Commodities / Raw Materials

[Mick100]

Tin reaches 17 yr high – and further price rises predicted
By: Lawrence Williams
Posted: '28-DEC-06 17:00' GMT © Mineweb 1997-2006



LONDON (Mineweb.com) --Tin, the least traded by volume of the primary base metals, and one where prices had been in the doldrums until recently, is currently trading at a 17-year high on the London Metal Exchange (LME). With demand expected to increase and supplies being curtailed, many metals analysts reckon there will be further rises ahead in the short to medium term. This puts tin alongside zinc and nickel as base metals where demand is expected to exceed supply over the next few months at least.

The immediate price surge has been due, though, to the Indonesian crackdown on around 20 small independent tin smelters which are operating illegally and whose output is reported to be of unreliable quality. The nervousness comes from uncertainty as to whether all, or any, of the smelters will reopen in the short to medium term if, and when, they become legally permitted.

The current market shortfall in tin production over rising consumption is put at some 25,000 tonnes for next year. Tin consumption is said to be increasing as pressures rise as solder manufacturers are under pressure to eliminate lead on environmental and health grounds. This coupled with an increase in electronics manufacture, particularly in China, is deemed to be enough to cause the supply problems. The predicted shortfall for 2007 amounts to around the volume that has been produced by the small Indonesian smelters in the past.

Today, spot tin traded on the LME at US$11,500 a tonne, with 3-month tin at $11,400 – the highest level since 1989.
/

[Mick100]

Base metals prices to moderate in 2007
By: Tessa Kruger
Posted: '03-JAN-07 09:00' GMT © Mineweb 1997-2006



JOHANNESBURG (Mineweb.com) --Base metals prices will moderate in 2007, but remain at “favourable” levels that will allow producers to generate excess cash flow.

Moody’s Investor Services believes prices will continue to be positive for producers although they will dip as lower demand from the United States is offset by continued strong demand from China next year, it says in a recent report titled Base Metals Industry Outlook 2007.

Supply will also continue to be constrained by lack of new capacity in copper, zinc and nickel. Price levels of these metals are likely to continue to derive support from “continued production challenges and ongoing labour disputes”.

The biggest threat to prices, apart from a significant reduction in Chinese demand, will be from the fund sector which has supported growth in prices over the past few years, but also contributed significantly to increasing volatility witnessed in 2006.

“Other significant negative factors for the entire mining industry are both operating cost platforms and development costs”, Moody’s says.

COPPER

Prices are expected to drift lower than current levels in the coming months towards a more sustainable level.

“With growing signs of a weakening US housing market, moderating demand growth from China, increased substitution due to high prices, and new mine production coming on line, we anticipate copper prices to settle below today’s levels, but to remain well above historic averages.”

New capacity will be brought on stream via BHP Billiton’s Spence project in Chile, which went into production in the fourth quarter of 2006 and is expected to produce 200,000 tonnes of cathodes annually. Phelps Dodge’s Cerro Verde mine will add 200,000 tonnes to annual production.

NICKEL

Moody’s expects a price correction from current levels, which could be significant, but it believes that the price will remain high.

The nickel price has been on a rise for a year as demand for stainless steel has been strong; the exchange inventory has dwindled to just over one day’s supply, supply
disruptions have persisted and the timetable for new mine supply has been pushed out.

“It is now accepted that the deficit expected in 2006, could occur again in 2007.”

Moody’s said the biggest negative factor for nickel producers today, was the rapid escalation in development costs.

While these costs and delays support the nickel price, they also have a direct negative impact on companies involved in producing the metal.

ZINC

As with copper and nickel, Moody’s believes the zinc price is likely to correct in 2007, but will remain at attractive levels for producers.

Strong demand from China is likely to continue as it expands its galvanizing capacity. Zinc has wide-ranging uses in construction, automotive, aerospace and pharmaceuticals.

