abn oct2010 monthly
TRANSCRIPT
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Price forecasts
13 October 1-month 2-month 3-month 12-month
Gold $/oz 1,366 1,340-1,420 1,365 1,300 1,260
Silver $/oz 23.53 23.50-25.00 24.00 23.00 22.00
Platinum $/oz 1,696 1,650-1,720 1,695 1,700 1,770
Palladium $/oz 587 570-620 600 620 560
Aluminium (3-month) $/tonne 2,425 2,300-2,450 2,400 2,300 2,390
Copper (3-month) $/tonne 8,411 8,250-8,600 8,000 7,895 8,250
Lead (3-month) $/tonne 2,434 2,250-2,400 2,300 2,200 2,400
Nickel (3-month) $/tonne 24,210 23,000-25,000 24,500 23,750 24,000
Tin (3-month) $/tonne 26,800 28,000-29,000 29,500 30,000 27,000
Zinc (3-month) $/tonne 2,410 2,350-2,460 2,350 2,280 2,100
Steel: (3-month) Med $/tonne 455 500 510 520 600
2010 av 2011 av 2012 av 2013 av 2014 av
Gold $/oz 1,218 1,425 1,165 921 900
Silver $/oz 18.96 24.71 19.25 17.18 17.00
Platinum $/oz 1,604 1,699 1,883 2,058 1,950
Palladium $/oz 505 562 639 720 600
Aluminium (3-month) $/tonne 2,164 2,200 2,496 2,667 2,900
Copper (3-month) $/tonne 7,386 8,227 8,796 8,896 7,950
Lead (3-month) $/tonne 2,166 2,303 2,142 2,171 2,200
Nickel (3-month) $/tonne 21,926 23,137 26,875 30,667 31,525
Tin (3-month) $/tonne 20,715 24,955 20,542 18,167 19,326
Zinc (3-month) $/tonne 2,158/ 2,258 3,408 3,671 3,200
Steel: (3-month) Med $/tonne 500 575 700 800 900
Source: VM Group italics denote revision from previous month
ABN AMRO Metals Monthly
Investment Research by VM Group October 2010
Precious metals
Base metals
Steel
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Analysts:
Carl Firman
E-mail: [email protected]
Gary Mead
E-mail: [email protected]
Marina Loterijman
E-mail: [email protected]
Charles Monbiot
E-mail: [email protected]
The Metals Monthly is produced as part of a joint venture
between ABN AMRO Bank N.V. and VM Group
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Contents
Prices and stocks ....................................................................................... 2
Feature: How high and how far? ................................................................. 3
Gold ............................................................................................................ 8
Silver ........................................................................................................ 10
Platinum and palladium ............................................................................ 12
Aluminium ................................................................................................. 14
Copper ...................................................................................................... 16
Nickel ........................................................................................................ 18
Zinc .......................................................................................................... 20
Lead ......................................................................................................... 22
Tin .......................................................................................................... 24
Steel ......................................................................................................... 26
Fund activity ............................................................................................. 28
About VM Group ....................................................................................... 30
VM Group disclaimer and copyright .......................................................... 31
ABN AMRO disclaimer and copyright ....................................................... 32
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Prices and stocks
London PM fix precious metal prices, over past month: re-
based to 100
LME 3-month base metal and steel prices, over past
month: re-based to 100
Source: VM Group
Historical prices & base metal stocks
Prices 13 Oct2010
Past 12 months1 week
agoWoW
(%)1 month
agoMoM
(%)
12months
agoYoY(%) Av. 2009 Av. 2008Average High Low
Gold $/oz 1,366 1,168 1,366 1,032 1,345 1.5% 1,247 9.5% 1,060 28.9% 973 873
Silver $/oz 23.53 18.14 23.53 15.14 23.4 0.6% 19.9 18.2% 17.9 31.2% 14.7 15.15
Platinum $/oz 1,696 1,546 1,752 1,313 1,723 (1.6%) 1,545 9.8% 1,356 25.1% 1,205 1,599
Palladium $/oz 587 454 598 318 598 (1.8%) 518 13.3% 326 80.1% 264 357
Aluminium $/tonne 2,425 2,135 2,482 1,858 2,376 2.1% 2,114 14.7% 1,897 27.9% 1,703 2,659
Copper $/tonne 8,411 7,145 8,411 6,101 8,286 1.5% 7,545 11.5% 6,211 35.4% 5,186 7,030
Lead $/tonne 2,434 2,154 2,620 1,581 2,307 5.5% 2,200 10.6% 2,189 11.2% 1,738 2,136
Nickel $/tonne 24,210 20,601 27,595 15,925 24,730 (2.1%) 22,855 5.9% 18,225 32.8% 14,762 21,689
Tin $/tonne 26,800 18,108 26,800 14,185 26,450 1.3% 21,800 22.9% 14,275 87.7% 13,382 18,766
Zinc $/tonne 2,410 2,178 2,660 1,618 2,333 3.3% 2,156 11.8% 2,011 19.9% 1,687 1,924
Steel (Med) $/tonne 455 459 620 355 460 (5.4%) 510 (14.7%) 390 11.5% 364 747
LME Stocks 13 Oct2010
Past 12 months
1 weekago
WoW(%)
1 monthago
MoM(%)
12months
agoYoY(%) Av. 2009 Av. 2008Average High Low
Aluminium Tonnes 4,318,100 4,517,104 4,640,750 4,318,100 4,331,600 (0.3%) 4,400,575 (1.9%) 4,548,375 (5.1%) 4,318,100 4,517,104
Copper Tonnes 371,500 459,718 555,075 353,325 372,000 (0.1%) 390,450 (4.9%) 353,325 5.1% 371,500 459,718
Lead Tonnes 197,875 170,231 199,450 128,975 198,400 (0.3%) 190,625 3.8% 128,975 53.4% 197,875 170,231
Nickel Tonnes 124,176 138,937 166,476 115,668 123,222 0.8% 118,818 4.5% 122,700 1.2% 124,176 138,937
Tin Tonnes 12,465 21,598 27,905 12,150 12,275 1.5% 13,885 (10.2%) 26,450 (52.9%) 12,465 21,598
Zinc Tonnes 609,275 547,321 623,600 424,250 611,725 (0.4%) 619,575 (1.7%) 428,200 42.3% 609,275 547,321
80
85
90
95
100
105
110
115
120
125
13 Sep 20 Sep 27 Sep 04 Oct 11 Oct
Aluminum CopperLead NickelSteel Med TinZinc
90
95
100
105
110
115
120
13 Sep 20 Sep 27 Sep 04 Oct 11 Oct
Gold
Silver
Platinum
Palladium
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Feature: How high and how far?
