METALS INSIDER
COMPILED ON FRIDAY, APRIL 15, 2011
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TRADING PLACES
 Regulators outline commodities market crackdown
 Boardroom sherpa Murray takes on Glencore
GENERAL NEWS
 Asia, Europe data point to mounting inflation risks
 G20 eyes anti-crisis plan, mulls recovery risks
 China copper, aluminium output set for new record in
April
 Goldman recommends underweight commodities for 3-
6 months
 U.S. metal imports slow in Feb, Q2 recovery seen
 Bolivia may scrap Glencore, Pan American contracts
METALS
ALUMINIUM
 Malaysia's resource-rich Sarawak state
COPPER
 Aurubis sees rising copper product demand
NICKEL/STEEL
 China steel output may hit 700 ml T this yr -NDRC
 China March steel output stayed high, outlook
cautious
 Rio tinto says iron ore market to remain tight
 Asia steel firms face tough 2Q, China tightening
eyed
Black Sea billet falls on sluggish
demand
 Major market developments in March
ZINC/LEAD
 Zinc premiums hold steady, inventories jump
 Major market developments in March
 Major market developments in March
TIN/MINORS
 Tight supply, brisk demand to keep tin aloft
 Supply constraints point to uranium rebound
 Germany delegation seeks Kazakh metals deal
 OMH to keep some HK listing funds for Malaysia
smelter
FEATURE
BREAKINGVIEWS-Glencore shows how not to launch an IPO
Glencore's flotation has become an excruciating case study in how not to
organise an initial public offering. The Swiss commodities trader made a seri-
ous error by confirming its intention to float without having finalised the ap-
pointment of an independent chairman. Hours later, a chairman was found:
but in circumstances that are close to comedy. When the market opened on
Thursday morning, Glencore unveiled its IPO with news that a chairman
would be appointed "shortly". That looked amateurish at best. It gave the
impression that corporate governance was an afterthought .
Click here to read the rest of the story
MARKETS (Click on the sections below to jump to the full story)
BASE METALS: Copper fell on Friday, heading for a fifth straight session
of losses as investors worried Chinese inflation at a 32-month high would
lead to tighter monetary policy hitting demand in the world's top metals
buyer. Chinese consumer price inflation sped to 5.4 percent in the year to
March, the fastest since July 2008 and topping market forecasts for a 5.2
percent increase. Gross domestic product eased a touch in the world's top
copper buyer. "Being the world's largest consumer of raw materials, its
demand has failed to live up to expectations in the first quarter," Virtual
Metals analyst, Carl Firman, said of China.
PRECIOUS METALS: Gold held near record highs on Friday as euro zone
sovereign debt concerns, worries over inflation and expectations U.S. in-
terest rates will stay low all conspired to support the precious metal. Gold
and silver retreated a touch after a decision by rating agency Moody's to
cut Ireland's debt rating to just above junk pressured the euro, but remain
firmly underpinned. Silver is holding near its earlier 31-year high at
$42.64. "The market has been reacting to (the credit issues in peripheral
Europe) by looking for ways to protect themselves from these types of
risks, and gold is seen as a way to do that," said Deutsche Bank analyst
Daniel Brebner.
FOREX: The euro slid on Friday after Moody's cut Ireland's rating to just
above 'junk' status, keeping the currency's debt problems in focus, though
it remained underpinned by expectations for further interest rate rises.
Also helping limit losses especially against the U.S. dollar was a widely-
held view U.S. interest rates will stay low for some time. Several top Fed-
eral Reserve officials have sounded relaxed about inflation and data on
Friday supported that. "The euro is in the middle of a tug-of-war between
rate expectations and sovereign debt concerns. Right now, the euro pulled
back a little bit because of the Ireland downgrade and concerns about the
Greek debt restructuring." said Brian Kim, currency strategist at UBS in
New York.
CLICK HERE TO SEE UPCOMING EVENTS FOR NEXT WEEK
FEATURE
BREAKINGVIEWS-Glencore shows how not to
launch an IPO
-- The author is a Reuters Breakingviews columnist. The
opinions expressed are his own --
By Chris Hughes
LONDON, April 14 (Reuters Breakingviews) - Glencore's
flotation has become an excruciating case study in how not
to organise an initial public offering. The Swiss commodi-
ties trader made a serious error by confirming its intention
to float without having finalised the appointment of an
independent chairman. Hours later, a chairman was found:
but in circumstances that are close to comedy.
When the market opened on Thursday morning, Glencore
unveiled its IPO with news that a chairman would be ap-
pointed "shortly". That looked amateurish at best. It gave
the impression that corporate governance was an after-
thought.
Whispers subsequently circulated that John Browne, the
former chief executive of BP , was emerging as a frontrun-
ner for the job. Had Browne been confirmed in the role, the
clumsiness might have been quickly forgotten. True,
Browne left BP in disgrace in 2007 after lying to an English
court about his private life. But his international and
boardroom experience would have been a big asset to
Glencore. In the end, the job went to Simon Murray, a
member of the Hong Kong business elite.
Murray was quite open about his candidacy in recent days.
But he didn't seem to be in the loop -- or in the lead. He is a
tough cookie, having served in the French Foreign Legion
and trekked to the South Pole. And he has big-cap board
experience from Vodafone , Richemont and Essar Energy.
But Murray is hardly the heavy hitter investors were expect-
ing. Worse, the delays and leaks surrounding his eventual
appointment have weakened his authority.
The same goes for the pallid endorsement from Ivan
Glasenberg, Glencore's chief executive. Glasenberg said
that Murray would make an "invaluable addition" to the
board, which contains a pre-installed slate of non-
executives that may or may not be to Murray's liking.
A chairman is indeed invaluable. But Murray's role should
be more than additional. The chairman is meant to lead the
board. And in Glencore's case, the chairman has a central
role representing the interests of new shareholders who
will be in a minority. It's a serious matter. This looks more
like farce.
Get Breakingviews alerts directly to your inbox three times
a day. To sign up click here: (http://
online.thomsonreuters.com/3000XtraBVRegistration)
CONTEXT NEWS
-- Glencore International has appointed Simon Murray, a
director of Richemont and Essar Energy, as non-executive
chairman ahead of its planned initial public offering.
-- The appointment came hours after the Swiss commodi-
ties trader formally unveiled the IPO, saying it had decided
on a chairman but did not give a name. In the meantime,
John Browne, the former chief executive of BP, emerged as
a candidate.
-- "Glencore is a world-class company that over several
decades of consistent growth has become a clear leader in
the commodities sector. The track-record of value creation
by its world-class executive management team is truly im-
pressive and, I believe, unrivalled. The new non-executive
directors bring extensive experience in running and advis-
ing major public companies. This experience complements
the unique strengths of Glencore and its management,"
said Murray.
-- Ivan Glasenberg, Glencore's chief executive, said: "We
are delighted that Simon Murray will join our board of di-
rectors as chairman and I look forward to working with him
as we develop as a public company. With his significant
experience in and insight into global business, Simon will
be an invaluable addition to our board."
2
GENERAL NEWS
Asia, Europe data point to mounting inflation
risks
By Alan Wheatley
BEIJING, April 15 (Reuters) - China and India reported
higher-than-expected inflation readings on Friday, giving
fresh ammunition to central bankers and investors alike
who are worried about mounting price pressures in the
global economy.
Consumer prices in the euro zone also picked up more than
expected, while figures due later in the day from the United
States are expected to show a similar trend, with the infla-
tion rate still moderate but steadily rising, not least be-
cause of higher food and energy costs.
Prices of oil and grain, in turn, are climbing in part because
of strong growth in China, India and other emerging econo-
mies, which have shown the developed world a clean pair
of heels since the global financial crisis.
"The weakness in markets this week is expected after the
smart comeback we have seen recently, with inflationary
concerns again coming to the forefront," said Jan Lam-
bregts, global head of financial markets research at Rabo-
bank.
Consumer price inflation in China quickened to 5.4 percent
in the year to March, the fastest rate since July 2008, from
4.9 percent in the first two months of the year.
In India, the Wholesale Price Index, the main inflation
gauge, rose 8.98 percent in the year to March, up from 8.31
percent in the 12 months to February and beating market
projections of an 8.36 percent reading.
Economists expect the central banks of both countries to
tighten monetary policy further in short order to dampen
inflationary pressure.
A rise in the proportion of deposits that Chinese banks
must hold in reserve, rather than lend out, could be immi-
nent after Premier Wen Jiabao in midweek reaffirmed his
determination to keep a lid on prices.
Core inflation, excluding food and energy, was the highest
in China in a decade. In India, too, a sharp upward revision
to figures for January has led some economists to the con-
clusion that underlying price pressures are greater than
they had thought.
"It seems that inflation trajectory has changed. The ex-
pected decline in inflation is just not happening and looks
like we have underestimated the underlying pressure on
prices," said Ashutosh Datar, an economist at IIFL in Mum-
bai.
"More monetary tightening is inevitable after today's data
and the case for a 50 basis point hike in May is strength-
ened," he added.
PERSISTENT PRESSURE
Final March figures for the euro zone showed inflation
jumped to 2.7 percent from 2.4 percent in February,
slightly more than a preliminary forecast and the fourth
month it has been above the European Central Bank's tar-
get of 2 percent.
The ECB was the first of the three major Western central
banks to raise rates last week and it is expected to move
again by July despite concern over the damage higher rates
will do to economies like Portugal and Ireland struggling
with high debt.
"The big news in these numbers is that core inflation rose
noticeably," said ABN Amro analyst Nick Kounis.
"Although we expect a rate increase at the July meeting,
the balance of risks is tilted towards an earlier move."
The People's Bank of China, the central bank, has in-
creased benchmark interest rates four times since last Oc-
tober and has required the country's big lenders to freeze a
record 20 percent of their deposits.
Dong Tao, the chief China economist for Credit Suisse, ex-
pects tightening to resume in the second half of the year
nad the rate banks offer on one-year deposits to rise an-
other 1.5 percentage points by the end of the year.
"In our view, China is by no means near the end of the cur-
rent tightening cycle. Food inflation is transitory, but ser-
vice inflation and wage inflation are structural," he said.
That bodes ill for Western economies that are big buyers of
manufactured goods assembled in China. If imported infla-
tion keeps climbing, central bankers will have to press
down domestically generated prices if they want to hit their
overall inflation targets.
Economists expect annual consumer price inflation in the
United States in March quickened to 2.6 percent, from 2.1
percent in February. The figures are due for release at 1230
GMT.
But the core consumer price index, which is tracked more
closely by the Federal Reserve for monetary policy pur-
poses, is forecast to have gained just 0.2 percent on the
month -- the same increase as in February.
Fed officials have said they would act to ensure an inflation
psychology does not take root. But they largely regard the
recent spike in food and energy prices as transitory. More-
over, analysts expect subdued labour costs will keep a lid
on inflation.
Fed Governor Daniel Tarullo said on Thursday there are no
signs that surging energy and commodity prices would
translate into higher underlying inflation. Commodity
prices were notoriously volatile, he noted.
But two prominent anti-inflation hawks, Richmond Fed
President Jeffrey Lacker and Philadelphia Fed President
Charles Plosser, said the recovery was strong and sug-
gested the Fed needs to prepare to withdraw some of the
extensive stimulus the central bank has provided.
The apparent strengthening of the U.S. economy suggests
that, in the not-too-distant future, monetary policy will
begin reversing course from a very accommodative policy
stance," Plosser said in New York.