“The greatest risk to zinc would be a reduction in demand for galvanized steel, a sector that Moody’s believes will perform well in 2007.”


ALUMINIUM

Moody’s expects aluminum prices to track within in last year’s levels, on the back of “current metal exchange inventory levels” and still acceptable demand fundamentals.

Continued cost pressures are likely to again restrain the degree of margin improvement that can be achieved in this price environment in 2007.

[Mick100]

General Motors Say China Sales Jumped
Monday January 8, 5:28 am ET
By Joe Mcdonald, AP Business Writer
General Motors Say China Sales Jumped 32 Percent in 2006


BEIJING (AP) -- General Motors said Monday its sales in China's booming car market grew by 32 percent last year, a boost for an automaker that has seen demand slump in its key North American market.
The company said it sold 876,747 vehicles in China last year, up about 208,000 units from 2005. It said sales of its flagship Buick brand grew by 24.9 percent to 304,230 units.




"Vehicle sales continued to outpace most projections as a result of unprecedented consumer demand for passenger cars," Kevin Wale, president of GM China, said in a statement.

Foreign automakers are competing aggressively for a share of China's market, where sales are expanding at double-digit annual rates and major U.S., European and Asian producers have set up factories.

On Friday, U.S. rival Ford Motor Co. said its China sales last year more than doubled to 129,790 units.

Total vehicle sales this year are expected to rise by 15 percent to 8 million, up from 7 million in 2006, according to the China Association of Automobile Manufacturers, an industry group.

GM says China is its biggest single national market outside the United States. In 2005, it overtook Germany's Volkswagen AG last year as China's No. 1 automaker, with an estimated market share of 11.8 percent.

General Motors Corp. plans to invest $3 billion in China in 2004-07 in hopes it will drive a revival for the company, which is cutting production and closing factories in its home North American market.

The automaker set up its first Chinese venture with a $750 million factory in Shanghai in 1998 and now has five joint venture assembly plants that make nearly all GM vehicles sold in the country. It also has an engine plant, an auto financing venture and is quickly expanding dealerships.

Japan's Toyota Motor Corp., on track to surpass GM as the world's No. 1 automaker in the next couple years, is well behind GM in China. In 2005, Toyota had just 3.5 percent of the market. But it has set a target of 1 million sales a year by 2010.

General Motors says sales in China and other foreign markets surpassed U.S. sales for the first time last year, reaching 55 percent of the worldwide total of 9.2 million.

GM chairman Rick Wagoner said in November the company would expand further in China and "invest ahead of demand," confident that robust sales growth will continue.

[Mick100]

from the January 05, 2007 edition

New prospect for US: glut of ethanol plants
By Mark Clayton | Staff writer of The Christian Science Monitor

Like at least four others building new ethanol plants in Illinois, Mike Smith expects his new biorefinery to begin pumping out fuel from corn by summer.
Unlike the other plants, Mr. Smith's Canton, Ill., facility is nowhere to be found on a key industry tally, which the US government and Wall Street analysts use to track ethanol plants under construction. A study released Thursday reports that at least 14 new biorefineries - representing nearly 1 billion gallons of extra fuel - are not on that tally. That oversight could mean problems ahead for the food supply and the "green fuel" industry, some analysts say.




• Ethanol production could pull so much corn out of the food supply by 2008 that US corn exports could plummet.

• The food-fuel competition could push corn prices so high that some ethanol producers in the fledgling industry, which many deem vital to US energy security, would merely break even - or, if corn gets pricey enough, actually lose money.

Even before Thursday's report, some analysts had warned of a future glut of ethanol production capacity.

The immediate concern of the Earth Policy Institute (EPI), which released the new report, is the impact on the global food supply.

"We're worried there will be less to feed the world if we're using too much corn to make fuel," says Lester Brown, EPI's president. "The US ... supplies 70 percent of the world's corn exports. These previously unidentified distilleries could have a big negative impact."