The degree to which base and precious metals prices rallied during Q3 2010 and
into Q4 2010 was phenomenal, and poses the obvious question how much
higher can they go? The star performer was tin which rose 43% over the period to
more than $25,000/t, while lead, palladium and copper brought up the rearguard,
rising 30%, 25% and 21%, respectively, to $2,302/t, $571/oz and $8,132/t. Gold,
which stole all the headlines, rose just 7% over Q3 but was up another 4% in
early October to hit a new record fix in London in the morning of 14 October, of
$1,380.75/oz. How much of this rally is justifiable, given the present shaky
economic climate is unclear; there are no historical precedents. But despite
appearances, not all is as positive as prices suggest. For now, prices are being
driven by expectations that emerging market demand will be huge, reinforced by a
weaker dollar and a second round of vast quantitative easing in the US; this is notincorrect, but the timing might be longer than the current surge implies. We
remain bullish regarding the longer term outlook, but cautious in the shorter term
for those metals with less appealing supply-demand fundamentals.
The centrepiece to the near-term metals outlook, and chief proponent of the Q3
2010 rally, is the now all but certain second round of quantitative easing by the
US Federal Reserve. Its become increasingly clear in the past couple of weeks
that the Fed which has the dual mandate of managing inflation as well as
ensuring full employment is more inclined to focus on the latter and let theformer go hang. There are more doves than hawks on the Federal Open Market
Committee (FOMC), the entity that sets US Fed monetary policy, and when the
FOMC next meets (2-3 November) the market now expects it to announce the
start of a fresh bout of quantitative easing, QE2, probably buying up $500bn of
long-term government debt. This will certainly inject a strong dose of inflation into
the US (and world) economy, but the FOMC firmly believes that the greater risk
right now is deflation, not inflation. If we are right in our assumption that the
November FOMC meeting will see QE2, then the dollar will remain weak and
commodities thereby relatively cheaper. Assuming the US Fed does elect to enteranother phase of quantitative easing in November 2010, which is currently built in
to metals prices, the race to the bottom of other currencies to fall in line with the
weaker dollar will most likely follow, and aggressively.
Largely forgotten over the Q3 2010 period was the risk of sovereign debt default
in the eurozone and its sluggish recovery, while the tough austerity measures
announced by many EU economies left little doubt that growth will be limited for
years ahead. To understand why the tepid recovery in the EU has had very little
effect on industrial metals prices, one only has to glance at the emergingeconomies and China in particular, where the long-term prospects for raw
PMI for China, eurozone and US,
July 2009-Sept 2010
45
47
49
51
53
55
57
59
61
63
Jul Oct Jan Apr Jul
Euro
zone
US
China
Source: ISM, Markit Economics
World industrial production actual
and forecast out to 2012
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
2002 2005 2008 2011
OECD IP Non-OECD IP
Source: VM Group
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materials demand remains very convincing. Indeed, demand from the emerging
world for commodities is now setting the pace, with the financial crisis and
recession in the West only accelerating this geographic shift of the global engine.
Its becoming increasingly clear that the advanced economies influence indetermining the prices of industrial metals, through fundamentals alone, has
become extremely diluted.
China stands as a good proxy for the emerging world, with its demand for base
metals exceeding all expectations over the past two years. Chinas exports may
have suffered, as global demand collapsed in Q4 2008, but it escaped largely
unscathed from the financial contagion sweeping the developed world, and
redirected its energies internally. Such has been the countrys structural demand
that consumption growth of materials has not only been maintained but
Commodities: Change in price (%) of commodities in Q3 2010 and high and low range
-80% -60% -40% -20% 0% 20% 40% 60% 80%
10yr yieldRhodium
Cocoa, LIFFELean hogsCocoa, ICE Futures US
$ index (broad currencies)Henry Hub natural gas
$ index (major currencies)Cobalt
Regular gasolineCO2 yr 2CO2 yr 3
yuan/$Feeder cattle
Steel (Med)Lumber
LLDP plasticsWhite rice
RBOB gasolinePP plasticsSteel (Asia)
S&P 500Gold
Coal, Nymexsterling/$Platinum
Rough ricePork bellies
Live cattleWTI crude
FCOJeuro/$
UraniumBrent crude
Ethanol (CBOT)Soybeans
NickelPalm oil
Heating oilSoybean Oil
MilkMSCI emerging markets
ZincSilver
AluminiumCopper
PalladiumRobusta coffee
CottonLeadCorn
Arabica coffeeSugar, no.5
TinWheat (KCBT)
Sugar no.1 1Wheat (CBOT)
Range (low to high)
Financial assets
Losers Gainers
Performance in Q3 2010
Source: VM Group
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accelerated. This is likely to remain a long-term trend. Even if Chinese economic
growth weakens slightly in 2011, Beijing will find it extremely difficult, politically if
not economically, to curb expenditure on transportation, affordable property and
power infrastructure, all of which must continue expanding rapidly if the country isto fulfil its developmental goals.
Base and precious metals are now inexorably linked to this shift towards
industrialisation in China and the rest of the emerging world. This is why supply-
demand fundamentals have come back into focus alongside the macro drivers,
giving prices for some metals a boost while depressing others. A further twist to
spiralling upward metals prices will be given by the introduction of physically-
backed base metal exchange traded products the first announced by ETF
Securities on 11 October, with other vendors sure to follow. This will inevitably
push up the prices of those base metals that have the tightest set of supply-side
dynamics, although those base metals in structural oversupply (such as
aluminium and lead) look unlikely candidates for successful ETFs. Add in supply-
side issues that are already impacting tin, copper and zinc, plus finite supply
source weakness in the PGMs, and the recipe is set for prices to rise even further
over the next 18 months. But the extent to which prices rise will partly be
governed by the individual supply-demand fundamental characteristics of each
metal. In the short-term, once QE2 becomes a reality, we expect to see a mild
correction.
