficit to some 256,000 ounces from 38,000. For now, the market is not tight enough to drive prices still higher given that consumers are well hedged, Barclays says. “To boost prices further, demand will need to surprise to the upside or supply will need to be curtailed with immediate effect,” Barclays says. “At this stage, the latter appears more likely, given the rising representation of the Association of Mineworkers and Construction Union (AMCU) and the biennial wage negotiations set to take place this year. Unions have already expressed dissatisfaction with the number of jobs that a restructuring would affect, and the likelihood of strike action when wage agreements expire in June looks high. Thus, an escalation of lost output poses upside risk and could drive prices through the $1,700/oz hurdle.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Barclays: China Churning Out More Base Metals

Friday January 25, 2013 12:05 PM

Better profits led to strong base metals production in China during December, which in turn may lead to a preference for concentrate imports rather than refined metal if the trend continues, says Barclays Capital. December data from China’s National Bureau of Statistics showed refined copper output in China hit a record 580,000 tons, up 22% year-on-year. Aluminum, nickel, tin and zinc output also jumped. Continued expansion in smelting capacity and improved margins drove the strong performance, said the bank. “The shift in incentive for domestic smelters could see China importing concentrate more readily than refined metal,” Barclays says. “In the case of copper, concentrate imports into China already surged in Q4 12, in contrast to softer cathode inflows. With 2013 term TC/RCs (treatment charges and refining charges) set 10% higher than last year’s levels at $70/7¢, the trend of stronger concentrate imports and softer refined inflows may continue.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: RJO's Haberkorn: Comex Gold Eases On Technical-Chart Factors

Friday January 25, 2013 10:50 AM

Comex gold is softer due to technically oriented weakness, says Bob Haberkorn, senior commodities broker with RJO Futures. As of 10:36 a.m. EST, the February futures were $12.80 softer at $1,658.10 an ounce. They bottomed at $1,655, their weakest level in two weeks. Haberkorn says selling set in after the failure to break up through $1,700 an ounce, with more occurring on a break through nearby support around $1,666 to $1,664. There does not appear to be any fundamental catalyst behind the move with the possible exception of some stronger-than-forecast U.S. economic data lately, Haberkorn says, but adding that he doubts the U.S. and Europe are out of the woods yet and describing himself as a longer-term bull. He lists the next chart support at $1,650.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: RBC Favors Using Weakness In Base Metals As Buying Opportunity

Friday January 25, 2013 9:30 AM

RBC Capital Markets says it favors using pullbacks in base metals as buying opportunities. Analysts described London Metal Exchange base metals as markets that have been putting in higher lows amid the ebb and flow of economic news and government issues. “With the U.S. and China recently showing an expansion in manufacturing activity, metals such as copper should be poised for a run to last year’s highs, just over $8,500,” RBC says. China is the world’s largest consumer of copper, and the rise in the HSBC January Purchasing Managers Index 51.9, reported this week, is “promising” for 2013, RBC says. There is a risk of a dip in the pace of Chinese economic activity, RBC adds. “We do, however, see the full-year results for metals to be positive and thus will look to use any price weakness on softer data as a buying opportunity.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Deutsche Bank: Copper Could Approach $9,000/MT In Second Quarter

Friday January 25, 2013 9:30 AM

Copper prices could approach $9,000 a metric ton in the second quarter, says Deutsche Bank. “We expect that, despite high copper stocks, net copper imports into China will likely remain elevated in the first half of 2013, with some re-stocking taking place at the consumer level,” the bank says. Chinese bonded warehouse stocks estimated to have risen by 500,000 tons in 2012, with copper cathode now being used as a financing tool in addition to industrial applications, Deutsche Bank says. The bank looks for economic activity to pick up in 2013, but says credit conditions are unlikely to change, meaning the financial incentive remains and bonded stocks continue to rise. Copper premiums could rise, but Deutsche Bank says it doubts they would increase enough to incentivize liquidation of finance-related stocks. “We also believe that there is a good chance that Shanghai copper (SHFE) outperforms that of the LME such that a positive arbitrage may appear – albeit briefly. This could result in greater-than-expected imports of cathode within the next three to four months.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Deutsche Bank: Precious Metals Likely To Be Range-Bound Near Term

