Base Metals Monthly Report203.199.89.36/brand_comm/commodities/Base Metals Monthly Repo… · Base...
Transcript of Base Metals Monthly Report203.199.89.36/brand_comm/commodities/Base Metals Monthly Repo… · Base...
Base Metals Monthly Report
Friday, April 07, 2017
www.angelcommodities.com
Friday, 07 April 2017
Base Metals Monthly Report
Executive Summary
Base metals traded mostly lower in Mar’17 as the Federal
Reserve increased its benchmark interest rate for the
second time in three months by 0.25 percent to a target
range of 0.75 percent to 1 percent and maintained its
stance on three rate hikes this year. The forecast for 2017
GDP was kept unchanged at 2.1 percent, while 2018 was
pushed up one-tenth to 2.1 percent.
Risk aversion mode stood out in Mar’17 as a host of
uncertain global events kept investors appetite under
check. World’s biggest economies at the G20 summit
dropped a pledge to keep global trade free and open,
thereby fuelling protectionism fears. The formal statement
issued after the meeting contained only a bland reference
to "working to strengthen the contribution of trade to our
economies" and the phrase "we will resist all forms of
protectionism" was conspicuous by its absence.
Besides, failure of Donald Trump to "repeal and replace"
the Obamacare health insurance reforms in the US
Congress raised questions on his ability to proceed with tax
cuts and infrastructure spending.
Amidst the ambiguous global environment, favorable
Chinese economic data provided a cushion. Chinese
industrial production increased at a faster-than-expected
6.3 percent pace in the first two months of the year, while
profits of Chinese industrial firms surged almost 32 percent
in the first two months of 2017, the fastest pace in nearly 6
years.
-8.7%
-2.3% -1.9%
2.0% 3.7%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
Nickel Copper Zinc Aluminium Lead
Base Metals performance in Mar'17 (%)
LME MCX
Source:Reuters, Angel Commodity Research
Talking about inventories, Copper stocks at the LME
jumped the most by 44 percent and Aluminium stocks
plunged the most by 14 percent. At Shanghai exchange,
Aluminium stocks jumped by a whopping 50 percent in
Mar’17.
Overall, March 2017 was an eventful month owing to the
much anticipated US rate hike and trade protectionism
concerns at the G20 summit.
Stock Dynamics in Mar’17
LME Stock scenario
Base metal Opening stock (in tonnes)
Closing stock (in tonnes)
Percent chg
Copper 200725 283900 41%
Aluminium 2188400 1877300 -14.22%
Zinc 384100 370950 -3.42%
Nickel 377778 376476 -0.34%
Lead 189600 184275 -2.81%
Shanghai Stock scenario
Copper 289899 312584 8%
Aluminium 221058 332326 50%
Zinc 199033 183086 -8%
Lead 68419 72218 6%
Upcoming crucial events (April’17)
Data/ Event Date & time
US Non-Farm Employment Change April 6th
, 2017 – 6:00 pm
China’s GDP q/y April 17th
, 2017 – 7:30 am
OPEC Meeting April 22nd, 2017
Japan’s Monetary Policy Statement April 27th
, 2017
ECB rate decision April 27th
, 2017 – 5:15 pm
US Advance GDP q/q April 28th
, 2017 – 6:00 pm
Macroeconomic ambiguity plays spoiler in Mar’17
Base Metals Monthly Report
Friday, April 07, 2017
www.angelcommodities.com
Friday, 07 April 2017
Base Metals Monthly Report
On the macroeconomic front, the Federal Reserve hiked
its benchmark interest rate for the second time in three
months in Mar’17, signaling that any further hikes this
year will be gradual. The central bank said in a statement
that a strengthening job market and rising prices moved it
closer to its targets for employment and inflation.
In its latest monthly bulletin, the International Copper
Study Group said the global copper market deficit had
fallen back to about 50,000 t in December, following a
deficit of about 90,000 t in November. Supply gains are
attributed to rise in Peruvian concentrate output and a
recovery in production levels in Canada, Indonesia and the
US, and expanded capacity in Mexico.
Overall, easing of supply disruption concerns along with
broader risk aversion in the global markets hurt the metal
in Mar’17.
Copper prices are likely to trade lower in April’17 as
lineup of crucial events this month starting right from
Trump – Jinping meeting on 6th-7th April will limit risk
appetite. Also, Indonesia's Energy and Mineral Resources
Ministry granted a temporary permit to Freeport’s
Grasberg to resume its previous annual quota of exports
up to 1.1 million tons of copper concentrate. However,
sharp downside will be restricted as Japan's biggest
copper smelter Pan Pacific Copper plans to cut its April-
September output of refined copper by 19.9 percent from
the same period last year due to long maintenance at
one of its plants.