Those to watch, those to avoid
Tin and copper stand out as our pick of the pack of the base metals in 2011, while
in the precious metals we favour those with a large industrial demand component,
such as the PGMs and silver. We still expect the gold price to appreciate, but also
to underperform the other precious metals. 2011 will see more volatility as the
market attempts to guess when and by how much the US Fed will adjust interest
rates, if at all, while the weakening dollar could usher in a scramble for the bottom
as nations vie with each other to keep their currencies internationally competitive,leading to rising tensions. Golds status as a hedge against generalised risk will
mean it blossoms further to a peak of $1,530/oz in June 2011 in our view.
Tin
We are unashamedly medium-term tin bulls. The LME stands as the market of last
resort and, in tins case, this has been realised, as there is little in the way of
above ground stocks of tin elsewhere. Tin inventories on the LME stand at just 13
days of global consumption, having trended down consistently since mid-January
2010 to stand at a little more than 12,000t by mid-October. Although cancelled
tonnage is quite low, at 285t as at 12 October, the prospects of further drawdowns
Gold price (pm fix, $/oz) during Q3
period, 2006-2010, 100=1 June
80
85
90
95
100
105
110
115
Jun Jul Aug Sep
2010 2006
2007 2008
2009 2010
Source: LBMA, VM Group
LMEX index during Q3 period, 2006-
2010, 100=1 June
70
8090
100
110
120
130
140
Jun Jul Aug Sep
2006 2007 2008
2009 2010
Source: LME, VM Group
Change in LME tin stocks during the
Q3 period, 2000-2010, 000 t
-11
-6
-1
4
9
14
1 2 3 4 5 6 7 8 9 10
Source: LME, VM Group
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are likely in Q4 2010 since, apart from in Q4 2005, tin stocks have been drawn
down continuously since late January 2010. This should result in the cash to
three-month spread heading into deeper backwardation and for tin prices to spike
even higher, even though they have recently reached new nominal peaks.Underpinning prices will be the continuation of Indonesian supply issues and lack
of new supply coming online to meet the expected growth in demand for
electronic soldering purposes. One caveat is whether Chinese producers become
incentivised to expand production, should tin prices continue to rise. This is not
likely to occur in Q4 2010, since China has cut tin smelter output in a drive to
meet a five-year energy efficiency target. The tin market will be in deficit by at
least 14,000t in 2010, widening to 19,000t in 2011 on a 2.7% growth in demand
but with a mere 1.2% improvement in supply.
Copper
Coppers bull story is based on very solid supply-demand problems. Large
established mines are consistently encountering lower ore grades and higher
costs and these elderly mines are regularly failing to hit production targets. There
is a dearth of large copper resource discoveries in politically stable jurisdictions.
China and other emerging economies have a long-term insatiable appetite for
copper. These are the main price drivers. The refined copper market is already in
deficit, with low and diminishing concentrate availability, as evidenced by very low
treatment and refining charges, all of which is impacting refined output. Demandgrowth meanwhile has outpaced supply growth and will do so again in 2011,
leaving as a buffer just the large overhang of exchange stocks and those
purportedly held by Chinas State Reserves Bureau and other off market entities.
This off market volume will alleviate some of the expected copper market
tightness ahead, but it is unclear how large these inventories are, and how fast
they might leak back into the market should the copper price challenge or even
surpass its record high of $8,940/t in July 2008. Higher copper prices will also
tempt more scrap supply into the market, but the question remains whether
existing inventories and scrap supply will be enough to counter rising emerging
world demand and weak mine production growth.
Zinc
Zinc has taken a beating in 2010 due to the failure of producers to restrain supply
to keep pace with shrunken demand. Even so, zinc supply and demand growth in
2010 has been stronger than all the base metals, except for aluminium. The
refined zinc surplus this year might remain large, at ~520,000t, from 725,000t in
2009. At first glance this estimate is bearish, but this surplus is necessary to stave
off the tightness in the market that we believe lies ahead, since like copper there is not enough new zinc mine supply coming through to replace depleted
Gold/copper correlation, 1 Jan 2010
13 Oct 2010
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Jan Mar May Jul Sep
Source: VM Group
Zinc stocks on the LME and SHFE
since the start of 2010, Mt
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Jan Mar May Jul Sep
SHFE LME
Source: LBMA, VM Group
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reserves. In the immediate term the stubbornly high stocks in the LME and SHFE
should see zinc underperform the base metals pack, but we anticipate the
surplus narrowing in 2011 and, with the possible introduction of a zinc-backed
ETF, we expect the zinc price to flourish in the latter part of 2011 as the marketbegins to tighten.
PGMs
Soaring Chinese car sales and a tepid recovery in US and EU sales in 2011 will
exert strain on PGM production in South Africa, which is beset with power supply
problems. This will support prices, leaving aside the perennial problems South
Africas deep level PGM mines encounter their record of first setting and then
subsequently under-achieving production targets is second to none. We expect
palladium to outperform platinum the platinum:palladium ratio has trended
lower for much of 2010 to mid-October on investment demand based on
expected continued strong growth in Chinese car sales, where the lions share of
new passenger cars are gasoline fuelled and thus favour greater palladium
loadings in the autocatalyst.
Aluminium
Even an aluminium-backed ETF will do little to dent the huge volume of
inventories held both on and off market. We do not envisage more than 400,000t
of ETF offtake in the first year of its introduction, which is a drop in the ocean of
inventories. To prospective ETF investors the thought of paying as much as 3%
in warehousing overheads in a market obviously awash with metal may entice
only the most ardent aluminium bull. Although ETF Securities has not yet
released details of the individual base metal ETFs, and we expect the vendor to
have negotiated favourable warehousing deals, we have yet to be persuaded that
the aluminium price in 2011 has much scope to rise higher, although a general
rise in other base metals will necessarily pull up aluminium, too. Existing
production capacity remains more than enough to meet demand growth next year
and, as yet, there is no telling when the metal held in term financing deals will
end.
