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BMO, INTL FCStone: Nickel Soars After Proposed Ban On Ore Exports From Philippines

Wednesday September 3, 2014 10:37 AM

Nickel is sharply higher Wednesday even as most of the other base metals trade weaker on the London Metal Exchange. Nickel was boosted by reports that a senator filed a bill to ban exports of raw ore from the Philippines, say BMO and INTL FCStone. “Timing on the implementation -- if approved -- remains unclear,” BMO says. “Despite the uncertainties on the credibility of this threat for the nickel market, nickel prices are already up today. BMO Research understands that, like Indonesia, power and transportation infrastructure are challenging for smelter economics. Further, given Philippines ore is of lower quality, on average, the government would likely have to offer additional incentives to build downstream processing in the Philippines rather than in Indonesia.” Nickel ore exports from the Philippines represented 9% of nickel mine supply in 2013, compared 18% for Indonesia, BMO says. INTL FCStone says it doubts the ban proposal will gain much traction, given massive ore exports now under way from the Philippines into China due to an Indonesian ore export ban. “Instituting a ban will result in foregoing massive amounts of revenue, not to mention the fact that buyers may very well have found other suppliers in the interim,” the firm says. “We would therefore not be jumping on this particular rally in nickel as we think the proposal will likely not enjoy broad support. Moreover, the fact that it is not being proposed by a top leader or a minister of mines makes it look all the more tenuous.” As of 10:19 a.m. EDT, three-month nickel was up $294, or 1.6%, to $18,844 a ton on a day when base metals bellwether copper was down 0.8%.

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

 

INTL FCStone Sees $1,240-$1,320 Sept. Range For Gold; ‘Uninspiring Backdrop’

Wednesday September 3, 2014 8:34 AM

INTL FCStone looks for gold to trade within a range of $1,240 to $1,320 an ounce in September amid an uninspiring backdrop.” Much of the focus remains on central banks, particularly the Federal Reserve, the firm says. Even if Chair Janet Yellen reiterates that the Fed remains flexible, strong data in the U.S. is working against her rhetoric, INTL FCStone says in a monthly commodities outlook. “Meanwhile, investment demand for gold remains soft, with no meaningful inflows see in ETFs (exchange-traded funds)," INTL FCStone says. The firm cites a Bloomberg report saying there has been a disconnect between ETFs and gold in that while ETF outflows are continuing, prices are holding up relatively well. “This may be true, but by the same token, bulls cannot expect prices to move substantially higher if fund money continues to exit these products,” INTL FCStone says. The firm sees an $18.60-$19.90 range for silver this month. “Platinum and palladium should sell off in line with a weaker gold market, but both complexes are benefiting from strong automobile sales and continued concerns about South African supplies, so dips may prove to be a good buying opportunity, particularly in palladium,” INTL FCStone says. The firm forecast a September range of $1,365 to $1,460 for platinum and $835 to $915 for palladium.

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

 

INTL FCStone: Copper, Zinc May Be Most Vulnerable Base Metals In September

Wednesday September 3, 2014 8:34 AM

INTL FCStone says it sees a “gradual grind lower” in copper during September, with potential for other London Metal Exchange base metals to soften as well. “The LME base metals group has been withstanding the weakening macro picture out of China quite impressively, but we are not sure how much longer it will be able to shrug off the poor numbers,” the firm says. “We think zinc and copper are likely the most vulnerable, and although aluminum looks very solid on the charts, it is also getting quite overextended in light of the fact that production growth, particularly from China, continues to outpace domestic demand.” A number of Chinese economic reports were softer in August, INTL FCStone notes, including new credit and lower Purchasing Managers Index readings. Other data showed growth, but with the upward trajectory moderating, such as a 9% year-on-year rise in factory production that was down from 9.2% in June. INTL FCStone sees a copper range of $6,820 to $7,120 per metric ton during September. Meanwhile, with the zinc market widely expected to be in deficit both this year and next, prices eventually could work higher, but in the short term INTL FCStone thinks “the complex has likely done too much” and will likely “continue to be a relative laggard in the group going into September.” The firm sees a $2,260-$2,430 range this month. Aluminum prices rose in August, but INTL FCStone points out that Chinese production has yet to decline meaningfully. Chinese product exports have been running at multi-year highs of 200,000 to 300,000 tons a month – “not a huge amount considering the size of the Chinese market, but indicative of the fact that the country is still producing too much metal,” INTL FCStone says. “Over the course of September, we see prices trading between $1,900-$2,100.”

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

 

SNL: Copper Range-Bound But Market Heading Toward Supply Surplus

Wednesday September 3, 2014 8:34 AM

Copper prices have been largely range-bound over the last year but the physical market does appear to be moving toward a surplus, says the consultancy SNL Metals & Mining. Since November, the market tended toward backwardation, says SNL editor Paul Dewison. This is where nearby prices are more expensive than deferred and generally seen as a sign of tightness. Further, exchange warehouse inventories of copper have fallen. “On the other hand, we have the specter of impending surplus, with sharp increases in supply and deep doubts about consumption prospects bringing massing clouds that augur a storm of oversupply and surplus," he says. He notes the copper market was “spooked” in mid-August by poor Chinese loan data. “However, a more enduring problem is a huge ongoing retreat in China's property sector, with housing starts falling in each of the first six months of 2014,” he says. “As copper is installed late cycle, much of the impact of this is yet to come." The market also faces a “stalled” economic recovery in Euorpe and “far-from-buoyant” forecasts by U.S. fabricators, he adds. Given new mine supply and output disruptions in the six months through June, Dewison believes mine output in the second half is likely to exceed that of the first half by a considerable margin. All of this adds up to a market moving into surplus, SNL Metals & Mining says. 

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

 

 

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