-60000
-40000
-20000
0
20000
40000
60000
80000
100000
120000
1-N
ov-
15
1-D
ec-1
5
1-J
an-1
6
1-F
eb-1
6
1-M
ar-1
6
1-A
pr-
16
1-M
ay-1
6
1-J
un
-16
1-J
ul-
16
1-A
ug-
16
1-S
ep-1
6
1-O
ct-1
6
1-N
ov-
16
1-D
ec-1
6
1-J
an-1
7
1-F
eb-1
7
1-M
ar-1
7
1-A
pr-
17
Managed Net Copper
Source:Reuters, Angel Commodity Research
Investor interest shows recovery in Mar'17
Copper
In Mar’17, LME Copper prices declined by 2.3 percent to
$5837.5 per tonne, while on the MCX, prices plunged by
around 4.3 percent to Rs.380.75/kg hurt by sharp
appreciation in the Rupee.
Copper prices touched a two-month low of $5652/t in
Mar’17 as supply disruption concerns, which acted as a
cushion for the metal since Jan’17, were put to ease
following restart of production at the two major mines,
accounting for almost 8-9 percent of global mined copper
supply.
The 43-day strike at Escondida, the world's largest copper
mine in Chile, ended after the workers decided to invoke a
legal provision that allows them to extend their old contract
for 18 months, following which both sides must again try to
reach a new agreement. Also, Freeport McMoRan's
Grasberg mine in Indonesia resumed production of copper
concentrate, readjusting its operations to 40% of normal
capacity and ending a stoppage that began February 11
after Indonesia prevented it from exporting the material
used to make refined copper.
Further, General Administration of Customs data showed
Chinese Copper imports accounting for nearly half of global
consumption estimated at around 23 million tonnes this
year, totalled 340,000 tonnes in February, down 10.5 per
cent from January and down 19 per cent from a year ago.
Although the slowing demand from the world’s top
consumer and producer was a result of Lunar New Year
holiday.
Besides, Global exchange stocks of copper surged by
around 167,000 tonnes in Mar’17 to 750,000 tonnes, the
highest level since mid-2013. Stocks at the LME-exchange
warehouses jumped by a whopping 41 percent while
Shanghai inventories rose 8 percent last month.
In addition to supply-demand dynamics, overall global risk
aversion mode too, weighed on the metal. Global investors
were taken aback after financial leaders of the world's
biggest economies at the G20 meeting dropped a pledge to
keep global trade free and open, accepting an increasingly
protectionist US after failed bids for consensus.
Base Metals Monthly Report
Friday, April 07, 2017
www.angelcommodities.com
Friday, 07 April 2017
Base Metals Monthly Report
Aluminium
In Mar’17, LME Aluminium prices gained marginally by 0.7
percent to $1962.5 per tonne, while on the MCX, prices
plunged by around 3 percent to Rs.126.1/kg as Rupee
appreciation restricted upside.
Aluminium, in Mar’17 enjoyed gains as a joint statement
from the Chinese Ministry of Environmental Protection
(MEP), Finance Ministry, National Development and Reform
Commission (NDRC) and the National Energy Bureau, in
conjunction with local governments, in order to contain
smog, have called upon aluminium producers in over two
dozen cities to cut their production significantly over the
winter months. Cuts in aluminium capacity by over thirty
percent and alumina by nearly the same amount in Hebei,
Henan, and Shandong provinces are particularly significant,
given they account for seventy percent of China’s total
aluminium production.
Further, demand side looked bright as Chinese home sales
rebounded in the first two months of the year with an
increase in new starts, resisting previous government curbs
to contain volatile prices in big cities such as Beijing.
Data from the International Aluminium Institute (IAI)
showed daily average primary aluminium output in China
fell to 90,500 tonnes in February from 95,200 tonnes in
January. Annualized Chinese Al output fell to 33 million
tonnes in February from 34.7 m tonnes in January. Besides,
Russian Aluminium giant Rusal anticipates the global
market deficit to widen to 1.1 million tonnes from 700,000
tonnes in 2016 whereas US’ biggest Aluminium producer
Alcoa expects the global aluminium market to end up with
a modest surplus of 0.4 to 0.8 million tonne.
Latest statistics from the World Bureau of Metal Statistics
(WBMS) showed that the global Aluminium market
witnessed a shortage of 985,000 tons, as compared to a
deficit of 659,000 tons. In 2016, the global demand for
primary aluminum increased by 748,000 tons to 58.74
million tons whereas China's primary aluminum production
of 31.87 million tons, accounted for 55% of the global
proportion.