VM Groups average price forecast by quarter, Q4 2010 Q4 2011
Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011
Gold, $/oz 1,355 1,410 1,496 1,410 1,336
silver, $/oz 23.66 23.16 24.80 26.93 24.66
platinum, $/oz 1,685 1,677 1,700 1,631 1,787
palladium, $/oz 589 577 562 528 580
Copper, $/t 8,025 8,283 8,417 7,792 8,417
nickel, $/t 24,083 21,417 24,000 22,874 24,257
aluminium, $/t 2,347 2,117 2,135 2,187 2,363lead, $/t 2,320 2,263 2,287 2,204 2,458
zinc, $/t 2,230 2,100 2,250 2,151 2,533
tin, $/t 27,500 25,000 23,333 22,652 28,833
Platinum/palladium ratio since 1
Jan 2010 to 13 Oct 2010
70
80
90
100
110
Jan-1 0 May-1 0 Se p-1 0
Source: LBMA, VM Group
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Gold
Gold enjoyed another month of record-breaking prices as investment demand
soared on the back of a weakening dollar and the likelihood of further quantitativeeasing. The US Federal Reserve announced on 21 September 2010 that it was
prepared to provide additional accommodation if needed as inflation remains well
below target and unemployment levels stubbornly high. The gold price rallied,
reaching a monthly high of $1,307/oz on 29 September in London. The upward
momentum continued into October following the release of the minutes from the
Feds September meeting. The report published on 13 October - confirmed the
US central banks readiness to provide additional monetary policy accommodation
if the unemployment rate or inflation continued to come in below levels consistent
with its mandate. The London pm gold fix reached another an all-time nominal
high of $1,373/t on 14 October.
We assume that when the Fed meets on 2-3 November it will decide to buy upto $500bn of long term government bonds. This will have the following implications:
the dollar will remain weak/weaken further (making commodities cheaper);
bubbles will emerge in stock markets; physical assets will become more sought
after; the risk of uncontrollable inflation appearing a couple of years down the line
will be higher; and large exporting nations whose currencies become even stronger
against the dollar will start to suffer and their governments will consider retaliatory
moves. All of this is good for gold but will there be another surge in prices? Maybe
not - since the Fed raised expectations of a second round of quantitative easing on
21 September, the gold price has risen 7.7%, its largest three-week rise in more
than five months. The immediate impact of any QE2 has probably already been
factored into the price.
Recent movements in ETFs reflect the growth of bullish sentiment. Inflows intothe 17 ETFs we follow have been positive in each of the three weeks from 10
September, rising to 66.84 Moz. The SPDR product in the US led the advance with
an increase of 0.28 Moz. There were also flows into non-US funds, which
increased by 0.17 Moz over the same period.
AngloGold Ashanti on 7 October became the last gold mining major to unwindits gold hedge book, providing the company and its shareholders with full exposure
to the prevailing gold price. The cost of closing out all future hedge contracts
amounted to a mammoth $2.63bn, representing an average buy-back of $1,300/oz.
The reaction to this was rather simplistic. Most saw it as yet another bullish
indicator but there is a deeper and less optimistic interpretation. The end of the
dehedging era means that gold miners no longer have the option of buying back
gold from banks. The gold price will instead be at the mercy of central banks and
speculative investors to a degree that has not been the case for many years. The
unspoken question who is going to be a big gold buyer in years to come, if not
the miners themselves? is an underlying concern which could not be more
Gold, London PM fix, $/oz
1,200
1,220
1,240
1,260
1,280
1,300
1,320
1,340
1,360
1,380
1,400
1 3-Sep 23 -Sep 03-Oc t 13-Oc
Source: LBMA, VM Group
Gold price in various currencies,
three months ago = 100
90
95
100
105
110
115
13-Jul 13-Aug 13-Sep
Dollar RupeeEuro
Source: LBMA, VM Group
Shanghai Gold Exchange, lots/day
(average past 22 days)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Oct-09 Apr-10 Oct-10
Source: VM Group, SHFE
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clearly shown than by the $20/oz fall shortly after AngloGolds dehedging
announcement in early afternoon trading on 7 October.
Central banks have been net buyers of gold since May 2009 to August 2010 to
the tune of 92.6t, while previously they were net sellers of gold. If this trend
continues it will help to bridge the gap vacated by de-hedgers; but is a drop in the
ocean from the almost 3,000t bought back from the global hedge book since 2001.
Short-term outlook
The last remaining gold bear has left the room in embarrassment. The Federal
Reserve, may be about to give the gold market bulls what they have been
warning for years a massive new dose of inflationary cheap money in a bid
to pull down US unemployment from almost 10%. With record low interest
rates and the loosest monetary policy in decades, gold will prosper. Right now
the fear is all about deflation. Its possible the Fed is right, and that the US
economy is on track to see extremely poor GDP growth rates for years ahead
in which case its next injection of liquidity will be a timely boost. In any case
however it will reinforce those who regard gold as the only true safe haven in
town and their ranks are growing. Short-term London pm fix: $1,340/oz-
$1,420/oz.
Gold forward curve (Comex), 1st
position = 100, various dates
98
100
102
104
106
108
110112
114
1 13 25 37 49
1yr ago
1m agoLatest
Source: LBMA, VM Group
Gold ETF offtake, tonnes
(30)
(20)
(10)
0
10
20
30
09-Jul 06-Aug 03-Sep 01-Oct
Source: VM Group
Lease rates, 1m and 12m, % per
annum
(0.2)
(0.2)
(0.1)
(0.1)
0.0
0.1
0.1
0.2
0.2
0.30.3
0.4
13-Sep 23-Sep 03-Oct 13-Oc
Gold - 12m
Gold - 1m
Source: VM Group
Gold supply & demand balance, tonnes
2008 2009 2010f
Supply
Mine supply 2,347 2,465 2,495
Scrap recycling 1,185 1,408 1,339
Hedging 33 74 65
Central Bank sales 310 397 161
Total supply 3,875 4,330 4,059Demand
Jewellery fabrication 1,976 1,672 1,424
Legal tender coins 225 234 296
Electronics 422 375 356
Other end uses 313 297 275
ETFs 320 576 563
Central Bank purchases 215 437 223
Dehedging 373 321 105
Total demand 3,842 3,912 3,241
Residual 33 432 818
Source: VM Group
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Silver
Silver fixed at a monthly high of $22.07/oz in London on 30 September 2010,
before rising to fix at $24.49/oz on 14 October, its highest level since 1980.Volatility in the currency markets has bolstered silver prices since the start of
2010, which have increased by 44%, compared to golds 26%. Silvers strong
performance has pushed the gold/silver price ratio to a 12-month low of 59 as at
the end of September, 6 points above the 40-year average. The acceleration of
silver prices in October pushed the ratio down by a further 2 points, reaching 57
on 14 October.
The metal is benefiting from a surge in speculative demand, with investorsopting to buy cheaper safe haven assets amid concerns over the health of the
global economy. Inflows into the ETFs have been positive in each week since 23July, rising during that time from 412 Moz to 453 Moz. The US iShares product
led the advance with an increase of 28.95 Moz. There were also flows into non-
US funds, which increased by 10.09 Moz over the same period. Between 1 June
2010 to mid-October, silver ETF holdings have advance almost 12%, compared
with less than 5% for palladium and less than 2% for platinum and gold.