Wall Street investment banks and farm cooperatives continue to pour billions of dollars into building ethanol plants, basing their decisions in part on predictions of future capacity by the Renewable Fuels Association. The RFA lists 65 plants under construction. But EPI, which put together its own tally using several industry lists, has found 79 such plants.

That extra capacity has major implications for agriculture and the ethanol industry. Using the RFA's lower estimate, the US Department of Agriculture has forecast that ethanol biorefineries - also called distilleries - will need about 60 million tons of corn from the 2008 harvest. But if EPI's higher estimate for plants is correct, then up to 139 million tons of corn will be needed.

For its part, the RFA defends its more conservative estimate. "Our list is a pretty accurate snapshot - about the best you can get in an industry that changes as quickly as this one," says spokesman Matt Hartwig. "If we were to do our list based on announcements, it would be much longer. But that would be misleading because not all those come to fruition. Those on our list we believe will be built and up and running."

Last month, the RFA added about a dozen new facilities to its list, which suggests about 11.4 billion gallons in capacity by 2008, which is still lower than the EPI's range of 12 billion to 15 billion gallons.

Besides the potential impact on food exports, the glut in capacity could throw the ethanol industry into turmoil. The problem isn't demand for ethanol. The energy industry could use far more than what's currently produced. The real challenge is that competition for corn could drive its price so high that profits evaporate, some analysts warn.

"We see significant overcapacity in the short term, 2007-2010," warned a Deutsche Bank analysis last month. That analysis, based in part on RFA data, sees capacity of only about 8.3 billion gallons a year by 2008 - similar to a Citibank analysis in September.

Factor in the EPI numbers and the crunch gets worse.

"We've got to come up with enough corn acres to meet the demand," says Jerry Gidel, grains analyst for North America Risk Management in Chicago. "We're chasing a kite right now that keeps on rising." He predicts that capacity could reach 11 billion gallons a year by early 2008. The 1.7 billion gallons of capacity RFA added late last year was "totally unexpected and has me a little

[stolwyk]

China's Copper Imports May Rise as Stockpiles Rebuilt (Update4)
http://www.bloomberg.com/apps/news?p...1ng&refer=home

[Mick100]

Merrill Lynch forecasts excellent nickel results
By: Dorothy Kosich
Posted: '25-JAN-07 08:00' GMT © Mineweb 1997-2006



RENO, NV (Mineweb.com) --Merrill Lynch analysts declared Wednesday that nickel still “has the best fundamentals of the industrial metals” and that “nickel companies should deliver excellent results during the reporting season.”

Research Analysts Daniel Hynes and Vicky Binns wrote that “we remain bullish on the longer term prospects for nickel,” despite their predictions that the “nickel price will be under pressure once the stainless steel industry begins de-stocking” during the first quarter of this year.

In their analysis, the analysts explained that about two-thirds of all nickel is consumed in the production of stainless steel, “and there is strong evidence that stainless steel stocks are rising to alarm levels that could precipitate a stainless steel producer de-stock (similar to H2 2005).

“There is not doubt that some of the slowdown in demand has been the result of record high prices in the nickel market,” they said. “With nickel prices hitting all time highs, it is likely that stainless steel producers and end consumers will look to reduce inventory and keep their cupboards as bare as possible, just in case the nickel market suffers a correction.” Based on stainless steel de-stocking/re-stocking cycles, ML forecast stainless steel destocking during the current quarter, “and do believe this will have a negative impact on spot nickel prices (no matter what investor/hedge funds own) and on nickel-leverage equities.”

The analysts also predicted a surge in stainless steel production when China’s Baosteel gets its new capacity to full production and a giant mill at Taiyuan is commissioned. Meanwhile, ML suggested that China is using pig iron as an alternate supply of nickel.

“Despite our forecast that nickel prices can come under severe pressure from current record spot price levels due to stainless de-stocking, we would look at the pull-back, after the dust settles, as a buying opportunity as we do believe the nickel market has a lot more life left in it,” they said.