(Continued on page 4)
3
GENERAL NEWS
G20 eyes anti-crisis plan, mulls recovery risks
By Daniel Flynn and Gernot Heller
WASHINGTON, April 14 (Reuters) - The United States tried
to instill confidence on Thursday that the global recovery
was not at risk as finance leaders from around the world
gathered to advance a plan aimed at preventing future
economic crises.
As finance ministers and central bankers from the world's
top economies who are aiming to find ways to shrink im-
balances in order to foster sustainable growth wrapped up
initial meetings on Thursday, the latest news underscored
the problems faced.
Export-rich China, the world's No. 2 economy, reported
another quarter of turbo-charged growth, while the United
States reported a pick-up in claims for jobless benefits,
raising questions about recovery in the world's biggest
economy.
Leaders from the Group of Seven developed nations met on
Thursday ahead of a larger Group of 20 rich and emerging
country meeting to last all day on Friday. Officials will
weigh the impact of high oil prices, huge government debts
and Japan's recent disasters.
"Despite the risks in oil, the financial challenges still facing
parts of Europe, despite what's happened in Japan ... what
you see is gradual healing, gradual strengthening in confi-
dence that the world economy is going to be growing at a
reasonable rate," U.S. Treasury Secretary Timothy Geithner
said at conference on the global economy.
To prolong the recovery, G20 officials were expected to
flesh out a plan to build a world economy less prone to the
booms and busts that have marked the past two decades.
That would involve shrinking imbalances between export-
rich countries such as China and debt-burdened ones such
as the United States.
Canadian Finance Minister Jim Flaherty said addressing
these imbalances, which have long plagued the global
economy was a top priority, though he conceded "there are
still some bumps along the road."
Many economists say imbalances contributed to the 2007-
2009 financial crisis, as emerging market countries rein-
vested large surpluses into Western markets and caused
excessive risk taking by banks.
The United States in particular has long held that China
undervalues its currency to support exports, which swells
its trade surplus.
But in an interview with Reuters, Brazilian Finance Minister
Guido Mantega blamed advanced countries for the imbal-
ances and urged the U.S. Federal Reserve and other cen-
tral banks to end their loose monetary policies. That would
push China's yuan higher and reduce its surplus.
"The primary responsibility for the excess liquidity lies with
the advanced nations, not the emerging ones," he said.
At a separate meeting in China on Thursday, the BRICS
group of emerging markets -- Brazil, Russia, India and
China -- along with South Africa called for a revamped
global monetary system that relies less on the dollar and a
louder voice in global financial institutions.
The G20, which accounts for about 85 percent of the global
economy, hopes to complete work this week on
"guidelines" to assess whether specific countries were sav-
ing or spending too much, although naming who was run-
ning afoul would come later.
French Finance Minister Christine Lagarde suggested the
biggest G20 economies -- those representing 5 percent or
more of the group's output -- might face scrutiny. That
would likely include the United States, Japan, Germany,
China and France.
"It is a matter of credibility for the G20 that we agree on
the indicative guidelines this weekend," said Olli Rehn, the
European Union's economic and monetary affairs commis-
sioner.
Govt debt, bond yields: (http://r.reuters.com/zyg98r)
G20 economic measures: (http://r.reuters.com/guh98r)
Oil prices and growth: (http://r.reuters.com/tyv88r)
GREEK WORRIES
Other issues are likely to crowd the G20 agenda as well. As
officials gathered, Greek borrowing costs hit new highs.
Investors were spooked as Germany suggested a debt re-
structuring may be unavoidable.
Athens is struggling to cut spending enough to meet com-
mitments made in return for a 110 billion euro ($160 billion)
bailout from the European Union and International Mone-
tary Fund.
Other officials said talk of a possible restructuring was mis-
placed.
"There is no discussion of debt restructuring as far as
Greece is concerned. None whatsoever," Lagarde said.
The G7 countries -- the United States, Britain, Canada,
France, Germany, Italy and Japan -- also met behind
closed doors Thursday evening to assess the economic
damage from Japan's earthquake and uprisings in the Arab
world.
The IMF, which holds its twice-yearly meetings this week-
end, warned officials not to grow complacent about the
recovery's prospects simply because the worst of the finan-
cial crisis has passed.
"The apex of the crisis is behind us, but it would be part of
the complacency I am trying to avoid to believe we are in a
post-crisis era," IMF chief Dominique Strauss-Kahn said.
SOUNDER FOUNDATION FOR GROWTH
China has expressed suspicion that the effort on imbal-
ances may be aimed at pressuring it to bring down its hefty
trade surpluses.
China's foreign exchange reserves -- a stockpile that re-
flects Beijing's exporting prowess -- soared to a record of
more than $3 trillion by the end of March, a sum certain to
raise eyebrows in Washington.
But Chinese President Hu Jintao, who spoke in China as
meetings in Washington wound up Thursday night, said his
country's growth was still unbalanced and pledged to
boost the role of consumption in the economy.
(Continued on page 5)
4
GENERAL NEWS
China has so far resisted Western efforts to get it to let the
yuan rise more quickly, though rising price pressures at
home may encourage it to embrace more flexibility.
The People's Bank of China on Thursday set the yuan's
mid-point against the dollar at its highest level since it was
last revalued in 2005. The currency is up more than 4 per-
cent against the dollar since mid-2010.
Lagarde also said officials hoped for progress toward re-
forming the world monetary system, a top priority for
France, which chairs the G20 this year.
The G20 has been working on a plan to include the Chinese
yuan in the basket of currencies that makes up the IMF
Special Drawing Right, a unit of account between IMF
member nations.
Progress, however, has been slow, in part because of
China's policy of keeping the yuan on a tight leash. SDR
currencies are supposed to be "freely usable."
"So, we are ... not yet there, but there is a willingness on all
sides and an open-mindedness," Germany's deputy finance
minister, Joerg Asmussen, told Reuters.
China copper, aluminium output set for new
record in April
By Polly Yam
HONG KONG, April 15 (Reuters) - China's copper and alu-
minium production are set for another record month in
April, after a March surge, resulting from expanded capac-
ity and rosy demand forecasts by producers.
China produced a record 470,000 tonnes of refined copper
in March, up nearly 6 percent from a peak set in December
2010, data from the National Bureau of Statistics showed
on Friday.
Some of the output increase was linked to a natural re-
bound after a short month and smelter slowdown during
the Lunar New Year holiday in February as well as demand
for copper and aluminium intensive products such as air
conditioners ahead of the summer, analysts said.
They added that higher than expected inflation in March
won't lead smelters to keep production in check in the near
term.
"(We) did not see any factors that limited smelter produc-
tion (in March). In fact, many smelters such as Jiangxi Cop-
per have been increasing production," Guo said, who ex-
pects April's output to rise from March.
China's economy grew an annual 9.7 percent in the first
quarter versus a 9.8 percent clip in the previous quarter,
while consumer inflation hit a 32-month high of 5.4 per-
cent in March, government data showed on Friday.
The data raised broad investor concerns that Beijing may
move again to tighten credit further, hitting copper and
aluminium demand in the world's top consumer of the both
metals.
Table of March base metals production
Production and trade link: (http://link.reuters.com/nan98r)
China GDP (http://link.reuters.com/tym98r)
China Inflation (http://link.reuters.com/vym98r)
OUTLOOK SOLID
Expanded smelter capacity and sufficient raw material
supply has pushed up China's copper production, said Guo
Yong, analyst at Jinrui Futures, a subsidiary of China's top
copper producer Jiangxi Copper Corp.
Jiangxi Copper Co Ltd plans to produce 940,000 tonnes of
refined copper this year, from 900,000 tonnes last year
based on the demand and supply situation, he said.
He added that smelters had been building stocks since ex-
tra supplies had driven down international prices after the
Japan quake.
Some small copper production plants using scrap as feed
were built in the southern provinces of Guangdong and
Guangxi, adding production this year, Guo said.
ALUMINIUM
China's primary aluminium production also rose to record
high at 1.428 million tonnes in March, up nearly 1 percent
from the previous May 2010 record, even as Beijing has
pushed for aggressive consolidation in the industry.
However, many aluminium smelters have increased pro-
duction and started new capacity after local power supply
rose in late February, smelter officials said.
Reduced power between the fourth quarter of last year and
early February this year in some provinces, such as south-
western Guizhou, had limited smelter production.
LEAD, ZINC, NICKEL
Refined lead production rose 33.9 percent from the same
month of last year to 407,000 tonnes in March on a contin-
ued rebound in operations after the Lunar New Year holi-
days.
Output may rise in April with the re-start of a 100,000
tonne-a-year smelter in the top lead producing province of
Henan restarted operations in the beginning of the month.
"We closed for repairs before the Lunar New Year holidays.
We already restarted some production," a sales manager
at the smelter said.
China is the world's top lead and zinc producer.
Lead concentrates to China are priced on London Metal
Exchange lead price and silver prices , a common by-
product of lead concentrates.
China mined 225,000 tonnes of lead in concentrate in
March, double from February 2010 and up 28.6 percent
from March 2010.
A trading manager at a large lead and zinc producer said
plants were buying more locally produced lead concen-
trates, for which smelters paid about 2,000 yuan ($306)
per tonne less than prices for imported concentrates now.
China produced 458,000 tonnes of zinc in March, up 11.7
percent from March 2010 and 15.4 percent from February
2011. But high stocks may discourage some smelters from
running full rates. He estimated up to 1.5 million tonnes of
refined zinc may be stored in private and public ware-
houses in China.
(Continued on page 6)
5
GENERAL NEWS
"The supply won't stop even if all Chinese zinc smelters
halt production for three months," the trading manager
said.
Nickel production rebounded 16.4 percent to 19,634 tonnes
in March, after a 23.4 percent fall in February from record
22,015 tonnes in January 2011. March output rose 37.5 per-
cent from a year ago.
Goldman recommends underweight commodi-
ties for 3-6 months
SINGAPORE, April 15 (Reuters) - Goldman Sachs recom-
mended investors go underweight commodities over a
three to six month horizon, echoing its call from Monday,
saying oil prices are higher than justified by current supply
and demand.
The bank maintained an overweight recommendation for
the sector over a 12-month horizon as fundamentals are
expected to tighten over the next year.
"Barring further persistent increases in oil prices that dam-
age demand, we expect demand growth to continue to out-
pace supply growth, leading to much lower inventories and
OPEC spare capacity later next year, which would be has-
tened should the Libyan outage persist," the bank said in a
report dated April 15.
U.S. metal imports slow in Feb, Q2 recovery
seen
NEW YORK, April 14 (Reuters) - Mother Nature's wrath
likely had a hand in slowing U.S. imports of aluminum and
copper in February, but if seasonal demand trends hold
true, shipments should recover in the months ahead.
Data from the U.S. International Trade Commission on
Tuesday showed copper imports fell for a third straight
month in February to 50,494 tonnes.
The February figure brought the two-month total to
107,892 tonnes, down more than 11 percent from 121,626
tonnes in the corresponding period of 2010.
Inbound shipments of aluminum slowed to 103,891 tonnes
in February, bringing total imports for the first two months
of the year to 210,083 tonnes, over 17 percent below the
254,281 tonnes reported last year.
Graphic: (http://link.reuters.com/jyk98r)
Record-setting snowfall totals across much of the country
caused many end-users and manufacturers to either cancel
or delay bookings of material in January and February.
But as metal-intensive industries like construction and
automotive head into the seasonally stronger second quar-
ter, import levels should respond accordingly, analysts
said.
"Demand signals from the U.S. for base metals are pretty
positive and heading in the right direction," said Nicholas
Snowdon, an analyst with Barclays Capital in New York.