High silver prices are also being supported by a strong recovery in industrialdemand. The electronics sector in China is estimated to have grown by 15%
since the start of 2010, resulting in a 41% increase in Chinese imports of silver in
H1 2010, compared with the same period of last year. As China and otherdeveloping nations emerge out of recession, a further surge in physical demand
may occur and in the longer term, demand will surge on the back of silvers use
as a superior conductor and biocide.
Short-term outlook
The outlook for the silver price remains promising. Its precious image is
receiving growing interest from cautious investors while its industrial
usage is certain to flourish. As precious metal prices continue on their
upward trend, we expect silver to gain more ground on gold before the end
of the year. Short-term London fix: $23.50/oz-$25.00/oz.
Silver supply & demand balance, tonnes
2008 2009e 2010f
SupplyMine supply 21,398 22,058 22,793
Recycling 12,951 12,752 11,978Government 500 500 250Total supply 34,849 35,310 35,021
DemandJewellery and Silverware 7,784 7,068 6,971
Industrial 4,327 3,553 3,259Investment 6,600 6,260 6,385
Total demand 28,512 28,517 27,805
Residual 6,337 6,794 7,216
Source: VM Group
Silver, London fix, $/oz
19.0
19.5
20.0
20.5
21.0
21.5
22.0
22.5
23.0
23.5
24.0
13-Sep 23-Sep 03-Oct
Source: LBMA, VM Group
Lease rates, 1m and 12m, % per
annum
(0.5)
(0.4)
(0.3)
(0.2)
(0.1)
0.0
0.1
0.2
0.3
13-Se p 23-Se p 03-Oct 13-Oct
Sil ver - 12m
Silver - 1m
Source: LBMA, VM Group
Silver ETF offtake, weekly, tonnes
(50)
0
50
100
150
200
250
300
350
02-Ju l 30-Jul 27-Aug 24-S ep
Source: VM Group, ETF providers
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Gold and silver data
Gold CFTC net long position & price Gold in current $/oz and 2009 $/oz Gold/oil ratio, past 3 years
400
500
600
700
800
900
1,000
1,100
1,200
1,3001,400
Oct-09 Feb-10 Jun-10
0
100
200
300
400
500
600
700
800
9001,000
TonnesPrice, $/oz
0
200
400
600
800
1,000
1,200
1,400
85 90 95 00 05
2009
Current
0
5
10
15
20
25
30
Oct-07 Oct-08 Oct-09 Source: VM Group, CFTC Source: VM Group Source: VM Group
Gold/silver ratio, past 3 years Gold dehedging, tonnes/quarter Central bank gold data, August 2010
40
45
50
5560
65
70
75
80
85
90
Oct-07 Oct-08 Oct-09 (250)
(200)
(150)
(100)
(50)
0
50
100
01 03 05 07 09
Country/institution Tonnes
IMF (18.48)
Kazakhstan (3.11)
Others (0.15)
Total sales (21.74)
Russia 9.27
Others 0.12
Total purchases 9.39Net change (18.48)
Source: VM Group Source: VM Group Source: IMF, International Financial Statistics &
national country websites. Not all country changes
shown
Silver CFTC net long position & $/oz Silver in current $/oz and 2009 $/oz Silver/copper ratio, past 3 years
4
9
14
19
24
29
Oct-09 Feb-10 Jun-10
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
$/oz Tonnes
0
5
10
15
20
25
85 90 95 00 05
2009
Current $
0
20
40
60
80
100
120
140
160
Oct-07 Oct-08 Oct-09 Source: VM Group, CFTC Source: VM Group Source: VM Group
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Platinum and palladium
The past few months have been a good time to be long in palladium, as it has
risen by 31% since 1 June 2010, to reach ~$600/oz by mid-October, its highestlevel since 2001, outpacing both platinum and gold. Palladium has benefited
largely from soaring car sales in China and other emerging markets and this has
not been lost on the investment community.
Palladium ETF holdings have risen by more than 4% in the period 1 June to15 October, to a record 1.89 Moz. This compares with just 1.1% and 1.5% for
platinum and gold, respectively, but lower than the remarkable 11.8% increase in
silver ETF holdings. The palladium net long position on Nymex has increased by
23% over this same period, which is still off Mays highs. With this in mind and the
21% fall in the net futures position on Tocom, we suspect that physical demandhas played a larger role in palladiums advance than purely speculative futures
exchange investment.
Cars sold in China are mostly gasoline engine rather than diesel enginevehicles and therefore favour palladium over platinum in autocatalyst loadings.
With car sales in the US and EU remaining constrained, it is China that has led
the way in terms of numbers of vehicles being sold. Sales of new passenger cars
in China stood at annualised 14.72m units in September, up from 12.35m units in
the same month in 2009. Some estimates have Chinese car sales clocking up as
much as 17m units by the end of 2010, which means sales will rocket in Q4 2010.Chinas imports of palladium reached 0.7 Moz in the first eight months of 2010, up
53% and 47% on the same periods in 2009 and 2008, respectively. Palladium
exports from Hong Kong, much of which is destined for mainland China, have
leapt 468% on the year, to 0.25 Moz in the first eight months of 2010.
Swiss palladium exports have risen by 45% in the first eight months of 2010,to 1.85 Moz, with much of this metal destined for the Chinese and Honk Kong
markets, as well as going to London vaults to satisfy investment demand.
Short-term outlookPalladiums short to medium-term prospects appear more bullish than that
of platinum purely on the basis of Chinese car sales. But the improving
share of diesel engines in the EU is positive for platinum and we expect
both metals to perform well in 2011, especially with the ongoing risks that
South Africa will face a power supply crunch sooner or later. Short-term
London fix: $1,650/oz-$1,720/oz for platinum and $570/oz-$620/oz for
palladium.
