Post on 24-May-2020
Base Metals Monthly Report
Wednesday, December 07, 2016
www.angelcommodities.com
Wednesday, 07 December
2016
Base Metals Monthly Report
Executive Summary
In Nov’16, base metals on the LME gained momentum
owing to assurance by the President elect Donald Trump in
his victory speech that he would cut taxes and invest more
than $500 billion in infrastructure, the core demand area
for base metals.
Adding to the positive news was China’s National
Development and Reform Commission, which on 11th
Nov’16 said it has approved a total of 85.6 billion Yuan
($12.59 billion) for three railway projects.
Further supporting the prices was string of favorable data
releases from the US and China, major demand driving
nations for base metals.
Chinese Yuan too played a crucial role in the
unprecedented rally in base metals last month, as it
plunged to the lowest level since June 2008.
Temporary downside was however seen after Shanghai
Futures Exchange (ShFE) said it would raise margins and
trading limits on futures contracts including copper,
aluminium, zinc, lead, nickel and tin in an effort to ease
sharp movement.
MCX base metals trended higher in line with international
markets.
19.6
0.9
7.6
13.4 12.7
21.8
2.2
8.9
15.4 15.1
0.0
5.0
10.0
15.0
20.0
25.0
Copper Aluminium Nickel Lead Zinc
Base Metals performance in Nov'16 (%)
LME MCX
Source: Reuters, Angel Commodity Research
LME Stock scenario (Nov’16)
Base metal Opening stock
(in tonnes)
Closing stock
(in tonnes)
Percent chg
Copper 3,71,775 3,19,475 -26%
Aluminium 21,54,825 21,40,550 0.17%
Zinc 4,38,675 4,50,725 -1.95%
Lead 1,90,250 1,88,700 -0.52%
Nickel 3,62,004 3,63,024 0.95%
Shanghai Stock scenario (Nov’16)
Base metal Opening stock as on 4th Nov’16
Closing stock as
on 2nd Dec’16
Percent chg
Copper 97839 135363 32.5%
Aluminium 97,561 72155 -30.2%
Zinc 167759 152731 -9.4%
Lead 31080 20310 -42.5%
Upcoming crucial events (Dec’16)
Data/ Event Date & time
ECB Press conference 8th Dec, 2016 – 7:00 pm
FOMC Statement 15th
Dec, 2016 – 12:30am
US Final GDP q/q 23rd
Dec, 2016 – 7:00 pm
Trump’s Infra- spending assurance leads to wild rally in base metals in Nov’16
Base Metals Monthly Report
Wednesday, December 07, 2016
www.angelcommodities.com
Wednesday, 07 December
2016
Base Metals Monthly Report
However, wild upward swings in the Copper prices
temporarily halted as dollar rallied to 14-year highs after
Fed Chair Janet Yellen affirmed in her testimony that
Trump’s victory in the Presidential elections will not
change anything. She will stay in office until her term
expires in January 2018 and reiterated that the Federal
Reserve remains on course of raising interest rates.
Another hit came from customs data showed refined
copper imports fell 45% year-over-year and 22% month-
over-month to the lowest level in over three years.
Further, Chinalco reached a deal with the Peruvian
government for a major expansion of Toromocho, one of
Peru’s biggest copper mines. Also, Peru’s National
Institute of Statistics said that national copper production
in Sep’16 grew 35.9% as compared to the same month of
2015.
Also, preliminary data released by the International
Copper Study Group showed the global refined copper
market showed an apparent production surplus of around
154,000 mt in August, mainly due to weaker Chinese
demand and seasonally weak usage in other regions. For
the January-August period, indications suggest a
production deficit of around 91,000 mt, and a seasonally
adjusted deficit of about 93,000 mt.
Despite falling from record high levels, the metal still
managed to gain 20 percent on the LME and 21 percent
on the MCX.
-60000
-40000
-20000
0
20000
40000
60000
80000
100000
11
/1/2
01
5
12
/1/2
01
5
1/1
/20
16
2/1
/20
16
3/1
/20
16
4/1
/20
16
5/1
/20
16
6/1
/20
16
7/1
/20
16
8/1
/20
16
9/1
/20
16
10
/1/2
01
6
11
/1/2
01
6
12
/1/2
01
6
Managed Net Copper
Source:Reuters, Angel Commodity Research
Net longs jump to fresh record high Copper
Price performance
In Nov’16, LME Copper prices jumped by 20 percent having
started the month at $4862/t and touched levels as high as
$6045.5/t during the course of the month before closing at
$5795/t.