The analysts also asserted that supply issues will continue to dominate the world nickel market this year with frequent supply disruptions, as well as a loss of nearly 4% of potential nickel production.

Meanwhile, a British shipwreck has also put pressure on nickel prices as more than 1,000 tonnes of nickel is on board the MSC Napoli, which was deliberately run aground on Britain’s south coast near Branscombe, England, last week to prevent the ship from sinking.

To compound potential supply disruption concerns, Swiss mega-miner Xstrata is still negotiating with unions at Falconbridge nickel operations in Sudbury, Ontario, which produces about 4% of yearly international nickel production. Schedules to bring new nickel mines into production have been delayed at BHP Billiton’s Ravensthorpe in Australia and CVRD Inco’s Goro project in New Caledonia.

[Mick100]

By David Harman
17 Jan 2007 at 08:58 AM EST


SHANGHAI (Interfax-China) -- China's zinc consumption will rise 4.5% to 3.1 million metric tonnes this year, resulting in a supply shortage of around 370,000 metric tonnes, said Lei Wanjun, an analyst at Great Wall Securities.

"Zinc consumption will maintain its rapid growth in 2007, which may push average prices higher to around RMB 32,000 ($4,156) in 2007," said Lei. Zinc prices in the physical market stand at around RMB 31,000 ($4,025) in the current market.




"Technical upgrades and industrial consolidation in the domestic steel industry will boost zinc consumption this year," said Lei. Zinc is mainly used in the steel industry.

China's galvanized sheet output grew by 40% per year during the past three years. Current domestic capacity stands at 10 million metric tonnes and is expected to exceed 15 million metric tonnes by the end of this year.

Domestic galvanized sheet output will reach 10.5 million metric tonnes in 2006, up 45% from the previous year, and increase zinc consumption by 145,000 tonnes from last year.

Lei added that the currently low LME zinc stocks will also push prices up this year. LME stocks are at less than 10,000 metric tonnes, equivalent to four days of world consumption.

World zinc output reached 10.669 million metric tonnes in 2006. China's output was 2.75 million metric tonnes, and it been the largest zinc producing country in the world for 15 straight years.

China became a net zinc importer in 2004 and imported about 400,000 metric tonnes zinc per year in the past couple of years. China's net imports of zinc products, including mined output, or so-called concentrates, were at 860,000 tonnes last year.

Interfax recently reported that the Shanghai Futures Exchange may launch zinc futures trading soon.

Jianjun, general manager of the trading body of Zhu Zhou Smelter Company Ltd., China's biggest Zinc production company, said the contract would be launched in February or March of this year. Tong Leshen, director of the market information department at Shanghai Nonferrous Metals Association, said zinc futures would be launched sometime in the first half of the year.

However, a senior official from Shanghai Futures Exchange refused to comment on the news.

Commentary

A 4.5% rise in consumption would be at the low end of estimated growth which may turn out to be 8% or more. Forecasts for demand to 2010 are suggesting up to a 50% increase and these figures have been the driver of prices, which saw new highs in November last year.

Prices have retreated 16% or so since then and continue to ease off. China is committed to exporting high end finished steel products and, until that industry reaches an apex, demand for zinc will continue to grow.

© Interfax-China 2007

[Mick100]

increasing demand for corn

http://www.usatoday.com/money/indust...-24-corn_x.htm
.

[Mick100]

Massive metals deposits revealed along China’s Qinghai-Tibet Railway
By: Dorothy Kosich
Posted: '29-JAN-07 09:00' GMT © Mineweb 1997-2006



RENO, NV (Mineweb.com) --Chinese geologists have disclosed one of the closely-held secrets that motivated the nation to spend US$3.7 billion on the Tibet railway: the discovery of large mineral deposits that may reduce the nation’s dependence on mineral imports.