Platinum price, PM fix, $/oz
1,400
1,420
1,440
1,460
1,480
1,500
1,520
1,540
1,560
1,580
1,600
10-Aug 20-Aug 30-Aug 09-Sep
Source: LPPM, VM Group
Palladium price, PM fix, $/oz
450
460
470
480
490
500
510
520
530
540
550
10-Aug 20-Aug 30-Aug 09-Sep
Source: LPPM, VM Group
Platinum/palladium price ratio
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Dec-06 Dec-07 Dec-08
Source: VM Group
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PGMs data
US & China car* monthly sales, million
units
Top four European car markets sales,
monthly, million units
Platinum turnover on the SGE, rolling
3m average, annualised, oz
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Aug-07 Aug-08 Aug-09 Aug-10
US China
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
Aug-07 Aug-08 Aug-09 Aug-10
France Germany
UK Italy
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Source: VM Group, national data. * China includes
commercial vehicles.
Source: VM Group, national data Source: VM Group, SGE
Palladium ETFs weekly offtake, oz Platinum ETFs weekly offtake, oz South Africa PGM output, 2005=100
(80,000)
(60,000)
(40,000)
(20,000)
0
20,000
40,000
11-Ju n 09-Ju l 06-Au g 03-S ep
ETFS US
ZKB
ETFS UK
(50,000)
(40,000)
(30,000)
(20,000)
(10,000)
0
10,000
20,000
11-Jun 09-Jul 06-Au g 03-Se p
ETFS US
ZKB
ETFS UK
0
20
40
60
80
100
120
140
Jul -07 Jul-08 Jul-09 Jul -10 Source: VM Group, company data Source: VM Group, company data Source: VM Group, SSA
Platinum supply & demand balance, 000 oz Palladium supply & demand balance, 000 oz2008 2009e 2010f 2008 2009e 2010f
Supply SupplyMine supply 5,964 6,020 6,160 Mine supply 6,345 6,390 6,480
Scrap recycling 1,457 1,450 1,518 Scrap recycling 1,392 1,356 1,558
Total supply 7,421 7,470 7,678 Total supply 7,737 7,746 8,038
Demand Demand
Autocatalysts 3,538.0 2,700.0 3,100.0 Autocatalysts 4,411 4,000 4,600
Jewellery 1,710.0 2,500.0 2,150.0 Jewellery 1,022 1,075 1110
Other industrial 1,813 1,571 1,505 Other industrial 2,218 2,093 2,111
Total demand 7,061 6,771 6,755 Total demand 7,561 7,168 7,821
Residual 360 699 922 Residual 86 578 217
Stock movements Stock movements
ETF inflows 102 380 633 ETF inflows 280 502 1124
Russian stock sales 1,000 1,000 850
Unknown/implied investment 258 319 289 Unknown/implied investment 705 1,076 (57)
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Aluminium
The aluminium price has been swept up by the dash towards tangible assets
by investors driven by a potential second round of quantitative easing in the US.However, the enforced closures of smelters in China, as Beijing looks to hit a
five-year energy efficiency target in 2010, has added a much needed boost from
a fundamental perspective. Chinese aluminium production is likely to remain
subdued for the rest of 2010, after mirroring the excesses of the steel sector prior
to the government clampdown. This should see its exports of aluminium products
capped (primary aluminium exports are heavily taxed, while aluminium products
are not) and perhaps alleviate Western world concerns of cheap Chinese-made
products swamping the international market.
Aluminium demand outside of China is booming, with North Americandemand up 15% year-on-year, to 3.9 Mt, in the first eight months of 2010, anddemand from the EU up 18%, to 4.4 Mt over the same period. However, some of
this is due to restocking, in our view, and will not be repeated in 2011. While
demand should still remain healthy in 2011, high aluminium stocks on the LME
and SHFE and the existence of huge off market stocks, and ample excess
production capacity, will be more than able to cope with any demand growth in
the medium-term and will cap prices. Also, metal that is locked in the LME on
financing term deals, taking advantage of the contango in aluminiums nearby
spread relative to the cheap cost of capital, is a ticking time bomb. When the US
Fed decides to increase interest rates, which we believe will not happen until
before late 2011 at the earliest, then this metal will become available, which is
likely to be very bearish for prices.
Short-term outlook
Aluminium may have further upside due to macro drivers and the closure of
some smelters by Beijing, but ultimately it has the weakest set of short to
medium-term fundamentals of all base metals. We therefore see the rise in
the aluminium price as short-lived and expect it to be one of the worst
performers in 2011. Short-term LME three-month aluminium price: $2,300/t-
$2,450/t.
Chinese aluminium and alumina prices, yuan/t
14 October 2010 Current YoY % chg Last mth YoY % chg
SHFE spot price 16,050 8% 15,365 4%
SHFE three-month price 16,345 9% 15,660 5%
SHFE six-month price 16,680 12% 15,985 -93%
SHFE stocks, tonnes 494,782 116% 491,488 114%
Chinese aluminium ingots (99.7%min) 16,125 8% 15,285 3%
Chalco alumina prices 2,750 4% 2,750 8%
Chinese alumina (Australian import) 2,875 4% 2,925 9%
Aluminium price, LME, $/tonne
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
2,600
14-Sep 28-Sep 12-Oct
3m 27m
Source: LME, VM Group
Aluminium stocks, LME, Mt
4.10
4.20
4.30
4.40
4.50
4.60
4.70
Oct-09 Feb-10 Jun-10 Oct-10
Source: LME, VM Group
Aluminium forward curve, LME,
various dates, spot price = 100
95
100
105
110
115
120
125
Spot 3m 15m 27m 63m
13/10/2010
1m ago
1yr ago
Source: LME, VM Group
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Aluminium data
Aluminium output by region, monthly,
Mt
SHFE/LME price differential, $/t Japanese domestic shipments of
extruded products, 000t
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2003 2005 2007 2009
China
Rest of worldEurope
Americas
(500)
(400)
(300)
(200)
(100)
0
100
200
Oct-09 Mar-10 Aug-10
0
10
20
30
40
50
60
70
80
90
Oct
07
Jun
08
Feb
09
Oct
09
Jun
10 Source: IAI, VM Group Source: SHFE, LME, VM Group Source: Japan Aluminium Association
Unwrought aluminium producer stocks,
Mt
Chinese imports/exports of unwrought
aluminium and aluminium products,
000t
US output, alumina and aluminium,
100=2002
0.0
0.5
1.0
1.5
2.0
2.5
99 01 03 05 07 09 (400)
(300)
(200)
(100)
0
100200
300
400
500
06 07 08 09 10
(400)
(300)
(200)
(100)
0
100
200
300
400
500
600Exports
Imports
Net
60
65
70
75
80
8590
95
100
105
2006 2007 2008 2009 2010 Source: IAI, VM Group Source: China Customs Source: Federal Reserve, VM Group
Aluminium supply & demand balance, 000t
2006 2007 2008 2009 2010 2011
SupplyChina 9,352 12,605 13,247 13,483 16,655 18,250
North America 5,334 5,643 5,783 4,762 4,775 4,801Europe & CIS 9,197 9,665 9,997 8,774 8,792 8,800Rest of world 10,029 10,181 10,588 10,438 10,925 11,495
Total world output 33,912 38,094 39,615 37,457 41,148 43,346Year-on-year % chg 6.4% 12.3% 4.0% (5%) 9.9% 5.3%
DemandTotal world consumption 34,121 37,765 38,265 35,721 40,115 42,823
Year-on-year % chg 6.5% 10.7% 1.3% (7%) 12.3% 6.7%
Implied market balance - 209 329 1,350 1,736 1,033 523
Total stocks 3,671 4,248 4,987 6,695 7,674 7,913
Average 3-m LME price ($/t) 2,593 2,662 2,626 1,703 2,125 2,220
Source: IAI, WBMS, VM Group
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Copper
The copper price is benefiting from the weak dollar and on its own set of
convincing supply-demand fundamentals. The price has trended higherthroughout Q3 2010 and now threatens to reach its all-time nominal high of
$8,930/t (set in July 2008). We are forecasting a deeper deficit in 2010 of
129,000t, moving to a large deficit of 442,000t in 2011, as a number of dynamics
weigh on the market.
