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Market Nuggets: Societe Generale Trims 2013 Base-Metals Price Forecasts

Friday May 10, 2013 2:06 PM

Societe Generale has trimmed 2013 forecasts for base metals. The bank says it considers the sell-off in base metals in recent months to be “overdone” and expects a rally in the second quarter, helped by Chinese restocking. However, there is also substantial spare capacity in the manufacturing sector, which suggests that re-stocking will be capped, Societe Generale says. “We also expect China’s economic growth to fade by mid-year as the Chinese government’s policies to rebalance the economy away from infrastructure spending act as a brake,” the bank says. The London Metal Exchange cash-to three-months spread is in contango, pointing to good supply availability, the bank continues. New 2013 forecasts include aluminum, $2,000 a metric ton (2,160 previously); copper, $7,420 ($7,900); zinc, $1,950 (2,100); lead, $2,200 ($2,300); nickel, $16,600 ($18,000); and tin, $23,500 ($24,500).

By Allen Sykora of Kitco News; asykora@kitco.com

 

Market Nuggets: Barclays Expects Platinum, Palladium To Remain In Deficit This Year

Friday May 10, 2013 1:06 PM

Barclays looks for platinum and palladium to remain in supply deficits this year. The bank says South Africa's supply-side challenges, auto-catalyst recycling and weak European demand are likely to be the dominant themes at Platinum Week events next week, which include the widely anticipated release of Johnson Matthey's Platinum 2013 report on Monday. Recycling picked up toward the end of last year, but production lost in the second half of 2012 due to industrial unrest in South Africa should more than offset this, Barclays says. "We expect platinum and palladium to deliver deficits in 2013 and to remain in deficit in 2014 as the challenging mine supply backdrop overshadows the modest recovery in demand anticipated for later in the year," the bank says. Barclays looks for platinum to remain in deficit even though Anglo American Platinum has scaled back its expected production cuts after consultations with unions and the government. Barclays describes investment demand as strong, with platinum exchange-traded-product holdings at a fresh record high above 2 million ounces. "Yet, the platinum price has yet to meaningfully break above $1,500/oz, suggesting that underlying fabrication demand remains weak or stock levels are healthy."

By Allen Sykora of Kitco News; asykora@kitco.com

 

Market Nuggets: Barclays: Risk Of South African Supply Disruptions Remains High

Friday May 10, 2013 1:04 PM

The risk of supply disruptions in the platinum market remains high, given upcoming wage negotiations in South Africa, says Barclays. "Although we do not expect losses to the magnitude suffered last year, the presence of AMCU (Association of Mineworkers and Construction Union) at the negotiation table poses the potential to tighten the market should industrial action occur," Barclays says. The bank cites a news report in which Lonmin says the AMCU now represents 70% of its workforce as workers have switched from National Union of Mineworkers, beginning at less than 10% at the start of last year.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Market Nuggets: Gold Could Rise Further, But Needs Support From ETFs – Nomura

Friday May 10, 2013 9:54 AM

Gold prices are up from the lows scored in April, supported by strong physical demand out of Asia, but selling out of gold exchange-traded funds is limiting gains, said Nomura. “While we think gold is likely to rise, it needs a turn from gold ETF holdings, for this to be a significant move. So far we have yet to see any sort of turn in gold ETF holdings,” they say. Based on historical data, they believe most of the ETF-based gold selling is likely over and there will be only a small amount left, as long as gold prices are stable.

By Debbie Carlson of Kitco News dcarlson@kitco.com

 

Market Nuggets: MKS' Nabavi: Strong Dollar, Break Below Support Pressure Gold

Friday May 10, 2013 8:15 AM

The combination of a muscular U.S. dollar and technical selling on a break of chart support has left gold on the defensive, says Afshin Nabavi, head of trading with MKS (Switzerland) SA. As of 8:36 a.m. EDT, Comex June gold was $39.60 lower to $1,429 an ounce. The move is occurring as the dollar hit its strongest level against the Japanese yen in more than four years and also rose against the euro. "It's because of the stronger dollar," Nabavi says. "And we breached $1,440, which was support." Gold had held around $1,440 over the last two weeks and some sell stops were activated on the break below, although "nothing huge," Nabavi says. He puts the next support around $1,425.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Market Nuggets: BBH: Dollar Break Of 100 Yen 'Unleashed The Animal Spirits' In FX Market

Friday May 10, 2013 8:15 AM

The U.S. dollar's break above 100 Japanese yen "has unleashed the animal spirits" in the foreign-exchange market, with the dollar broadly higher against other currencies as well, says Brown Brothers Harriman. The firm cites two themes, with one being signs of improvement in the U.S. labor market as weekly jobless claims and the smoothed four-week moving average fell to cyclical lows Thursday. "This encouraged more talk that the Fed may taper off its purchases of long-term assets sooner than the market currently anticipates, which is late this year," BBH says. "The second theme came from reports in Tokyo, after the JPY100 level broke in North American yesterday, that Japanese investors turned into buyers of foreign bonds. This is an important signal for the yen bears. They have been selling yen partly in expectation that this is what Japanese investors will do as they are displaced from the local bond market by the BOJ's (Bank of Japan's) qualitative and quantitative easing." The dollar has been as high as 101.736 yen, its strongest level since October 2008. The greenback is also firmer against the euro. Metals traders tend to monitor foreign-exchange moves since base and precious metals alike often move inversely to the greenback.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Market Nuggets: MKS, Commerzbank: Gold ETFs Halt Long String Of Outflows On Thursday

Friday May 10, 2013 8:13 AM

The outflow from gold exchange-traded funds has abated at least for now. They have been on the decline for much of 2013 so far. "However, ETFs had their first inflows seen in some weeks yesterday to the tune of +87k oz - a little too early to say we have turned any corners but positive nonetheless," says Alex Thorndike, senior trader for precious metals and foreign exchange with MKS Finance. Commerzbank cites Bloomberg data showing Thursday was the first significant influx, at 2.5 metric tons, since the end of March. "True, one swallow doesn't make a summer, but this influx could nevertheless herald an early end to institutional investors scaling down their holdings," the bank says. "After all, from a fundamental viewpoint, investor interest should continue to rise around the globe in a climate of ultra-loose monetary policies." Holdings by SPDR Gold Shares, the world's largest gold ETF, climbed to 1,054.18 tons from 1,051.47 the day before, according to the ETF's Web site. They finished 2012 at 1,350.82.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Market Nuggets: Commerzbank: April Data Shows Indonesian Tin Output Elastic To Prices

Friday May 10, 2013 8:11 AM

Tin exports from Indonesia fell last month as prices slumped, reflecting the elasticity to prices, says Commerzbank. The trade ministry in Indonesia, the world's biggest exporter of the base metal, reported tin exports fell 15.5% month-on-month to 7,853 metric tons. "Yet again, this underlines how price-elastic the country's tin exports and its output are," Commerzbank says. "In the wake of the slump in prices last month – tin temporarily lost as much as 14% in one week to trade at well below $20,000 a ton – a number of smelters scaled down production. According to the Indonesian Tin Mining Association, many smelters are no longer profitable. Average production costs, they say, amount in most cases to $22,000 a ton." Further, smelters are facing a new challenge in the second half of the year -- as of July, higher quality standards are to be imposed on tin exports. "The actual tin content will have to be increased and the levels of lead and cadmium to be reduced," Commerzbank says. "The association claims that only 15 to 20 of the 30 smelters who constitute its members are fulfilling the new requirements. The consequence could be lower export levels, which would mean that supplies on the global tin market would remain strained."

By Allen Sykora of Kitco News; asykora@kitco.com

 

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