"As auto plants pick up, it's likely to have a positive effect
on the level of inventory OEMs (original equipment manu-
facturers) and automakers will have going forward."
Total U.S. automotive inventories stood at 2,484,300 as of
April 1, representing 54 days of supply, down from 60 days
as of March 1, according to the Automotive News Data Cen-
ter and company sources.
As lean as they are, U.S. automotive inventories are ex-
pected to see further reductions due to production slow-
downs and parts shortages from quake-ravaged Japan.
Toyota Motor Corp warned that the uncertain supply of
parts from Japan could threaten its output of vehicles
through July.
Last week, the Philippine unit of Honda Motor Co Ltd said
it would cut production by 50 percent due to a spare-parts
shortage.
Sterling Smith, an analyst with Country Hedging Inc in
Minnesota, believes Japan's supply chain troubles would
likely translate into greater U.S. auto sales, and with it,
stronger aluminum demand.
"If you have a person who is not brand-loyal and wants
their car, that's going to leave them with domestic oppor-
tunities, which would mean more domestic use of alumi-
num and use by automakers who are not having any parts
issues," he said.
"It could be bullish for aluminum, and I think it could be
bullish for a company like Ford."
The U.S. auto industry snapped a four-year sales decline in
2010, including three consecutive sales months above the
12 million-unit annual rate to close the year. Most analysts
expect double-digit growth in 2011 and further gains in
2012.
Barclay's Snowdon agreed, saying he saw few reasons to
think the auto sector would experience a significant soften-
ing in 2011.
"Given that the construction sector remains very soft, we
have heard nothing to believe that the transport sector is
going to be anything but a positive influence on metals
demand this year."
Bolivia may scrap Glencore, Pan American
contracts
By Claudia Soruco and Carlos Quiroga
LA PAZ, April 14 (Reuters) - Bolivia's leftist government
may rescind concessions on four mines run by Glencore
affiliates and Canada's Pan American Silver , the Andean
country's mining minister said on Thursday.
Mining unions are asking the state to "recover" the silver,
zinc, lead and tin mines currently operated by private
firms, which would be in line with President Evo Morales'
drive to regain control over key natural resources since
2006.
Mining Minister Jose Pimentel said state-run Bolivia Min-
ing Corp (COMIBOL) would assume control of the mines if
the concessions were rescinded, a move described as
"recovery, not nationalization" that could happen before
May 1.
(Continued on page 7)
6
GENERAL NEWS
The decision would affect Swiss commodity trader Glen-
core's Porco, Colquiri and Bolivar mines, as well as Pan
American's San Vicente mine.
Pimentel said the government did not plan to target min-
ing projects that have been private investments from the
start, such as San Cristobal, the country's largest silver
mine, owned by Japan's Sumitomo Corp .
"We respect the legal framework but we are also conscious
that the whole privatization process has had judicial pit-
falls," Pimentel said.
Coeur d'Alene , which operates the San Bartolome silver
mine in Bolivia, said it believes its operations in the country
will not be impacted.
SAN VINCENTE
Pan American's San Vicente mine, located in the center of
the silver-rich Potosi region, produced 3.0 million ounces
of silver and 4,661 tonnes of zinc concentrates last year,
according to the company's website.
Shares in Pan American fell as much as 11.3 percent, before
recovering somewhat to close down 9.3 percent at C$35.89
on the Toronto Stock Exchange.
Pan American Silver's corporate manager in Bolivia, Carlos
Prieto, said he was troubled by the government's an-
nouncement, although he said he did not have first-hand
knowledge of the plan.
"We are concerned for the (legal) security of our invest-
ments," Prieto told Reuters.
A spokeswoman for the company in Canada said Pan
American was surprised by the minister's reported state-
ments, adding that the company has received no official
word from authorities about the proposed move to rescind
concessions.
"We are finding out everything from the press," she said.
"We are following the situation closely ... And we will keep
the market updated if anything material comes up."
GLENCORE
Glencore has operated in Bolivia since early 2005. The gov-
ernment nationalized its Vinto tin smelter two years later.
Through its Sinchi Wayra subsidiary, Glencore has said it
can produce up to 205,000 tonnes of zinc concentrates,
15,000 tonnes of lead concentrates and 6,000 tonnes of
tin concentrates a year at its five Bolivian mines -- Porco,
Colquiri and Bolivar as well as two smaller sites.
The company did not give its capacity for silver output.
Officials at Sinchi Wayra, Glencore's Bolivian subsidiary,
declined to comment.
Zinc and silver exports brought $1.57 billion into the poor
South American nation last year.
7
TRADING PLACES
Regulators outline commodities market crack-
down
By Huw Jones
LONDON, April 15 (Reuters) - Global regulators unveiled
plans on Friday to tighten supervision of commodities mar-
kets but said there was still no evidence to pin price swings
on speculators.
The International Organisation of Securities Commissions
(IOSCO) published a list of draft actions it will finalise for a
meeting of finance ministers from the world's top 20
economies (G20) to endorse in October for global imple-
mentation.
IOSCO said it will broaden and deepen previous work on
improving transparency in oil markets to cover all com-
modities.
The aim is for all regulators to have a better overall picture
of how exchange-traded, off-exchange (OTC) and physical
commodity markets interact to set prices.
The IOSCO report is published for a G20 finance ministers
meeting in Washington on Friday to review progress on
pledges their leaders made in 2009 to reform global regu-
lation in light of the financial crisis.
Hans Hoogervorst, chairman of IOSCO's technical commit-
tee, said a broader focus was a recognition that other areas
including agricultural markets are crucial for economies.
"This expanded focus will include making new recommen-
dations for further work which is likely to lead to proposals
to improve market transparency, oversight and anti-market
abuse treatment for these commodities markets, where
necessary," Hoogervorst said in a statement.
IOSCO signals it wants all its members in over 100 coun-
tries to arm themselves with powers to intervene in con-
tract details, trading, mandate publishing of aggregate
positions and sanctioning of abuses.
"Well I must say it reads as a huge wish list and to a very
large extent much of this supervision already takes place
on the London Metal Exchange via large position reporting
and member surveillance," said Malcolm Freeman, man-
aging director at Ambrian Commodities.
IOSCO is made up of securities regulators from over 100
countries, including the U.S. Securities and Exchange Com-
mission, the UK Financial Services Authority and Hong
Kong's Securities and Futures Commission.
Its recommendations are not legally binding but applying
them is a condition of IOSCO membership, though making
sure all members introduce actions consistently remains a
tough task.
The recommendations also set out conditions for an indus-
try-led trade repository to open in the first quarter of 2012,
initially for OTC financial oil derivatives markets and ex-
panded to other commodities later on.
A repository allows regulators to easily see who is party to
each contract if a trading house goes bust.
WARY ON POSITION LIMITS
G20 president France has made a crackdown on commod-
ity markets a priority, saying speculators have helped push
food prices to record highs in recent years. Other countries
say supply and demand factors are the key price drivers.
The United States is introducing limits to positions on com-
modity markets but some countries and producers say such
a permanent supervisory tool is ineffective and tantamount
to price control.
G20 officials say there is broad consensus to improve
transparency and reporting in all commodities markets but
there are splits over whether tougher action, like perma-
nent position limits, are needed.
These divisions are reflected in the IOSCO report which
emphasises better reporting and a tailored approach to
each commodity, stopping short of calling for hard position
limits.
"It resists the U.S. approach that the only answer is posi-
tion limits," said Anthony Belchambers, chief executive of
the Futures and Options Association, a European industry
lobby.
The European Union is set to propose formalising practices
in countries like Britain whereby regulators and exchanges
intervene to manage positions temporarily during volatil-
ity.
"It's always been the view of EU regulators and the UK's
FSA that strengthened position management is the pre-
ferred way forward, which is different from the United
States," he added.
An IOSCO report in 2009 found that fundamentals rather
than speculative activity were a "plausible explanation" for
price swings in commodities. The watchdog said on Friday
that further reports and various studies published in the
intervening period support this view.
Boardroom sherpa Murray takes on Glencore
LONDON, April 14 (Reuters) - Few things daunt Simon
Murray, a former French Foreign Legionnaire who fought in
the Algerian war, climbed Everest and walked unsupported
to the South Pole.
But as chairman of the soon-to-be-listed commodities gi-
ant Glencore, he will face some of his toughest challenges
yet -- standing up to some of the hardest men in the busi-
ness and convincing investors to back a company that re-
mains opaque to many after operating out of the public eye
for 37 years.
"This is very exciting, but you are talking to someone who
has been chased by a leopard. You are talking to someone
who has been shot at with a machine gun and missed,"
Murray, 71, told Reuters outside his Hong Kong offices ear-
lier this week.
8
TRADING PLACES
Murray, currently chairman of Asian private equity firm
GEMS, was appointed non-executive chairman of Glencore,
the world's largest diversified commodities trader, on
Thursday. His appointment -- not unexpected after he was
named as a candidate earlier in the week -- was not in-
cluded in initial intention-to-float documentation pub-
lished by the firm, but came only hours later, after Glen-
core ironed out final details.
The delay has already irked investors.
Murray will sit on the board alongside Chief Executive Ivan
Glasenberg, Chief Financial Officer Steven Kalmin and five
non-executive directors led by former BP boss Tony Hay-
ward.
He has said he will seek to make his mark on the board.
"It's absolutely critical that the board understands what its
role is," he said this week. "In today's markets we are per-
manently under the microscope, and we have to make sure
we covered and ticked all the boxes."
Among his previous roles, Murray was managing director
of Hong Kong billionaire Li Ka-Shing's Hutchison Wham-
poa and serves on boards including Richemont and Essar
Energy . He has also served on the Vodafone board along-
side John Bond, who was last month appointed chairman
of Xstrata , in which Glencore owns a 34 percent stake.
Murray, a member of the Hong Kong elite, has spent 45
years in Asia and his Hong Kong connections will be valu-
able to Glencore, planning a dual Hong Kong and London
listing.
Murray, whose tales of derring-do include carrying two
severed heads in his backpack during his time in the French
Foreign Legion, was born in Leicester in central England.
As a teenager in 1960 he joined the Foreign Legion on a
whim, going on to fight for five years in Algeria. He later
wrote a bestseller, "Legionnaire", about his time in north
Africa.
It was made into a film in 2002.
Educated at Bedford School, one of England's oldest public
schools, Murray was turned down by the British Army be-
fore signing up with the Foreign Legion.
"I think perhaps I was just a young buck without much con-
fidence in himself setting an extreme challenge to see if he
could hack it in a man's world," he says in his book.
He has since become the oldest man to walk unsupported
to the South Pole, run a 240-km race in the Moroccan de-
sert and climbed Mount Everest. Murray told Reuters after
his appointment on Thursday that he expects to remain in
Asia after he takes on the role.
"This is a an international business and Asia is the future
as China and India are driving demand for commodities,"
Murray told Reuters from a hotel in Tokyo, jazz music blar-
ing in the background. "My first priority is to have a really
good understanding of where Ivan wants to take the busi-
ness."
Murray is married with three children. His America-born
wife Jennifer was the first woman to fly solo around the
world in a helicopter.
9
METALS
Malaysia's resource-rich Sarawak state
KUALA LUMPUR, April 15 (Reuters) - Malaysia's Sarawak
state, which goes to the polls on Sunday, is rich in re-
sources such as natural gas, timber and crude palm oil.
Following is a summary of the key commodities and pro-
jects in the state located on Borneo island:
OIL & GAS
* National oil company Petronas operates one of the
world's largest liquefied natural gas (LNG) complexes in
Sarawak with eight production trains that have an annual
capacity of 24 million tonnes.