On the demand side, Chinas appetite for copper is now and will remain verystrong, with September 2010 imports of unwrought copper and copper products
down just 2.9% month-on-month, to 368,410t. In the first nine months of 2010
imports of unwrought copper and products are on par with the record breaking
volumes seen in 2009 and are up 75% on the same period in 2008 and 57% on2007. Chinas production of refined copper however is up 24% in the first eight
months of 2010 from year ago levels, to 3.45 Mt, implying that its copper demand
has strengthened. Demand elsewhere has also grown. In the US, copper demand
has risen 5% in H1 2010 vs. H1 2009, while in the EU it is up 7% and in Japan up
37%.
It is on the supply side however that the copper price will find most of itssupport. The under-performance of many of the large and mature copper mines
and the decline in the rate of discovery of replacement reserves suggests that
supply will have a difficult task in keeping up with growing demand. Throw inlabour disputes, since a high copper price is sure to lead to calls for wage
increases, and other unforeseen risks, and deficit territory is assured.
Short term outlook
In 2011 China will continue to dominate global copper usage, which could
rise more than 5%, and we expect improving consumption in the US and EU
as economic recovery becomes more certain. The copper market is already
in deficit and is likely to remain so from now at least through 2012. Copper
exchange stocks (LME, SHFE and Comex) are all in decline, and although
US dollar fears are currently built into the copper price, we believe that the
metal is supported by its own fundamentals and will go on to record new
record highs in the near future. Short-term, LME three-month copper price:
$8,250-$8,600/t.
Chinese copper prices, yuan/t (unless stated otherwise)
14 October 2010 Current YoY %chg Last mth YoY %chg
SHFE spot price 62,110 27% 59,350 119%
SHFE three-month price 62,210 27% 59,390 120%
SHFE six-month price 62,300 28% 59,330 119%
SHFE stocks, tonnes 114,302 14% 98,025 101%
Chinese copper cathode (99.95%) 62,850 29% 59,150 24%
Current Last mth 6m ago
Copper TC (cif) China ($/t) 17.5 25.0 10.5
Copper price, LME, $/tonne
6,000
6,500
7,000
7,500
8,000
8,500
9,000
14-Sep 28-Sep 12-Oct
3m
27m
Source: VM Group
Copper stocks, LME, Mt
0.0
0.1
0.2
0.3
0.4
0.5
0.6
Oct-09 Feb-10 Jun-10 Oct-10
Source: VM Group
Copper forward curve, LME, various
dates, spot = 100
85
90
95
100
105
110
Spot 3m 15m 27m 63m
13/10/2010
1m ago
1yr ago
Source: VM Group
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Copper data
World mine capacity utilisation, % Global copper concentrate output,
monthly, 000t
Apparent copper usage, monthly, 000t
65
70
75
80
85
90
95
2007 2008 2009 2010 800850900950
1,0001,0501,1001,1501,2001,2501,3001,3501,4001,450
Jan-07 Jan-08 Jan-09 Jan-10 0
100
200
300
400
500
600
700
800
2007 2008 2009 2010
EU-15
United States
China
Source: ICSG, VM Group Source: ICSG, VM Group Source: ICSG, VM Group
Monthly refined copper production
(primary and secondary), 000t
China implied copper demand & copper
output, monthly, 000t
US copper imports in million dollars
0
500
1,000
1,500
2,000
2007 2008 2009 2010
Rest of World China
India Japan
Russian Fed US 0
200
400
600
800
1,000
1,200
Aug 07 Aug 08 Aug 09 Aug 10
Implied demand
Products output
0
100
200
300
400500
600
700
800
900
1,000
Jul 07 Jul 08 Jul 09 Jul 10
Source: ICSG, WBMS, VM Group Source: China customs, NBS, VM Group Source: US Census Bureau, VM Group
Copper supply & demand balance, 000t
2006 2007 2008 2009 2010 2011
SupplyTotal mine production 14,983 15,439 15,450 15,262 15,369 15,561Year-on-year %change 0% 3% 0% (1.2%) 0.7% 1.3%
North America 2,150 2,169 2,182 2,002 1,862 2,151Latin America 3,555 3,600 3,515 3,564 4,499 4,612
Asia (ex China) 3,974 4,167 4,121 3,952 3,520 4,065China 2,822 3,222 3,597 4,005 4,725 5,068
Europe 3,551 3,578 3,698 3,522 3,659 3,787Total refined production 17,361 18,011 18,232 18,288 18,837 19,534
Year-on-year %change 5% 4% 1% 0.3% 3.0% 3.7%Demand
Total refined consumption 17,148 18,048 18,027 17,821 18,966 19,976
Year-on-year %change 3% 5% 0% (1.1%) 6.4% 5.3%Implied balance 213 (37) 204 467 (129) (442)
Total stocks 1,093 1,422 1,158 1,263 1,098 656Average 3-m LME price ($/t) 6,861 7,096 6,871 5,186 7,331 8,317
Source: ICSG, WBMS, VM Group
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Nickel
There is a flood of nickel supply coming in the next two quarters, promising to
move the market from balance in 2010 to surplus in 2011. The initial spike indemand from the stainless steel sector has come and gone, as evidenced by the
slip in stainless steel scrap demand in H2, and while we expect a pickup in nickel
demand in Q4, it will not keep pace with supply.