Critics had long questioned China’s claim that the development of Tibet was the sole reason behind the building of the 1,956-km Qinghai-Tibet Railway. Now, the official Chinese news agency Xinhua has reported that Meng Xiani, director of the China Geological Survey (CGS), has revealed that 16 large copper, lead, zinc, iron iron and crude oil deposits along the railway are expected to yield 18 million tons of copper, and 10 million tons of lead and zinc.

One copper deposit on Qulong has a proven reserve of 7.89 million tons, second only to the country’s largest copper mine in Dexing in China’s Jiangxi Province. The CGS believes the copper reserves in Quolong could reach 18 million tons, making it the largest copper deposit in the country.

Zhang said three major copper deposits in Qulong and in Yunan Province’s Pulang and Yangla regions, will add 26.78 million tons of copper to China’s reserves, increase total mined copper output by almost a third, and reduce China’s dependence on copper imports. China’s copper miners currently produce about 600,000 tons of copper annually. The nation imported another 731,200 tons of refined copper from January to November last year, more than a quarter of its domestic output.

Chinese steel mills are extremely dependent on imported iron ore. The Chinese Geological Survey announced it has found estimated reserves of 760 million tons of high-grade iron ore along the rail line in the Kunglun Mountain on the western Qinghai-Tibet plateau and the southern Xinjiang Province, according to Deputy Director Zhang Hongtao.

Zhang also noted that the Midwestern part of the northern Qiangtang Basin in northern Tibet has favorable conditions and promising resources for oil and gas, according to the Beijing office of the Press Trust of India.

Meanwhile, the official Chinese Government news service Xinhau reported that the China Iron and Steel Association has vowed to cut the number of domestic companies importing iron ore to 90 this year. All outdated steel mills will be closed by the end of the year. The world’s top iron ore consumer, China imported 326 million tons of iron ore in 2006.

At a recent steel and iron ore industry meeting in Kuming City, it was disclosed that 20% of the nation’s iron-ore importers are expected to be out of business at the end of this year.

Meng said it China’s economic security would ultimately be endangered if the nation continued to rely on imports of major mineral resources in the long term. He added that the results of the geological survey along the railroad proved it was possible to improve China’s natural resources security.

[Mick100]

Continued market growth for zinc expected in 2007
By: Lawrence Williams
Posted: '29-JAN-07 12:00' GMT © Mineweb 1997-2006




LONDON (Mineweb.com) --In his latest research report, Numis Securities analyst, John Meyer, points out that, according to the International Lead & Zinc Study Group (ILZSK), world zinc consumption is forecast to reach 11.35million tonnes this year, up 2.6% from 2006. China is expected to account for 30% of world zinc demand with growth of 6.9% expected.

In the report, Meyer comments that China has been helping to drive up zinc prices with its high consumption levels as the economy continues to develop. It is by far the largest consumer with the US a distant second place with only 10% market share according to the ILZSG. 47% of zinc is consumed to galvanise steel which protects the steel against corrosion.

Also he adds that a zinc futures trading contract is to be launched in Shangahai to enable local consumers and producers hedge against risk, and he feels that this may expose the metal to further speculation and volatility.
.
He points out too that zinc prices are currently well below the US$4,600/t high of December 2006. Prices have fallen back in response to concerns on US manufacturing data, which had particularly affected copper prices with that metal being seen to move into surplus in 2007. The fall in copper prices dragged other base metals down too, but Meyer notes that the supply/demand position for zinc is likely to be rather different with supplies still likely to be in deficit by the end of the year, even though supply growth is expected to exceed demand growth over the period.

“Fears over security of supply are likely to prevent significant downward price moves for the time being, and there is considerable scope for a recovery. Market commentators have talked about a recovery in zinc prices to back over the US$4,000/t level” says Meyer.

Although there is new production anticipated to come on stream during the year (7.3% mine supply output growth is expected), any delays, labour disruption and other factors which may cause output to be curtailed, even temporarily, could have an immediate effect on the market. Warehouse stocks are still very low.