Friday January 25, 2013 9:30 AM

Deutsche Bank looks for precious metals to be stuck in ranges in the short term, although it looks for them to pick up by year-end. “The precious complex is under some pressure currently, with the PGMs (platinum group metals) lacking direction following their recent strength on the back of South African supply concerns,” the bank says. “The gold market is also under some selling pressure after failing to breach the USD1,700/oz level and a lack of apparent catalysts following the deferral of the U.S. debt-ceiling debate. We expect the precious metals are likely to be somewhat range-bound near term.” The bank currently looks for gold and silver to average $1,725 and $33, respectively, in the first quarter, then rise in each of the remaining quarters of 2013.  

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Commerzbank: Rising Chinese Demand Supportive For Lead In Medium Run

Friday January 25, 2013 8:37 AM

Commerzbank looks for rising Chinese demand to support lead in the medium term. The bank cites news that state research institute Antaike estimates that Chinese lead demand should increase by 11%-12% to around 5 million metric tons in 2013. "This would put demand growth only slightly below the previous year's figure, and would mean that absolute demand would more or less correspond to local lead production," Commerzbank says. "Battery production, which accounts for 80% of Chinese lead demand, is expected to contribute particularly to the robust demand. Last year already saw battery production soar by 27.3% to 174.9 million kwh. This should lend support to the lead price in the medium run, even though we feel that the latest price rise to more than $2,400 per ton is somewhat excessive."

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: UBS: ETF Gold Holdings Down So Far In January

Friday January 25, 2013 8:37 AM

Holdings of gold by global exchange-traded products are down for the month so far, says UBS. The bank says "the picture does not look great, but we don't think it's flashing red either, at least not yet. Gold ETF investors have been net sellers of about 550koz so far in January, with over half of the decline posted on Jan. 3; outflows on a daily basis have been small since, although this has been the most persistent daily selling we've seen since July last year. Indeed, January is shaping up to be the first month of declines in gold ETFs in five months, so this space needs to be watched closely for any signs of acceleration."

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: TDS: Platinum Taking 'Breather,' Needs Demand-Side Positives Before Takeoff

Friday January 25, 2013 8:14 AM

Platinum is taking a "breather" after its recent rally and may need more demand-positive news before taking off again, says TD Securities. "We have been very bullish on platinum for some time now and we continue to see prices jump to well over the USD1,900/oz mark before the end of 2013," TDS says. "However, at this point in time, we believe that platinum will stay range bound between USD1,705-1,650/oz for a while, as most of the supply-related news and expectations have been priced in and there are unlikely to be any imminent positive economic revelations that would boost demand estimates." For now, there appears to be ample inventories of industrial-grade metal and auto producers do not appear in a hurry to accumulate stock, TDS says. Also, given near-record long positioning by speculators, some could opt to exit and book profits. However, TDS says, it looks for a deep deficit as the year unfolds and eventually more positive economic news to rally the metal to its final 2013 target of $1,925 an ounce.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: HSBC: Emerging-Market, Central-Bank Gold Demand Likely To Stem Price Declines

Friday January 25, 2013 8:00 AM

Any further gold price declines may trigger increased emerging-market and central-bank demand, says HSBC. "Since 2011, central banks, most notably emerging-market central banks, have stepped in as gold buyers during periods of steep price declines," HSBC says. "For example, in 2012, gold prices fell to USD1,670/oz at the end of March from USD1,784/oz in late February. This coincided with central banks adding 84t of bullion, which represented nearly a quarter of the total gold added in the first 11 months of 2012." HSBC cites comments this week from a Russian central bank official saying the central bank would continue adding gold. "Gold's attractiveness to central banks lies primarily in its inverse correlation to the USD and its utility as a portfolio diversifier," HSBC says. Meanwhile, India's and China's demand for bullion appear steady, HSBC says. "Indian gold demand has benefited from a rise in the INR (Indian rupee), which is lowering gold costs in local currency terms."

By Allen Sykora of Kitco News asykora@kitco.com

 

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