* Shipments of Sarawak's LNG meet a large chunk of de-
mand from South Korea, Taiwan and Japan. In 2007, LNG
from Sarawak was also shipped to China.
* Petronas said it discovered new fields offshore Sarawak
that had 100 million barrels of oil and 0.2 trillion standard
cubic feet of gas in place. The discovery could see oil ma-
jors such as Shell and ExxonMobil ask for more produc-
tion-sharing contracts.
TIMBER
* Malaysia is the world's fourth-largest exporter of tropical
timber with the bulk of the shipments coming from Sara-
wak where most of the timber barons have their company
headquarters.
* Exports are falling as Sarawak now allows only 40 per-
cent of the state's production to be shipped out, while 60
percent must be used for the domestic timber processing
industry.
* Analysts have raised their target prices for Sarawak tim-
ber firms such as Rimbunan Hijau Group's listed unit Jaya
Tiasa , WTK and Samling as Japan will need timber to
rebuild after the March 11 earthquake and tsunami.
* Some investors are shunning several of these firms based
on their environment track record. Norway has barred its
$550 billion sovereign wealth fund from investing in Sam-
ling and its unit Lingui Development over allegations of
environmental damage in Sarawak.
PALM OIL
* Sarawak accounted for more than a tenth of total palm oil
production of 17 million tonnes in 2010. Key planters in the
state include Sarawak Oil Palm and Sime Darby . Malaysia
is the world's No.2 palm oil producer.
* Last week, an industry body for eco-friendly palm oil cen-
sured IOI Corp for green and social violations in Sarawak
and threatened further sanctions if the planter did not re-
solve the issues.
* Wetlands International and Dutch remote sensing insti-
tute Sarvision said large areas of carbon rich peatswamp
forests were being destroyed in Sarawak to make way for
estates.
POWER GENERATION
* Sarawak plans to double its hydropower capacity to
6,000 megawatts (MW) in 2015 by building five more dams
to complement the Bakun and Murum dams that have a
combined capacity of more than 3,000 MW.
* State government officials have declined to name a price
for the expansion but they are counting on investors like
China's state run power grid operator to help build the
dams to exploit Sarawak's rivers.
* Sarawak Energy, which manages the power assets in the
state, said it was in talks with 20 energy customers includ-
ing smelters and processors on power tariffs.
SMELTERS
* Several big ticket aluminium projects have been an-
nounced but none has been confirmed pending the finali-
sation of the power purchase agreements, which could
take place at the end of 2011.
* The biggest is Rio Tinto's $2 billion smelter joint venture
with Cahya Mata Sarawak . The plant will have an initial
annual capacity of 720,000 tonnes with an option to ex-
pand to 1.5 million tonnes.
* Another mega project is the 330,000-tonne aluminium
smelter by Aluminium Corp of China with a local partner
that is estimated to cost $1 billion.
* Projects in the pipeline include Australian OMH's pro-
posed manganese plant in Sarawak and Tokuyama's
planned $780 million polysilicon processing plant.
* Press Metal has started operating its 120,000- tonne
capacity aluminium smelter in Sarawak in which Japan's
Sumitomo Corp has an equity stake. The plant is set to be
the first customer of power from Bakun dam. The Malay-
sian firm also has a second phase expansion plan for a
240,000-tonne capacity plant in Sarawak.
PRECIOUS METALS
* Canadian miner Olympus Pacific Minerals has raised its
stake in a small gold field in Sarawak that has about 1.8
million ounces in reserves.
Aurubis sees rising copper product demand
HAMBURG, April 14 (Reuters) - Strong demand is being
experienced for copper products but surging copper prices
are starting to impact on sales, Aurubis , Europe's biggest
copper producer, said on Thursday.
"Sales of copper wire rod remain at a high level, the cable
and wire industry is still ordering large quantities and the
trend is rising," Aurubis said in a report.
"Copper shapes are also very much in demand, whereby
the continuing high copper prices are slightly reducing the
momentum in some market segments."
(Continued on page 11)
10
METALS
Three-month copper on the London Metal Exchange was
at $9,420 a tonne at 1232 GMT on Thursday after hitting a
five-week-high of $9,944.75 a tonne on Monday.
The overall demand in the copper market is positive al-
though the impact of the Japan crisis is unclear, it said.
"Nevertheless, the sideways movement of the copper price
in recent weeks will continue as long as there are no sig-
nificant new fundamental developments," it said. "It may
only be possible to break out of the trading range of
$9,300 to $9,800 a tonne when, for example, physical cop-
per demand picks up substantially in the second quarter or
if the copper stocks in the metal exchange warehouses de-
cline again long-term."
Meanwhile, China had shown strong copper import de-
mand in March and Germany had been a surprise with its
strong economic growth, Aurubis said.
Germany's copper-intensive machine construction industry
increased its production forecast from 10 to 14 percent for
2011, while the electrical engineering industry believes pro-
duction will rise by 10 percent after previously only expect-
ing 7 percent, it said.
"This will be directly reflected in the physical sales of cop-
per products," it said.
JAPANESE SMELTERS
In Japan, one large copper smelter is located close to the
troubled Fukushima nuclear power plant while other Japa-
nese smelters are also believed to be having difficulty gain-
ing the continuous energy supply necessary for copper pro-
duction, Aurubis said.
"If the situation calms down, the first reconstruction meas-
ures and corresponding repercussions for copper demand
can be expected in the second half of 2011," it said.
Treatment and refining charges (TC/RCs) for copper con-
centrates have risen sharply in the last few weeks and are
currently at $120 to $150 a tonne and 12 to 15 cents a lb for
prompt shipments depending on the quality and destina-
tion, rising from $80 a tonne and 8 cents a lb last month, it
said.
TC/RCs are fees paid to smelters by mines and traders to
refine ore into metal and are a key part of the copper indus-
try's income.
TC/RCs may rise further as almost all smelters are already
fully supplied for the next few months, Aurubis said.
China steel output may hit 700 ml T this yr -
NDRC
SHANGHAI, April 15 (Reuters) - China's crude steel output
may hit 700 million tonnes this year on expectations of
strong demand, the country's economy watchdog said on
Thursday.
The National Development & Reform Commission (NDRC)
gave the forecast in a statement on its website based on
output figures released by the China Iron & Steel Associa-
tion (CISA), mainly on behalf of China's medium- and
large-sized steel mills.
"The higher growth of steel output will bring more compe-
tition to the domestic market," NDRC said, shrinking steel
mills' profit margins further.
Surging prices of iron ore and coal have sharply squeezed
Chinese steel mills' profit margins, with major ones only
seeing margins of 3 percent, the NDRC said.
CISA said China produced 1.93 million tonnes of crude steel
on a daily basis in March. China's industry ministry and
CISA earlier forecast that China would produce around 660
million tonnes of crude steel in 2011.
NDRC expected the government's plans to boost construc-
tion of affordable houses and urbanization to support de-
mand for steel products, and said Japan's reconstruction
after the earthquake and tsunami may also bring higher
export growth.
However, it warned that the steel market rebound would
be curbed by the government's efforts to strengthen mac-
roeconomic controls, tighten liquidity and curb housing
prices.
China March steel output stayed high, outlook
cautious
By Ruby Lian and Jacqueline Wong
SHANGHAI, April 15 (Reuters) - Steel mills in China
shrugged off overcapacity, higher interest rates, rising iron
ore costs and narrow profit margins in March and focused
on improving demand prospects to keep daily output near
last month's record high.
Daily crude steel output in March fell slightly to 1.92 mil-
lion tonnes, compared to 1.94 million tonnes a day in Feb-
ruary, a Reuters calculation showed based on data from
the National Bureau of Statistics released on Friday.
Analysts said the data showed that Chinese steel mills,
which produce nearly half of the world's output, have
ramped up production in anticipation of strong demand
buoyed by an expected resumption in housing construction
activity in the second quarter.
"Steel production will continue to stay at current high lev-
els on expectations of improved demand, and steel mills
will keep running at high capacity utilisation as long as
they are making profits," said Wu Jingchen, an analyst with
Capital Futures.
Worries that tighter monetary policy to reduce inflation and
a warning by China's economy watchdog that profit mar-
gins at major steel mills were only 3 percent as raw mate-
rial costs surge have so far not outweighed demand opti-
mism, Wu said.
China GDP (http://link.reuters.com/tym98r)
China Inflation (http://link.reuters.com/vym98r)
Steel mills have lifted running rates by around 16 percent
from the beginning of this year, bringing daily output to
average above 1.9 million tonnes in the first quarter, com-
pared to 1.66 million tonnes in December, the statistics
data showed.
(Continued on page 12)
11
METALS
China produced 59.42 million tonnes of crude steel in
March, up 9 percent from the holiday-shortened month of
February and 76.02 million tonnes of steel products in
March, up 20 percent from 63.54 million tonnes a month
ago, while iron ore output surged 30 percent to 94.44 mil-
lion tonnes in March from February, the data showed.
Chinese steel futures fell more than 1 percent to one-week
lows on Friday, reflecting investor concerns that accelerat-
ing inflation may prompt Beijing to tighten credit further,
hitting steel demand in the world's top consumer and pro-
ducer.
China's economy grew an annual 9.7 percent in the first
quarter versus a 9.8 percent clip in the previous quarter,
while consumer inflation hit a 32-month high of 5.4 per-
cent in March, government data showed on Friday.
HOUSING PLANS
But analysts remained upbeat on steel demand, citing gov-
ernment plans to soon kick off the building of affordable
houses, an effort expected to consume around 20 million
tonnes of steel, mainly for long products, which will help
alleviate oversupply.
"I am positive on demand for steel this year, particularly for
long products, as steel used to build affordable houses
might take about 7-8 percent of total steel output, which
will help ease the oversupply pressure," said a securities
firm analyst in Guandong province.
However, steel demand in other sectors may face head-
winds as the government has vowed to use all tools at its
disposal to stabilise prices and wrestle inflation under con-
trol.
China will likely raise interest rates again this year in an
effort to cool inflation, after lifting interest rates four times
and cash reserve ratios for banks six times since October
last year, crimping access to credit for the private property
market, analysts said.
Rio tinto says iron ore market to remain tight
SYDNEY, April 15 (Reuters) - The global market for iron ore
will remain tight in the near to medium term, with demand
running strongly and new supply coming on slowly, miner
Rio Tinto said.
"We believe that the market for iron ore will remain tight in
the short to medium term with delays to new supply and
strong demand driving prices," the world's second-largest
producer of the steel-making raw material said in a state-
ment released to the Australian stock exchange on Friday.
Asia steel firms face tough 2Q, China tightening
eyed
By Yuko Inoue
TOKYO, April 15 (Reuters) - Asia's steel firms are bracing
for a tough second quarter with even higher pressure on
profit margins as input costs are set to jump 30-50 percent
on tepid demand. Last month's devastating quake will also
take a heavy toll on Japanese mills.
Hopes for a recovery in the market have also been dashed
by China, the world's biggest producer, which has raised
interest rates four times since October to counter inflation
and ramped up production to record levels.
A weaker-than-expected market forced many Asian mills
to put off price hikes to account for last year's rise in input
costs in the first quarter, leading them to report lower
profit for January-March.
"China's tightening remains as a risk factor," said Cindy
Park, a Seoul-based analyst at Nomura Securities. "China
is increasing housing supply, although its steel demand is
not as good as it was before."
Japan's JFE Holdings Inc , the world's No.5 steelmaker by
output of crude steel, kicks off the sector's earnings on
April 21, with a potential steep fall in profit on quake-
related extraordinary losses for January-March, the fourth
quarter of the 2010/11 financial year for Japanese firms.