However, gains were limited by a sharp plunge in crude oil
prices. Oil prices came under pressure as US oil stocks
witnessed gains for nine consecutive weeks in a row, to
record high of 528 million barrels, thereby igniting
concerns that the supply cut by OPEC will be overpowered
by rising supplies from the US. Crude oil production in the
US has already risen 8.3 percent since mid-2016 to 9.13
million barrels per day (bpd). On the inventory front, LME
Aluminum inventories fell by 14.2 percent in Mar’17
whereas stocks at the Shanghai exchange warehouses
jumped by a whopping 50.3 percent.
Overall, Chinese output concerns continued to support
prices for second month in a row in Mar’17 although
weakness in crude oil prices limited upside.
We expect Aluminium prices to trend higher in April’17
as China’s Air pollution control, which has given rise to
expectation of tightness in the Aluminium market, is
likely to provide a cushion for prices this year. As a result,
Japan's aluminium premium for shipments during the
April to June quarter has been set at $128 per tonne, up
35 percent than the $95 per tonne premium in the
previous quarter.
46
47
48
49
50
51
52
53
54
55
1850
1870
1890
1910
1930
1950
1970
1990
28
-Feb
-17
7-M
ar-1
7
14
-Mar
-17
21
-Mar
-17
28
-Mar
-17
4-A
pr-
17
Falling crude oil limited Aluminium gains
LME Aluminium ($/t) WTI crude oil ($/bbl)
Base Metals Monthly Report
Friday, April 07, 2017
www.angelcommodities.com
Friday, 07 April 2017
Base Metals Monthly Report
Technical Levels (April 2017)
Commodity Support 2 Support 1 CMP Resistance 1 Resistance 2
LME Copper ($/tonne) 5430 5650 5804 6080 6300
MCX Copper (Rs./kg) 345 365 374.5 395 415
LME Aluminium ($/tonne) 1800 1890 1939.5 2020 2065
MCX Aluminium (Rs./kg) 118 122 124.6 131 135
LME Nickel ($/tonne) 8850 9430 10020 10800 11700
MCX Nickel (Rs./kg) 565 610 644.4 725 795
LME Lead ($/tonne) 2100 2220 2260.5 2420 2510
MCX Lead (Rs./kg) 140 145 145 157 164
LME Zinc ($/tonne) 2520 2640 2686.5 2900 3030
MCX Zinc (Rs./kg) 168 172 172.2 190 198
Technical outlook - MCX Copper (CMP Rs.374/kg)
On the above monthly prices chart of Copper, it is clearly seen that prices are trading in down
side after making a high of 414.75 levels in Feb.
2017. Last month prices have touched the high of
409.25 levels and made a low of 370.15 levels and
finally closed 4.30% lower at 380.75 levels. As per
the chart structure prices have formed “Lower Top
Lower Bottom” formation which is the sign of
down trend.
Technical Indicator 14 month RSI is falling from
over bought zone and currently hovering around
54 levels. MACD is also near to zero line and
showing negative divergence. Both indicators
suggesting sideways to down trend in the copper
prices.
Support could be seen at 365 levels and the next strong support could be seen at 345 levels.
Resistance could be observed at 395 levels and the next resistance could be at 415 levels.
Looking after negative chart structures and indicators suggesting down trend, we recommend
sell in copper.
Sell Copper between 390 – 395, SL – 415, Target – 365 / 360 levels.
Base Metals Monthly Report
Friday, April 07, 2017
www.angelcommodities.com
Friday, 07 April 2017
Base Metals Monthly Report
Research Team
Kaynat Chainwala Research Analyst (Base Metals) [email protected] (022) 3935 8136 Extn :6136 Prathamesh Mallya Chief Analyst (Non-Agro Commodities & Currency) [email protected] (022) 3935 8134 Extn :6134
Anuj Gupta Head– Technical Research (Commodity & Currency) [email protected] (011) 4916 5954
Angel Commodities Broking Pvt. Ltd.
Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai - 400 093.
Corporate Office: 6th Floor, Ackruti Star, MIDC, Andheri (E), Mumbai - 400 093. Tel: (022) 2921 2000
MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX: Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
Disclaimer: The information and opinions contained in the document have been compiled from sources believed to be reliable. The company does not warrant its accuracy,
completeness and correctness. The document is not, and should not be construed as an offer to sell or solicitation to buy any commodities. This document may not be reproduced,
distributed or published, in whole or in part, by any recipient hereof for any purpose without prior permission from “Angel Commodities Broking (P) Ltd”. Your feedback is
appreciated on [email protected]