Copper prices on the LME jumped to 17-month highs and
crossed the crucial $6000/t mark before closing at $5795/t
in Nov’16 on anticipation of increased infrastructure
spending in view of US President elect Trump’s plan to fix
inner cities and rebuild highways. In his victory speech, he
pledged to at least double Hilary Clinton’s estimated $275
billion, five-year plan for roads, airports and bridges.
Also, manufacturing activity in the main consumer nations
i.e. the US and China showed robust improvement. US
Manufacturing PMI print for the month of November was
53.2, higher from October's 51.9 while Chinese PMI came in
at 51.7 in November, the highest since the 53.3 hit in April
2012.
Other data sets too showed stabilization in the Chinese
economy, thereby boosting the metal. China’s annual fixed-
asset investment, a proxy for long-term spending, increased
8.3% in the January-October period although industrial
production and retail sales grew less than expected in
October. Official data showed foreign direct investment
(FDI) into the Chinese mainland rose 4.2 percent year on
year to reach 666.3 billion Yuan (around 98 billion U.S.
dollars) in the first ten months of this year.
200000
220000
240000
260000
280000
300000
320000
340000
4500
4700
4900
5100
5300
5500
5700
5900
6100
10
/31
/20
16
11
/2/2
01
6
11
/4/2
01
6
11
/6/2
01
6
11
/8/2
01
6
11
/10
/20
16
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/12
/20
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/14
/20
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/20
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/18
/20
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/20
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11
/22
/20
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/24
/20
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11
/26
/20
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11
/28
/20
16
11
/30
/20
16
LME Copper Vs stocks
prices stocks
Source:Reuters, Angel Commodity Research
Base Metals Monthly Report
Wednesday, December 07, 2016
www.angelcommodities.com
Wednesday, 07 December
2016
Base Metals Monthly Report
Aluminium
Price performance
In Nov’16, LME Aluminium prices have declined marginally
(-0.3%) to $1731 per tonne, after two consecutive monthly
gains while on the MCX, it prices gained by 2 percent to
Rs.117.45/kg as rupee weakness supported the rise.
The light metal witnessed a paltry downside in Nov’16,
largely on account of weakness in the crude oil prices in the
first half of the month just before the contentious OPEC
meeting which was scheduled on Nov.30, 2016. The
uncertainty spurred by shaky prospect of major producers
being able to agree on output cuts weighed on Aluminum
prices, since crude oil accounts for around 30 percent of
input costs for the metal.
On the supply front, International Aluminium Institute data
showed total Chinese output slipped from the highest in
fifteen months of 2.75 million tonnes in Sept’16, to 2.727
million tonnes in Oct’16. Daily average output fell to 88,000
tonnes in Oct’16 against 91,700 tonnes in the Sep’16.
Excluding China, Global production for Oct’16 rose to 2.169
million tonnes, from 2.096 million tonnes recorded in
Sep’16 while daily average primary aluminium output
excluding China rose to 70,000 tonnes in Oct’16, from
69,900 tonnes in the previous month.
Demand scenario too looks good as Aluminum imports into
the United States excluding those from Canada totaled
179,521 tonnes in September, up from the previous
month's total of 160,450 tonnes. This is the third-highest
monthly total of imports for the year, exceeded only by
193,345 tonnes in March and 212,797 tonnes in June.
2060000
2080000
2100000
2120000
2140000
2160000
2180000
1680
1700
1720
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/30
/20
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/1/2
01
6
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/3/2
01
6
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/5/2
01
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/7/2
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6
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/9/2
01
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/11
/20
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/13
/20
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/15
/20
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/17
/20
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/19
/20
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/21
/20
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11
/23
/20
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11
/25
/20
16
11
/27
/20
16
11
/29
/20
16
LME Aluminium V/s stocks
prices stocks
Source:Reuters, Angel Commodity Research
Besides, LME inventories are down by more than 26
percent this year whereas stocks at the Shanghai
exchange warehouses are at the lowest level since 2007.
Aluminium stocks at three major Japanese ports stood at
278,200 tonnes at the end of October, down 2.9 percent
from the previous month.
Overall, crude oil was the only spoiler for Aluminium in
Nov’16 while demand-supply balance and stocks favored
the metal.