Japanese automakers, their biggest clients that account for
a third of their shipments, suspended work at most facto-
ries after the March 11 earthquake and tsunami, which dev-
astated the northeast of Japan, disrupted their parts sup-
ply chains and triggered power outages and an ongoing
nuclear crisis.
" The April-June period for Japanese firms will be even
tougher (after a tough January-March period), with some
firms going into the red and July-September may not im-
prove much," Rajeev Das, an analyst at Goldman Sachs in
Tokyo, wrote in a research note.
Starmine comparative data: (http://link.reuters.com/
cun98r)
Graphic on China steel: (http://link.reuters.com/xax88r)
Graphic on Japan steel: (http://link.reuters.com/bes58r)
Sumitomo Metal Industries , Japan's third-biggest steel-
maker by output in Japan, said on Thursday in would take a
60 billion yen ($715 million) charge for the year that ended
on March 31 due to damage resulting from the earthquake.
In addition, Japanese steelmakers, led by Nippon Steel
Corp , the world's No.4 steelmaker by output, will face
trouble in lifting sales prices for April-June as carmakers
and other manufacturers struggle. "Cost increases have
kicked in, but the prospect of raising domestic prices have
already receded," Das, of Goldman Sachs, said.
The cost of iron ore will rise 34 percent in April-June from
the preceding three months and coking coal, nearly 50 per-
cent, according to industry agreements reached in 2010.
Toyota Motor Corp and other top automakers have re-
sumed production in Japan at all domestic factories in
stages since April 11, but output levels will be half of origi-
nal plans.
RECORD OUTPUT IN CHINA
A near-term bright sign is Beijing's plan to build govern-
ment-assisted affordable housing, which will likely kick off
in May. Demand for construction steel like rebar and wire
rods is expected to grow, although some analysts are skep-
tical of the scope of the impact on the market.
(Continued on page 13)
12
METALS
China's steelmakers are ramping up production in anticipa-
tion of improving demand, with daily output of crude steel
hitting a record 1.95 million tonnes in mid-April, boosting
steel product stockpiles.
Steel prices on the Chinese domestic market slumped by
about 7 percent by the end of March after touching a record
high in early February.
Some analysts said the planned housing construction was
not enough to absorb the oversupply in China.
"We believe in the short term, the Chinese steel market will
fluctuate at its low level, unlikely exceeding its high set in
February 2011," said Henry Liu, regional head of commodi-
ties research at Hong Kong-based Mirae Asset.
Last week, Baoshan Iron & Steel Co , China's biggest listed
steelmaker by output, cut prices of its main products for
May, the first reduction in nine months, citing weak de-
mand and higher inventories.
Japan's magnitude 9.0 earthquake, which has left 28,000
dead or missing, is unlikely to have knock-on effects on
Chinese producers, but South Korea's POSCO , the world's
No.3 steelmaker by output, may come under pressure due
to rising exports from Japan.
Hwang Eun-yeon, executive vice president at POSCO, said
he expects Japanese steelmakers to temporarily increase
exports following the quake to offset slumping demand in
the domestic market. South Korea is the biggest export
market for Japan, which was Asia's top steel exporter last
year followed by China.
POSCO kept its domestic steel prices unchanged for the
January to March period. It is widely expected to raise
prices in the second quarter, but some analysts believe it
will not be able to fully pass on $160-$180 per tonne of in-
creased raw materials costs to clients.
India's Tata Steel , the world's No.7 steelmaker by output,
is expected to report a lower profit for the first quarter due
to flat volumes and higher input costs at its European unit
Corus.
Most Japanese steelmakers are unlikely to provide earn-
ings outlook for the new financial year that begun on April
1. Some analysts said a robust recovery in car output may
be delayed into October-March and the start of reconstruc-
tion demand may be three to four quarters away.
Here are the estimated Q1 profits and reporting dates for
Asia's major steelmakers.
Company Jan-Mar Est Yr-ago result Reporting date
JFE 28.52 bln yen 73.6 bln yen Apr 21
POSCO 1.24 tln won 1.45 trln won Apr 22
Nippon Steel 31.61 bln yen 55.4 bln yen Apr 28
Tata Steel 16.68 bln rupees24.34 bln rupees mid-May
Notes: For JFE and Nippon Steel, companies' own esti-
mates of pretax recurring profit published before the March
11 quake; Operating profit for POSCO and net profit for
Tata steel. POSCO introduced IFRS accounting from the
Jan-Mar period. POSCO's estimate is based on Thomson
Reuters I/B/E/S. Estimates on Tata Steel profit is a con-
sensus of Reuters' survey of 12 brokerages.
Black Sea billet falls on sluggish demand
By Silvia Antonioli
LONDON, April 14 (Reuters) - Black Sea billet edged down
this week as demand remained depressed and sentiment
was subdued by ongoing political tensions in North Africa
and the Middle East and by the worsening nuclear crisis in
Japan.
Since violence in the Middle East and North Africa esca-
lated about a month ago construction and investment in
the area have slowed, dragging down billet demand.
Billet prices have fallen slowly but relentlessly.
Traders were quoting Black Sea billet at $585-605 per
tonne free-on-board (FOB) Russia and Ukraine (CIS) this
week, down from $590-610 per tonne FOB last week.
"I think there is still some negativity in the market," said a
UK-based billet trader. "I certainly wouldn't expect prices
to stabilise. It's all on shaky legs."
Buyers were now bidding for billet at $580-585 per tonne
FOB CIS and would not accept higher prices, the trader
added.
Small volumes of Turkish billet sold at $600-610 per tonne
FOB, down from offers at $620-630 per tonne FOB two
weeks ago.
Turkish billet export volumes fell by over 50 percent in
March from February, representative of the crisis affecting
the steel market at the moment, a source at a Turkish pro-
ducer said. Markets were feeling the impact of fast-moving
world events.
"You think that the market is getting better and then there
is a war in Libya. Then you think that the market is getting
better again and there is an earthquake in Japan," said a
source at a second steel mill, underlining that the market is
very fragile.
Turkish rebar sold at $645-660 per tonne FOB, down from
$650-660 per tonne FOB last week.
However wire rod- a steel long product used in construc-
tion and other sectors such as agriculture, was performing
better than other long products, and sale prices were little
changed from last week at $700-710 FOB on firm demand.
"Wire rod is sold out until mid-May. At this point we should
be sold out until June for everything but we are not," said a
source at a third steelmaker, adding that billet and rebar
were performing worse than expected. "I am not convinced
prices are going up," he added.
STRUCTURAL PROBLEMS
Besides unpredictable events such as wars and natural
disasters, which are currently weakening demand for billet
and rebar, the steel long products industry is facing some
structural problems.
Many of those emerging countries in North Africa and the
Middle East which have been major importers of Turkish,
CIS and European steel long products to feed their con-
struction industry are now developing their own steel in-
dustries.
(Continued on page 14)
13
METALS
"The problem is overproduction. By 2020 the Middle East
and North Africa will be self-sufficient and Turkey will be in
trouble," a second steel trader said.
"At the end some mills will have to shut down."
To overcome these problems some Turkish mills are
switching from producing steel long products - mainly used
in the construction industry- to steel flat products - used in
the automotive and manufacturing sectors.
As Turkish steel flat products market is currently undersup-
plied and the country largely relies on imports, domestic
steel producers are hoping to fill this hole.
Some others are instead looking at new exports markets
for their long products.
"We have been trying to find new markets not to be so de-
pendent on the Middle East anymore and this is now pay-
ing off," said the source at the third producer, explaining
that they have been focusing on sales to South America,
smaller in volumes but more profitable.
On the London Metal Exchange, the three-month billet
contract traded at $547 a tonne, from $522 a tonne at the
close last Thursday.
Major market developments in March
LONDON, April 15 (Reuters) - Nickel prices lost ground in
March, and will struggle to make headway as more new
projects start up.
"If we're going to see another price spike back to
$30,000 ...it's got to happen in the first half, before more
nickel projects come on stream," said one analyst.
But others were less convinced the market would be able to
launch itself higher.
"I'm bearish on nickel. More and more supply is coming
down the line," said Will Adams of Fastmarkets.
Last month, Anglo American and Vale both announced
production starts at projects in Brazil and more new opera-
tions are scheduled to go on stream later this year.
Adams predicted prices would fall back towards $22,000 a
tonne region in the next month or so.
London Metal Exchange (LME) three-months nickel price
was last indicated at $26,049 a tonne.
Aside from the swathe of new nickel projects coming on
stream or ramping up capacity this year, strong nickel
prices are encouraging higher output of nickel pig iron
(NPI), adding to supply worries.
NPI is a lower grade nickel produced mainly in China and
used by domestic stainless steel mills.
Meanwhile, demand for nickel from the key stainless steel
sector was reasonably robust, although the picture was
somewhat mixed, the analyst said.
"The U.S. is pretty strong, Europe is getting a bit nervous
about the second half, while underlying demand in China is
not as strong as it might appear," he said.
Industry consultants CRU Group expect stainless steel pro-
duction to grow by around 5 percent this year.
"It's too early to say if there's a new trend emerging in
nickel prices, but we expect to see quite a lot of volatility,"
an analyst at the consultancy said.
Below are some of the more significant recent develop-
ments in production, stocks and prices which may influ-
ence the direction of the market in 2011.
PRODUCTION:
March 31 - Pacific Metals Co said it does not know when it
will resume operations at its 44,000 tonnes-a-year Hachi-
nohe nickel plant in northeast Japan after it was sub-
merged in a devastating tsunami on March 11. Pacific Met-
als is partially owned by Nippon Steel and Sumikin
Stainless Steel Corp, Japan's biggest stainless steel maker.
March 31 - Anglo American said it had delivered first pro-
duction from $1.9 billion Barro Alto nickel project in Brazil.
March 16 - Lundin Mining said operations at its Aguab-
lanca mine in Spain will not resume until 2012, after heavy
rains caused a landslide at the nickel-copper mine in De-
cember. At the time, the Canadian base metal miner said it
would suspend operations pending a technical investiga-
tion.
March 11 - Vale has started nickel production at its Onca
Puma operation in Brazil's state of Para, the company said
in a securities filing. The nominal production capacity is
53,000 metric tonnes of nickel contained in ferronickel.
March 11 - China produced 38,886 tonnes of nickel in the
first two months of the year, up 46.5 percent from the same
period last year, according to the National Bureau of Sta-
tistics.
March 3 - Russia's Norilsk Nickel expects nickel output at
its South Africa joint venture to reach 20,000 tonnes a year
by end 2012 from about 6,000 tonnes now, a top official
said. Norilsk is in a 50-50 joint venture with South African
diversified miner African Rainbow Minerals and the two
have collectively invested 3.6 billion rand ($524 million) to
expand the mine.
PRICES
Nickel prices ended March at $26,095 a tonne, down from
$28,990 a month earlier. The market fell early in the
month as political unrest in the Middle East and North Af-
rica undermined sentiment. After that the earthquake in
Japan heightened demand worries.
On March 15, three-months nickel dropped to $24,675 as
LME benchmark copper fell to a three-month low. Senti-
ment had been dented by Japan's worsening nuclear crisis
worsened and investors abandoned investments perceived
as risky.
Nickel prices rebounded in line with copper and tended to
track the latter's moves. The month's high of $27,355 was
reached on March 24.
But the market came under pressure after that through to
the end of the month as investors fretted over Chinese de-
mand, the economic impact of the Japan quake and the
worsening debt crisis in Europe.
(Continued on page 15)
14
METALS
Sentiment improved for a time and on April 11 three-
months reached $27,950. But it was not to last as rising
inflation pressures in China dragged copper prices lower,
taking nickel with them.
The latest Reuters poll in January showed nickel cash
prices are expected to average $24,251 a tonne this year
versus an average $21,811 last year.
STOCKS
LME nickel stocks finished March at 123,948 tonnes, down
from 130,578 tonnes a month earlier.
Inventories have been on a general downtrend since Janu-
ary 14, when they were at 137,766 tonnes, their highest
since May 2010.
On Friday, they stood at 120,480 tonnes, their lowest since
September 2010.
At the end of March LME stocks equated to around 28-1/2
days of consumption.
Zinc premiums hold steady, inventories jump
By Rebekah Curtis
LONDON, April 15 (Reuters) - Premiums for physical zinc in
Europe held steady this week, traders said, with demand
little changed and a recent jump in stocks having little im-
pact because the metal went into New Orleans, far from
consumers' reach.
Zinc premiums to the London Metal Exchange (LME) cash
price were at $110-130 a tonne this week, according to
traders, unchanged from the previous week's quote.
"Premiums are going to stay at that level," a trader said,
adding that the European market was fairly balanced.
LME inventories of the metal rose by 3 percent, or 26,700
tonnes on Wednesday, their biggest daily climb since early
December, but the increase went into warehouses in New
Orleans.
"It can stay there for quite some time," the trader said of
the metal in New Orleans.
"It's far away from any consumption area," he said, adding
that removing metal from there was "logistically challeng-
ing". Inventories of zinc rose again on Thursday, climbing
525 tonnes to a seven-year high of 764,250 tonnes.
Zinc traded at $2,417.50 a tonne at 1104 GMT from $2,400
a the close on Thursday. Another trader said premiums
could stay under pressure. "It seems there's a build-up of
stocks in China. People are afraid some of this material is
going to come to Europe."
Major market developments in March
LONDON, April 14 (Reuters) - Zinc prices lost ground in
March and are likely to remain under pressure in coming
months as supply continues to outstrip demand.
"For the next year or two at least we're looking at the zinc
market being well supplied. Even the bulls are starting to
recognise that," said Huw Roberts of industry consultants
CHR Metals.
High prices for zinc and co-products lead and silver were a
big incentive for companies to add more mine projects into
the supply pipeline, he added.
The London Metal Exchange (LME) three months zinc price
was last indicated at $2,415 a tonne. For an interactive
graphic on monthly stocks and prices:
(http://r.reuters.com/jah98r)
Graham Deller of consultancy CRU Group said the 26,675
tonne increase in LME warehouse stocks on Thursday was
disconcerting. "It looks to be confirmation of what we're
hearing -- that demand is chugging along, but really not
that great overall."
Fastmarkets analyst Will Adams was less disconcerted by
rising inventories, but thought zinc would struggle to make
headway if other industrial metals turned lower again.
He expected prices to trade within a $2,200 to $2,600
range in the next month or two.
Below are some of the more significant recent develop-
ments in production, stocks and prices that may continue
to influence the direction of the market in 2011.
PRODUCTION:
March 31 - A strike at Sumitomo Corp's San Cristobal zinc-
lead-silver mine in Bolivia continued to halt output and
exports on with no talks in sight. Work resumed at the mine
on April 4 following the 12-day strike, the union and oper-
ating company said.
March 31 - Dowa Mining Holdings Co said it plans to re-
sume operations of its 200,000 tonnes-a-year Akita zinc
smelter in northeastern Japan in early April. The Akita
plant is Japan's biggest zinc smelter, accounting for nearly
30 percent of Japan's total production.
March 29 - China's Minmetals Resources said it is unlikely
to extend the life of its giant Century zinc mine in Australia
much past the pre-arranged closure date of mid-2015, re-
moving a major source of concentrate for European mar-
kets. The mine, which also produces some lead, is running
out of reserves.
March 25 - Mitsui Mining and Smelting Co , Japan's top
zinc smelter, said it will resort to imports of bare metal as
its 110,000 tonnes-a-year Hachinohe zinc smelter in north-
ern Japan will likely remain shut for a while after a devas-
tating quake and tsunami damaged the facility. The com-
pany's two other plants, in west Japan, are already operat-
ing near full capacity, while the emergency acquisition of
ore looks difficult.
March 22 - Mitsui Mining and Smelting plans to boost zinc
production at two factories in western Japan, a company
official said, after operations at its Hachinohe zinc smelter
were halted by the earthquake and tsunami that hit north-
eastern Japan on March 11. Mitsui Mining plans to boost
zinc output at its facilities in Kamioka in Gifu Prefecture
and Hikoshima in Yamaguchi Prefecture to offset losses at
Hachinohe, which produces 85,000 tonnes annually but
has no prospects of resuming at this point, the official said.
March 21 - The global zinc market was in surplus by 35,300
tonnes in January, the latest monthly bulletin from Lisbon-
(Continued on page 16)
15
METALS
based International Lead and Zinc Study Group (ILZSG)
showed. Global refined zinc use amounted to 1.087 million
tonnes in January compared with 921,000 tonnes in Janu-
ary 2010. World refined zinc output rose to 1.123 million
tonnes from 1.012 million a year earlier.
March 11 - Xstrata said it must spend $900 million to dou-
ble productivity at its McArthur River zinc-lead mine in
Australia, as it tries to maintain the viability of one of the
world's largest operations of its kind. The plan involves an
increase in mine production and also installation of pro-
prietary hydrometallurgy technology at the company's San
Juan de Nieva smelter in Spain and Nordenham smelter in
Germany, and potentially improvements to its lead smelter
in Brunswick, Canada, according to Xstrata.
March 11 - China produced 799,000 tonnes of refined zinc
in the first two months of the year, down 12.7 percent from
the same period last year, according to the National Bu-
reau of Statistics. Output of mined zinc dipped by 0.7 per-
cent over the same period to 409,000 tonnes.
March 1 - Bulgaria's largest zinc and lead smelter, KCM,
will keep its metals output target unchanged in 2011 on
hopes of stable conditions on the global markets, a senior
official said. KCM expects to produce 73,000 tonnes of zinc
and up to 65,000 tonnes of lead.
PRICES
Zinc prices finished March at $2,362 a tonne, down from
$2,520 at the end of February.
Political unrest in the Middle East and North Africa under-
mined sentiment early on and it was dented further by the
earthquake in Japan and fears about near-term demand.
The ensuing recovery was pretty muted and not enough for
zinc to post gains over the month, in contrast to sister
metal lead.
Even so, prices were dragged higher along with LME
benchmark copper in early April. Zinc reached $2,555 a
tonne on April 11, but a sell-off ensued and was exacer-
bated on Thursday by reports of quickening inflation in
China and worries for demand.
Nor was sentiment helped by a sharp rise in LME invento-
ries, which was seen as indicative of how the state of over-
supply in the market.
STOCKS
LME zinc stocks ended March at 736,225 tonnes, up from
708,300 tonnes the previous month. On March 28 they
reached 737,100 tonnes, their highest since August 2004.
Inventories did not stray far from these levels in early April
until a sharp jump of 26,675 tonnes on Thursday April 14,
their highest since April 2004.
At the end of March, LME stocks equated to just over 21
days of demand.
Deliverable Shanghai stocks were 370,720 tonnes, up from
335,096 tonnes at the end of February.
Meanwhile, western world commercial stocks were
1,145,100 tonnes or 8.5 weeks of consumption at the end of
January, compared with 1,122,500 tonnes or 8.8 weeks at
the end of December.
Major market developments in March
LONDON, April 14 (Reuters) - Prices for battery material
lead made some headway in March, helped by robust de-
mand expectations, but the market is well supplied and
may move lower in the near term.
"The lead price is rich at this level and we could see it back
to $2,400," said Fastmarkets analyst Will Adams.
The London Metal Exchange (LME) three months lead price
was last indicated at $2,645 a tonne. On Monday it
reached $2,904, its highest in around three years.
The run-up in LME prices was not mirrored in prices in top
consumer China, according to Huw Roberts of industry
consultants CHR Metals. "Presumably it's an indication of
a well-supplied market in China," he said.
Lead prices surged soon after the Japan earthquake and
tsunami, helped by expectations the metal would get a
boost from demand for battery-powered electricity because
of damage to nuclear plants.
"My feeling is that it (demand for battery power) will lead
to a medium-term underpinning effect on demand rather
than a short-term spike," said Graham Deller of consult-
ants CRU Group.
For an interactive graphic on monthly stocks and prices:
(http://r.reuters.com/jah98r)
CRU expects the lead market to record a modest deficit of
around 26,000 tonnes this year, compared with a surplus
of 47,000 tonnes in 2010. Below are some of the more sig-
nificant recent developments in production, stocks and
prices that may continue to influence the direction of the
market in 2011.
PRODUCTION:
April 7 - Ivernia Inc said it expected to place its flagship
Magellan lead mine in Australia under full care and main-
tenance for an indefinite period and lay off about 83 per-
cent of related workforce amid environmental concerns.
April 4 - Work resumed at Sumitomo Corp's San Cristobal
zinc-lead-silver mine in Bolivia after a 12-day strike, the
union and operating company said.
March 29 - China's Minmetals Resources said it was
unlikely to extend the life of its giant Century zinc mine in
Australia much past the pre-arranged closure date of mid-
2015, removing a major source of concentrate for European
markets. The mine, which also produces some lead, is run-
ning out of reserves.
March 21 - The global lead market was in surplus by 1,300
tonnes in January, a monthly bulletin from Lisbon-based
International Lead and Zinc Study Group (ILZSG) showed.
Global refined lead use was 812,700 tonnes in January, up
from 718,000 in January 2010. World refined lead output
was 814,000 tonnes, also up from 718,000 tonnes a year
earlier.
March 14 - OTZK , Bulgaria's second-largest zinc and lead
smelter, said it had cut planned lead output this year to
14,000 tonnes due to environmental concerns. The smelter
has been warned by the environment ministry to signifi-
(Continued on page 17)
16
METALS
cantly cut pollution levels from its lead facilities or face a
shutdown.
March 11 - Xstrata said it must spend $900 million to dou-
ble productivity at its McArthur River zinc-lead mine in
Australia as it tries to maintain the viability of one of the
world's largest operations of its kind. The plan involves an
increase in mine production and also installation of pro-
prietary hydrometallurgy technology at the company's San
Juan de Nieva smelter in Spain and Nordenham smelter in
Germany, and potentially improvements to its lead smelter
in Brunswick, Canada.
March 11 - China produced 574,000 tonnes of refined lead
in the first two months of the year, up 30.2 percent from
the same period last year, according to the National Bu-
reau of Statistics. Output of mined lead rose by 19.3 per-
cent over the same period to reach 235,000 tonnes.
March 1 - Bulgaria's largest zinc and lead smelter, KCM,
will keep its metals output target unchanged in 2011 on
hopes of stable conditions on the global markets, a senior
official said. KCM expects to produce 73,000 tonnes of zinc
and up to 65,000 tonnes of lead.
PRICES
Lead prices firmed in March to end the month at $2,695 a
tonne from $2,562 the previous month.
Prices were under pressure in the early part of the month
as political unrest in the Middle East and North Africa un-
dermined sentiment. Attempts to rebound were then
knocked by the massive earthquake in Japan.
But lead picked up sharply, helped by expectations the
quake would boost demand as hospitals and businesses
expected to turn to battery-powered electricity because of
damaged nuclear plants.