Base metal in focus for Dec’16
Nickel
Nickel, the silvery white metal mainly used in production
of Stainless Steel, has been out of spotlight for some time
now. That may well change for good in December as
Philippines’ Environment and Natural Resources Secretary
Regina Lopez reiterated on 2nd Dec’16 that the mine
suspension still remains on her priority list adding they
will release the final audit result very soon.
In the initial audit result released September 27, the DENR
named 40 mining firms, with 11 mines (including 5 nickel
mines) passing the audit, 9 mines (including 7 nickel
mines) shutting down and 20 mines (including 15 nickel
mines) being recommended for suspension. These 20
were sent out show-cause letters in late October.
As a result of this mining crackdown, the Philippines’
output of nickel ore fell 16 percent in the third quarter
from a year earlier. Data from the Mines and Geosciences
Bureau showed output of nickel ore for direct shipping fell
to 9.34 million tonnes in July-September from 11.09
million tonnes in the same period last year.
This is a major blow as earlier ban on 8 mines and
potential ban on 20 more would likely hit Nickel ore
supplies harder since they accounted for more than half
of the Philippines’ nickel ore output last year.
So, one can expect the metal to outperform in the
coming months as Indonesia too is reluctant to ease its
ore ban, blocking Nickel supplies to China.
Base Metals Monthly Report
Wednesday, December 07, 2016
www.angelcommodities.com
Wednesday, 07 December
2016
Base Metals Monthly Report
Outlook
For Dec’16, we expect base metal prices to trade higher as the Organization of Petroleum Exporting
Countries finalized a deal to cut production by 1.2 million barrels a day starting in January 2017, its first
reduction since 2008. Since crude oil is a crucial component of input cost for metals, the upside in oil
prices will reflect in metals as well. However, potential US rate hike on 15th Dec’16 for the first time in
nearly a decade would be keenly watched by global investors.
Copper prices will likely trade higher this month as lofty infrastructure spending in China is likely to keep
demand robust for the metal. China has already splurged $1.4 trillion on roads, railways, bridges,
telecom networks and other infrastructure in the ten months through October. However, cautious
stance ahead of crucial FOMC statement and persistently falling Chinese forex reserves to $3.051tn in
November to defend the Yuan will limit upside.
Aluminium prices are likely to trade higher in Dec’16 as positive momentum in crude oil prices would be
a reason to cheer for Aluminium. Another favorable factor would be indications that the Aluminium
market would be tight going forward was seen as some big aluminum producers seek a premium of $95-
$110 per ton from Japanese buyers for primary metal shipments in the January to March period, up 27-
47 percent from $75 per ton in the previous quarter. However, restricted upside would be seen as global
aluminum production expanded to a record high of 4.986 million tons in October, despite fall in Chinese
production.
Technical Levels (December 2016)
Commodity Support 2 Support 1 CMP Resistance 1
Resistance 2
LME Copper ($/tonne) 4800 5530 5921 6550 7420
MCX Copper (Rs./kg) 330 380 403.4 450 510
LME Aluminium ($/tonne) 1620 1670 1729.5 1790 1850
MCX Aluminium (Rs./kg) 110 114 117.1 123 127
LME Nickel ($/tonne) 9400 10300 11685 12100 13000
MCX Nickel (Rs./kg) 680 740 789.5 840 890
LME Lead ($/tonne) 1790 2060 2386.5 2595 2850
MCX Lead (Rs./kg) 120 139 161.4 180 195
LME Zinc ($/tonne) 2130 2410 2846 2980 3260
MCX Zinc (Rs./kg) 142 165 191.7 205 225
Base Metals Monthly Report
Wednesday, December 07, 2016
www.angelcommodities.com
Wednesday, 07 December
2016
Base Metals Monthly Report
Study group updates
Copper surplus jumps to 154 000 t in August’16 - ICSG
New analysis by the International Copper Study Group
(ICSG) has shown an apparent production surplus of around
154,000 metric tonnes in August, mainly owing to weaker
Chinese demand and seasonally weak use in other regions.
The Lisbon, Portugal headquartered think tank said in a
statement Monday that when making seasonal adjustments
for world refined production and use, August showed a
production surplus of about 56,000 t.
During the eight-month period since the start of the year,
data suggests a production deficit of about 91 000 t, and a
seasonally adjusted deficit of about 93,000 t, compared
with a production surplus of about 10,000 t (a seasonally
adjusted surplus of about 19,000 t) for the same period in
2015.