Prices maintained that upwards path to reach three-year
highs just above $2,900 a tonne on April 11. But they have
since fallen towards $2,600 in a broad-based commodity
rout as Japan's worsening nuclear crisis and aftershocks hit
market confidence.
According to the latest Reuters poll in January, lead cash
prices are expected to average $2,500 a tonne this year
compared with an average of $2,147 last year.
STOCKS
LME lead stocks ended March at 281,500 tonnes, down
from 293,850 tonnes the previous month.
Despite the odd blip, inventories during the month re-
mained on a general downtrend, which had been in place
since they reached 297,500 tonnes in mid-February -- their
highest in almost 16 years.
At the end of March LME stocks amounted to almost 11
days of consumption.
Commercial stocks of lead were 523,200 tonnes, or 5.4
weeks of demand, at the end of January, compared with
448,000 tonnes or 4.6 weeks at the end of 2010.
Tight supply, brisk demand to keep tin aloft
By Sue Thomas
LONDON, April 15 (Reuters) - Tight supplies and resilient
demand will keep tin prices high this year, despite the im-
pact of the earthquake on big consumer Japan and increas-
ing exports from Indonesia, a Reuters survey of metals
analysts showed.
The consensus of 10 forecasts showed tin will average
$30,285 per tonne, up from a forecast of $27,000 a tonne
in a January survey.
Tin for three-months delivery on the London Metal Ex-
change hit a record high $33,600 on April 11, and was
$32,500 a tonne at 0917 GMT.
The price strength reflects growth in lead-free solder used
in circuit boards, which accounts for more than half of tin
demand, as consumer electronic goods production rises in
Asia. The metal is also used in tin plate and chemicals.
Although tin demand in Japan is expected to fall around 10
percent this year because of the March earthquake and
tsunami, according to the International Tin Research Insti-
tute (ITRI), the effects are not likely to last.
"There will be a short-term hit from Japan because of the
dislocation in component supply -- some of the manufac-
turers have suspended production there -- but that can be
recovered over the medium to longer term," said Credit
Agricole analyst Robin Bhar.
"So if you look over the whole of 2011 and 2012 you are go-
ing to get some periods where demand will be lower than
expected but to be recovered later when reconstruction
efforts start to have an impact."
Japan has slashed electricity generation capacity since the
March disaster shut big nuclear and thermal power sta-
tions, forcing many companies to idle or halt plants and
factories.
The disruptions have had a global impact, creating bottle-
necks in some key components for Japanese factories. Sony
Corp , for instance, is considering a complete two-week
summer shutdown of some company premises to save en-
ergy.
For a graphic on prices:
(http://r.reuters.com/fyn98r)
Japan earthquake and commodities:
(http://link.reuters.com/kuw58r)
CHINA
But growth elsewhere will keep consumption increasing.
Demand in top consumer China is expected to rise by 5 per-
cent this year, after a 13 percent jump last year, according
to ITRI.
And, although high prices bring the threat of substitution,
tin is not easily replaced with other metals.
"If you don't have tin, it's difficult to see where the substi-
tution for solder, packaging or for tin chemicals would
come from," Bhar said. "There's no viable alternative."
(Continued on page 18)
17
METALS
However, while the global tin market will remain in deficit
this year, it is likely to narrow to 12,750 tonnes, according
to the consensus of eight analysts, from a 15,000 tonne
deficit forecast in a January poll.
"We have revised down our tin deficit by 5,000 tonnes due
to a softening in Chinese demand and a slight pickup in
Indonesian output due to the high price. More importantly,
the Japanese earthquake will impact tin demand used in
electronics," Carl Firman of Virtual Metals said.
Top exporter Indonesia's refined tin exports rose 37.6 per-
cent in March as smelters increased shipments to benefit
from the high prices and as rains that had disrupted mining
eased.
An ITRI producer survey also showed that Chinese tin pro-
duction was higher than expected due to an unexpected
pace of expansion in recycling levels in 2010, according to
Barclays Capital commodities research published last
month.
Still, analysts say tin fundamentals remain solid.
"Tin looks like a metal that will be in deficit for a protracted
period," said Natixis analyst Nic Brown. "So, whether you
are looking at the very near term, or longer term, tin is
looking very good, and it's no surprise that people are fo-
cussing on that metal."
The survey on tin was carried out between March 23 and
April 11.
Supply constraints point to uranium rebound
By Martin de Sa'Pinto and Natalie Olof-Ors
ZURICH, April 14 (Reuters) - Uranium prices and shares in
uranium miners have fallen since Japan's Fukushima crisis
clouded the future of nuclear energy, but these could re-
bound as uranium supplies are not enough to meet global
demand, an industry executive said.
"Supply and demand fundamentals don't tell us we should
be writing an obituary for the industry any time soon," Amir
Adnani, Chief Executive of Amex-listed miner Uranium En-
ergy Corp told Reuters this week.
"Sentiment is bad now because of events, but nuclear en-
ergy still has an important role in the 21st century," said
Adnani, who was visiting Switzerland.
As the crisis around the Fukishima-Daiichi reactor unfolds,
many countries have begun to re-examine their nuclear
policy. Switzerland has a moratorium on nuclear new-
builds, while Germany has closed for three months all reac-
tors opened before 1980.
For a graph of new reactor projects:
(http://r.reuters.com/xav58r)
Uranium consumption and production
(http://link.reuters.com/xar68r)
Adnani compared the nuclear industry's situation now to
that of oil companies after the Gulf of Mexico oil spill --
which prompted a moratorium on deep water drilling.
"There's a reason why nine months after the BP oil spill
they have resumed drilling," he said, pointing to new
Transocean and Petrobras projects.
"Knee-jerk reactions are not going to translate to sustain-
able long-term (energy) policy," Adnani said.
He added that although Japan had decided this week to
raise the severity level of the Fukushima accident to the
highest level of 7, radiation leakage at the Chernobyl acci-
dent of 1986 was far higher.
VOLATILITY AHEAD
Even so, since the Japan crisis broke, shares in uranium
miners are down 30 to 50 percent. The cost of uranium
itself has fallen 20 percent from a February peak to $58.50
per pound.
With the marginal cost of production at $60, it is cheaper
for some miners to buy uranium on the market, said Ad-
nani.
Nuclear now accounts for 16 percent of world electricity
production. With 425 of the world's 443 reactors still work-
ing, the 175 million pounds of uranium a year they use out-
strip current supply by a wide margin, Adnani said.
"There is now a significant imbalance of supply needed to
meet current reactor requirements," he said.
Moreover, governments in China and India consider their
nuclear buildouts as strategic, and are unlikely to halt their
programmes, he added.
Uranium prices were bid up sharply 2006-2007 as hedge
funds and other financial investors piled in. That bubble
burst when the financial crisis demolished commodity
prices, but Adnani said volatility might return.
"There could be spikes in uranium prices because there's
not enough to meet demand and there's no substitute for
it."
Texas-based Uranium Energy Corp has a processing facility
in Hobson, Texas, and began production in late 2010.
Germany delegation seeks Kazakh metals deal
HAMBURG, April 14 (Reuters) - Germany held talks this
week with Kazakhstan about a commodity supply partner-
ship focusing on metals, the German Economy Ministry
said on Thursday.
The German government approved a new commodities
strategy in October 2010 aimed at helping German industry
secure raw materials at a time of growing global competi-
tion for supplies which includes seeking partnerships with
supplier countries.
A German-government led delegation including industry
representatives held talks in Kazakhstan which it is hoped
will lead to an agreement guaranteeing German compa-
nies discrimination-free access to commodities produced
by Kazakhstan, the German ministry said.
This will involve non-energy commodities, especially met-
als and minerals.
(Continued on page 19)
18
METALS
"In the forefront of this will be critical raw materials such
as tungsten and tantalum," it said.
Tungsten is used in electronics, catalysts and production of
hard metals for armour plate.
Tantalum is a metal used in alloys often used in electronic
equipment such as computers, mobile phones and home
electronics.
Consumers in many industrial countries have noted with
concern how commodity-hungry China has been buying up
supplies of raw materials, especially rare ores and earths
while restricting its own exports.
Germany is supporting the creation of commodity partner-
ships with key supply countries but actual raw material
deals must be agreed by companies alone, the ministry
said.
It is hoped a commodity supply agreement with Kazakh-
stan focusing on minor metals will be reached in the first
half of this year, the ministry said.
OMH to keep some HK listing funds for Malaysia
smelter
By Niluksi Koswanage
KUALA LUMPUR, April 15 (Reuters) - Australia's OM Hold-
ings (OMH) will use some of the funds generated from a
planned secondary listing in Hong Kong to finance a man-
ganese and ferro silicon smelter in Malaysia's Borneo is-
land state of Sarawak, its chief said on Friday.
The miner expects to spend up to $400 million to build the
smelter with 600,000 tonnes of annual capacity in its
quest to join BHP Billiton and Vale as top producers of
the steel components.
Chief Executive Peter Toth said the firm will keep to its
plans to list on the Hong Kong stock exchange by mid-2011.
He declined to comment on plans by the firm's top share-
holder Consolidated Minerals to oppose the listing.
"Some of the funds from the listing will be used but the
exact structure of shareholding for this asset is still under
discussion," Toth told Reuters in an telephone interview
from the firm's Singapore headquarters.
"We could consider investors, project financing, debt or
internally generated funds," he added.
The Malaysian smelter in Sarawak links OM's manganese
mines in Australia and Africa to markets in China, the
world's largest steel maker.
Ukrainian billionaire Gennady Bogolyubov's Consolidated
Minerals wants to vote against the share issue worth up to
$522 million next week and go to court to stop the Hong
Kong listing, which it said would heavily dilute existing
shareholders.
It owns 11.4 percent of OMH, which has a total market
value of $663 million.
Shares of OMH dropped 2 percent compared to Australia's
benchmark S&P/ASX index that inched 0.5 percent lower.
SARAWAK SMELTER
This week, OMH signed power purchasing term sheet for
500 megawatts of electricity from state utilities firm Sara-
wak Energy that is in the process of acquiring the power
generated from the Bakun dam.
"We are finalising the power purchasing agreement by the
middle of this year and we will prepare the site for the
plant soon after," said Toth, a former BHP Billiton execu-
tive. "Construction will start in 2012 for two years and we
should start commissioning the smelter in 2014."
Toth said the company "followed with interest" the state
polls this week in Sarawak where investors such as Rio
Tinto are considering plans to set up an aluminium
smelter to capitalise on cheap power supply.
OMH owns one smelter in China's southwestern, coastal
city of Qinzhou that can process 300,000 tonnes of man-
ganese sinter and 60,000 tonnes of manganese alloys an-
nually.
The firm is also setting up a plant that mirrors its China
operations on the west coast of mainland Malaysia and can
take up the rising output from OMH's share of South Af-
rica's Tshipi Borwa mine from next year onwards.
"Our expansion plans centre around Malaysia at the mo-
ment. We need to create a low-cost centre for manganese
processing and meet future demand, especially from
China. Malaysia ticks those boxes," Toth said.
Sentiment improved for a time and on April 11 three-
months reached $27,950. But it was not to last as rising
inflation pressures in China dragged copper prices lower,
taking nickel with them.
The latest Reuters poll in January showed nickel cash
prices are expected to average $24,251 a tonne this year
versus an average $21,811 last year.
STOCKS
LME nickel stocks finished March at 123,948 tonnes, down
from 130,578 tonnes a month earlier.
Inventories have been on a general downtrend since Janu-
ary 14, when they were at 137,766 tonnes, their highest
since May 2010.
On Friday, they stood at 120,480 tonnes, their lowest since
September 2010. At the end of March LME stocks equated
to around 28-1/2 days of consumption.
19
MARKET REVIEW
METALS-Copper under pressure as inflation
rises globally
By Rebekah Curtis
LONDON, April 15 (Reuters) - Copper fell on Friday, head-
ing for a fifth straight session of losses as investors worried
Chinese inflation at a 32-month high would lead to tighter
monetary policy hitting demand in the world's top metals
buyer.
Chinese consumer price inflation sped to 5.4 percent in the
year to March, the fastest since July 2008 and topping
market forecasts for a 5.2 percent increase. Gross domestic
product eased a touch in the world's top copper buyer.
Copper for three-months delivery on the London Metal
Exchange (LME) was at $9,350 a tonne at 1245 GMT from
Thursday's close of $9,410.
"Being the world's largest consumer of raw materials, its
demand has failed to live up to expectations in the first
quarter," Virtual Metals analyst, Carl Firman, said of
China.
China's production of refined copper and primary alumin-
ium rose 23.7 percent and 7.4 percent respectively from a
year earlier in March, hitting monthly records for both met-
als on expanded capacity and sufficient supply of raw ma-
terials.
Copper inventories at LME warehouses fell 375 tonnes to
450,425 tonnes on Thursday, little respite in an upward
trend that has seen stocks of the metal used in power and
construction climb by a fifth so far this year.
"The market is gradually getting a little bit more worried
about what Chinese growth is going to look like over the
medium term because of the ongoing tightening," Jesper
Dannesboe, senior commodity strategist at Societe Gener-
ale, said.
"Growth is going to slow down quite significantly, it's go-
ing to be very bumpy."
DATA SLEW
Copper briefly pared some losses after a bout of U.S. data.
A gauge of manufacturing in New York State rose in April
to its highest level in a year, and the state employment
index jumped to its highest since May 2004, the New York
Federal Reserve said in a report.
Earlier, data showed inflation in the euro zone climbed
higher than expected in March to 2.7 percent year-on-year,
adding to the case for further rises in interest rates.
Also, rising food and gasoline prices lifted U.S. consumer
inflation as expected in March, but underlying inflation
pressures remained contained.
Also knocking sentiment, Moody's cut Ireland's sovereign
rating by two notches to the verge of junk status and kept
its outlook on negative, pushing the euro lower, which de-
terred European investors from metals.
Meanwhile, finance leaders from the Group of 20 advanced
and developing economies attempted on Friday to flesh
out a plan to build a global economy less prone to the
booms and busts of recent decades.
Aluminium traded at $2,663 a tonne from $2,664. Zinc
was unchanged at $2,400 a tonne from $2,400 and bat-
tery material lead was at $2,632.25 a tonne from $2,613.
Tin was at $32,750 a tonne from $23,225 and nickel was
at $26,135 a tonne from $25,800.
"Chinese demand (or rather the lack of it) is the overriding
key fundamental issue for the base metals, especially cop-
per," Standard Bank analyst Leon Westgate said in a note.
"...we might not see a decent pick-up in demand until the
second half of the year, which leaves prices vulnerable in
Q2," the note added.
"That said, ample liquidity, dollar weakness, inflation con-
cerns, and bullish perceptions of the longer term funda-
mentals, are likely to keep investment money flowing,
likely resulting in a particularly volatile couple of months to
come."
PRECIOUS-Gold holds near record high on
haven, inflation appeal
By Jan Harvey
LONDON, April 15 (Reuters) - Gold held near record highs
on Friday as euro zone sovereign debt concerns, worries
over inflation and expectations U.S. interest rates will stay
low all conspired to support the precious metal.
Gold and silver retreated a touch after a decision by rating
agency Moody's to cut Ireland's debt rating to just above
junk pressured the euro, but remain firmly underpinned.
Silver is holding near its earlier 31-year high at $42.64.
Spot gold was at $1,477.50 an ounce at 1117 GMT, versus
$1,472.90 late on Thursday, having earlier hit a record
$1,479.01. Silver was at $42.56 an ounce against $42.08.
U.S. gold futures for June delivery rose $6.20 to $1,478.60.
The euro fell after Moody's cut Ireland's sovereign rating
and left the outlook negative. Consequent gains in the dol-
lar, which make assets priced in the unit more expensive
for other currency holders, curbed gold's rise.
While the initial impact of the move on currencies has
taken some of the wind out of gold's sails, euro zone debt
fears are likely to support prices in the long run.
"The market has been reacting to (the credit issues in pe-
ripheral Europe) by looking for ways to protect themselves
from these types of risks, and gold is seen as a way to do
that," said Deutsche Bank analyst Daniel Brebner.
He said the main impact on gold of elevated debt levels in
Portugal, Greece, Ireland and Spain came from the ways in
which euro zone authorities addressed the issue.
"Do we see a bailout, do we see more money being ex-
tended into these countries, do we see monetary accom-
modation remaining very much the bias in Europe?" he
said. "If that's the case, that should be very supportive of
gold markets."
European shares dipped after the downgrade, while the
cost of insuring against a default by Greece and Ireland
rose on growing speculation Greece will eventually have to
restructure its debt and after the Moody's downgrade.
20
MARKET REVIEW
DEVELOPING WORLD INFLATION RISES
China and India reported higher-than-expected inflation
readings on Friday, giving fresh ammunition to central
bankers and investors alike who are worried about mount-
ing price pressures in the global economy.
Gold, which is often seen as a hedge against inflation,
would likely benefit if inflation pressures rise significantly.
Among other commodities, oil prices eased as the dollar
firmed, although they remain near multi-year highs as
fighting in Libya continues, supporting fears output could
be hit. Stronger oil prices also tend to benefit gold prices.
Goldman Sachs recommended investors go underweight
commodities over a three to six month horizon, echoing its
call from Monday, saying oil prices are higher than justified
by current supply and demand.
But gold prices look set to remain firmly underpinned.
"The bullion market has found support one day from eco-
nomic uncertainty and changes in risk sentiment, and on
another day by high oil and food prices, and on yet another
by sovereign risk and fiscal concerns," said HSBC analyst
Jim Steel in a note.
Elsewhere, shares in some North American silver miners
fell sharply overnight after Bolivia's leftist government said
it might rescind concessions on four mines in the country
run by Glencore International Ltd affiliates and Canada's
Pan American Silver Corp .
Bolivia was the world's sixth-largest primary silver pro-
ducer last year, metals consultancy GFMS said in a report,
with output of 41 tonnes.
Among other precious metals, platinum was at $1,789.49
an ounce against $1,786.49, while palladium was at
$769.28 against $760.63.
FOREX-Euro slides on Ireland, Greece
restructuring talk
By Gertrude Chavez-Dreyfuss
NEW YORK, April 15 (Reuters) - The euro slid on Friday
after Moody's cut Ireland's rating to just above 'junk'
status, keeping the currency's debt problems in focus,
though it remained underpinned by expectations for fur-
ther interest rate rises.
Also helping limit losses especially against the U.S. dollar
was a widely-held view U.S. interest rates will stay low for
some time. Several top Federal Reserve officials have
sounded relaxed about inflation and data on Friday sup-
ported that.
Data showed U.S. core consumer prices for March were
contained, suggesting the Fed was still a long way away
from tightening monetary policy. The headline annual in-
flation rose due to the spike in gasoline prices, but analysts
considered that rise temporary.
In contrast, investors are pricing in the chances of two
more European Central Bank rate increases before the end
of this year after the ECB raised rates by 25 basis points
last week .
"The euro is in the middle of a tug-of-war between rate
expectations and sovereign debt concerns. Right now, the
euro pulled back a little bit because of the Ireland down-
grade and concerns about the Greek debt restructuring."
said Brian Kim, currency strategist at UBS in New York.
"But we're still trading near $1.45. So in the end, it's still
rate expectations that will dictate direction and will keep
the euro supported."
In addition, euro zone inflation numbers surprised on the
upside, backing views that the ECB will continue to raise
rates in coming months.
In early new York trading, the euro fell 0.4 percent on the
day to $1.4427 , well below a 15-month high of $1.4521
touched earlier this week. Traders said market ran stop
orders below $1.4430, pushing the euro to session lows at
$1.4407 on electronic trading platform EBS.
There were reportedly Asian central banks had bids at
$1.4415/20 and then at $1.4385/90, which is the 200-hour
moving average and a key pivot.
The euro's losses gathered pace after Moody's cut Ireland's
sovereign rating by two notches to Baa3 and left the out-
look negative, citing an expected deterioration in the Irish
government's financial strength and the country's weaker
economic growth outlook.
Market players said the euro could find the going tough
above $1.45 given concern about sovereign debt problems,
which escalated this week as concerns about a possible
Greek restructuring intensified.
Still some asset managers are prefer to focus less on the
region;s fiscal debt problems.
Japan's Kokusai Asset Management said it plans to in-
crease the weighting of euro-denominated bonds in its $33
billion bond fund, the world's second largest, due to a solid
outlook for euro zone economies.
The dollar, meanwhile, was down 0.5 percent at 83.12 yen ,
but losses were limited. Traders said Japanese life insur-
ance companies have been buying the dollar and euro at its
lows with stops in the dollar/yen pair building below 83
yen.
Dollar losses accelerated after the U.S. inflation data.
"The data is solidly risk appetite-friendly and will only add
to the recent tendency to defer the first Fed tightening well
into 2012. For the moment, it gives the Fed doves addi-
tional staying power not to mention power at the FOMC
table," said Alan Ruskin, global head of G10 currency strat-
egy at Deutsche Bank in New York.
21
CALENDAR
Week of April 11 to April 15, 2011:
Sunday, April 10:
China: Mar Imports
Expected: +19.5% (Y/Y); Previous: +19.4% (Y/Y)
China: Mar Exports
Expected: + 21.0% (Y/Y); Previous: +2.4% (Y/Y)
Japan: Feb Machinery Orders
Result: -2.3%; Previous:+4.2%
Monday, April 11:
France: Feb Industrial Production
Result: +0.4%; Previous: +0.7% (Revised from +1.0%)
Italy: Feb Industrial Production
Result: +1.4%; Previous: -1.7% (Revised from –1.5%)
Tuesday, April 12:
Germany: April ZEW Index
Result: 7.6; Previous: 14.1
Wednesday, April 13:
Euro zone: Feb Industrial Production
Result: +0.4%; Previous: +0.2% (Revised from +0.3%)
Thursday, April 14:
US: Weekly Jobless Claims—1230 GMT
Previous: 389.5k
US: Mar Producer Price Index—1230 GMT
Expected: +0.9%; Previous: +1.6%
Friday, April 15:
China: Mar Industrial Output
Result: 14.8% (Y/Y); Previous: +14.1% (Y/Y)
China: Mar Consumer Price Index
Result: 5.4% (Y/Y); Previous: +4.9% (Y/Y)
China: Q1 GDP
Result: 9.7% (Y/Y); Previous: +9.8% (Y/Y)
Japan: Feb Industrial Production
Result:+1.8%; Previous Estimate: +0.4%
Euro zone: March Inflation (Final)
Result: +2.7% (Y/Y): Previous Estimate: +2.4% (Y/Y)
(Revised From +2.6%)
US: Mar Consumer Price Index
Result: +2.7% (Y/Y); Previous: +2.1% (Y/Y)
US: Mar CPI (Core)
Result: +0.1%; Previous: +0.2%
US: NY Fed Apr Manufacturing Index
Result: 21.70; Previous: 17.50
US: Mar Industrial Production
Result: +0.8%; Previous: +0.1% (Revised from 0.0%)
22
LME ANALYTIC CHARTS

23
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