In the same eight-month period, world apparent refined use
is estimated to have increased by about 3.8% (570 000 t),
compared with the same period in 2015, while World
refined output is estimated to have increased by about
3.1% (470 000 t). Output in Chile and Japan, the second-
and third-leading refined copper producers, increased by
around 2% and 3% during the period, respectively.
Surplus in global lead market narrows in September -
ILZSG
A global surplus of lead narrowed to 4,400 tonnes in
September from a revised surplus of 8,900 tonnes in
August, data from the Lisbon-based International Lead and
Zinc Study Group (ILZSG) showed on Monday.
For the year to September, the market saw a surplus of
38,000 tonnes versus a deficit of 37,000 tonnes in the first
nine months of last year.
The Group anticipates that in 2016 supply will exceed
demand in the global refined lead metal market by 42,000
tonnes. In 2017, an even closer balance is predicted with
current data indicating that the market will be in surplus by
23,000 tonnes.
Daily average aluminium output rise to 70,000 T in Oct -
IAI - Reuters
LONDON, Nov 21 (Reuters) - Daily average primary
aluminium output excluding China rose to 70,000 tonnes
in October, from 69,900 tonnes in September, data from
the International Aluminium Institute (IAI) showed on
Monday.
Global production for October, excluding China, was 2.169
million tonnes, up from 2.096 million tonnes recorded in
September. In China, daily average output fell to 88,000
tonnes in October against 91,700 tonnes in the
September.
Total Chinese production in October was 2.727 million
tonnes from 2.751 million tonnes in September, the IAI
said.
Nickel market to witness deficit in 2016, 2017 - INSG
The International Nickel Study Group (INSG) estimates
nickel usage will continue to grow in both 2016 and 2017
due to the increase in production of the austenitic
stainless steel grades in all main markets despite the
challenging economic environment world.
According to the International Stainless Steel Forum (ISSF)
world stainless steel melting production, after reaching
41.5 Mt in 2015, has recorded a 4.1% increase during the
first half of 2016 setting the stage for a strong
performance for the full year.
China recorded a 7.9% increase driven by an increase in
domestic demand and sustained export mainly to other
Asian countries. In the non-stainless steel sectors primary
nickel demand will maintain a positive trend in the
aerospace industry and in the battery sector.
World primary nickel production was 1.973Mt in 2015,
and decreased to 1.934Mt in 2016. World primary nickel
usage was 1.881Mt in 2015 and increased to 2.001Mt in
2016. For 2017 INSG estimates an increase to around
2.113Mt.
Base Metals Monthly Report
Wednesday, December 07, 2016
www.angelcommodities.com
Wednesday, 07 December
2016
Base Metals Monthly Report
MCX Copper - CMP – 401.95 / $ 5,851
As clearly seen on the above monthly price chart of MCX Copper, we observed that last month prices
have rallied sharply and made a high of 18th month high of 414.80 levels. Last month prices have
breached the long term down trend line and now trading above it.
As per the technical chart structure prices are in positive trend followed by bullish candlestick patterns.
Prices are trading above its 5, 20, 50 and 100 (Monthly basis) EMA, Exponential moving average, which
is supportive for the prices.
Technical indicator, 14 Month RSI is rising and MACD showing positive divergence and both indicators
shows optimism.
We expected Copper prices to find support at 385 – 380 ($ 5,530) levels. Trading below consistently
below 380 levels would lead towards the strong support at 330 ($ 4,800) levels and then finally towards
the major support at 300 levels ($ 4,350)
Resistance is now observed at 450 – 460 ($ 6,550) levels. Trading consistently above 460 levels would
lead towards the strong resistance at 510 ($ 7,420) levels and then finally towards the major resistance
at 550 ($ 8,000) levels.
Looking towards positive chart structure and indicators supports positive trend we recommend to buy in
Copper.
Buy Copper between 380 – 385, SL – 330, Target – 450 / 460
Base Metals Monthly Report
Wednesday, December 07, 2016
www.angelcommodities.com
Wednesday, 07 December
2016
Base Metals Monthly Report
Research Team
Kaynat Chainwala Research Analyst (Base Metals) kaynat.chainwala@angelbroking.com (022) 3935 8136 Extn :6136
Anuj Gupta Head– Technical Research (Commodity & Currency) anuj.gupta@angelbroking.com (011) 4916 5954
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