The strikes at Vales Voiseys Bay and Sudbury nickel operations in Canadaspanning H1 2009 and H1 2010 (the strike at Voiseys Bay has yet to be
concluded), coupled with strong demand growth, supported the nickel price and
saw LME nickel stocks decline from February 2010 onwards. But the settlement
of the strike at Vales Sudbury operation in July 2010 and the seasonal re-
opening of Norilsks Nickel shipments from the port of Dudinka in Russia after thelate spring melt has seen LME stocks inch higher since mid-August. The arrival of
more metal on the market from Vales Goro high pressure acid leach mine
(HPAL) in New Caledonia and other sources, including Vales Ona Puma project
in Brazil, Sherritt Internationals Ambatovy project in Madagascar and First
Quantums Ravensthorpe project in Australia, could add as much as 130,000t of
nickel in 2011, about 10% of global supply. Without a strong demand response,
which is not likely given that the nickel price is $25,000/t, it is likely that LME
stocks will stay high and pressure prices.
Matters will be compounded further once Vale negotiates a settlement withunionised workers at its Voiseys Bay mine, which could then be rapidly rampedup to as much as 70,000t/year. Additionally, Chinese nickel pig iron (NPI)
production might remain constrained due to government enforced cutbacks, but
the current nickel price leaves most of this small-scale supply profitable.
Short-term outlook
The nickel market balance is heading in the wrong direction while the price
has risen. High prices will not help demand rise nor prevent Chinese NPI
ramping up after Beijing eases its temporary policy of enforced closures.We estimate a global refined nickel surplus in 2011, even factoring in
hiccups in the production ramp ups at various HPAL projects. Short term
LME three-month nickel price: $23,000/t-$25,000/t.
Chinese nickel and stainless steel prices, yuan/t
14 October 2010 Current YoY %chg Last mth YoY %chg
Nickel cathode (Jinchuan, 99.9% min) 181,500 36% 170,500 28%
Nickel cathode (Norilsk 99.9% min) 181,000 37% 169,500 29%
Nickel cathode (Vale Inco, 99.9% min) 191,500 26% 181,500 24%
Stainless steel
Hot rolled sheet (304) 22,450 25% 21,950 28%
Cold rolled coil (304) 23,550 14.0% 22,950 13%
Nickel price, LME, $/tonne
17,000
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,00026,000
14-Sep 28-Sep 12-Oct
3m
27m
Source: VM Group
Nickel stocks, LME, Mt
0.00
0.05
0.10
0.15
0.20
Oct-09 Feb-10 Jun-10 Oct-10
Source: VM Group
Nickel forward curve, LME, various
dates, spot = 100
82
84
86
88
90
92
94
96
98
100
102
Spot 3m 15m 27m
13/10/2010
1m ago
1yr ago
Source: VM Group
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Nickel data
Chinese imports of nickel ore, 000t Chinese refined nickel output and
imports, 000t
Nickel mine production, year-on-year %
change
-
500
1,000
1,500
2,000
2,500
3,000
Jul -07 Jul -08 Jul -09 Jul -10 0
10
20
30
40
50
60
70
Mar-08 Feb-09 Jan-10
Imports
Production
-100%
-50%
0%
50%
100%
150%
Jan 08 Jan 09 Jan 10
Canada
Kazakhstan
Russian Fed
Australia
Source: China Customs Source: China Customs, NBS Source: INSG, VM Group
World primary output and refined
consumption, 000t
Chinese stainless CR Sheet (304 2b,
1mm), yuan/t
US stainless steel prices for flat rolled
coil, $/kg
-150
-100
-50
0
50
100
150
Jan
06
Jan
07
Jan
08
Jan
09
Jan
10
Consumption OutputNet
0
5,000
10,000
15,000
20,000
25,000
30,000
Aug
08
Feb
09
Aug
09
Feb
10
Aug
10 0
2
4
6
8
10
12
Jul 07 Jul 08 Jul 09 Jul 10
301(7%)
304 (8%)
316.0
Source: INSG, VM Group Source: Asian Metals, VM Group Source: Metal Prices
Nickel supply & demand balance, 000t2006 2007 2008 2009 2010 2011
SupplyTotal mine production 1,469 1,595 1,476 1,331 1,410 1,581
% chg y-o-y 5.9% 8.6% (7.5%) (9.8%) 5.9% 12.2%Canada 147 154 168 116 155 210
China 137 199 200 240 295 325Japan 152 162 158 142 152 161
Russian Fed. 286 272 258 244 250 260Australia 114 111 104 112 114 124
Total refined production 1,368 1,395 1,375 1,319 1,411 1,523% chg y-o-y 7.3% 2.0% (1.4%) (4.1%) 7.0% 7.9%
DemandTotal refined consumption 1,398 1,351 1,319 1,238 1,414 1,501
% chg y-o-y 12.0% (3.4%) (2.4%) (6.1%) 14.2% 6.2%Implied balance (31) 44 57 81 (2) 22
Total stocks 95 146 182 263 258 280Average 3-month LME price ($/t) 23,266 36,217 21,240 14,706 21,384 24,438
Source: INSG, WBMS, VM Group
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Zinc
LME zinc stocks have been stubbornly high since May 2010 and have only
declined modestly since late September, to 607,325t as at 15 October. Supply formuch of 2009 and 2010 has run ahead of consumption, but conditions are
improving. Alongside a marked improvement in mine supply from Latin America
and China, global consumption has also picked up. These LME stocks however
are probably the tip of an iceberg, as we suspect there may sit large volumes of
zinc held off market. A further constraint on higher prices will be that a lot more
idled mine capacity is due to restart at current high prices.
The macro drivers that have swept all base metals higher in the past fewmonths will encourage zinc mine and smelter restarts, continuing the already lofty
market surplus for most of 2011. We estimate some 0.5 Mt of additional minecapacity (excluding China) is profitable at or near current market prices and this
will put into the shade expected demand growth of 6% during H1 2011.
Although this appears bearish for prices, the build up of surplus metal may benecessary in staving off a prolonged period where mine supply falls short of
demand. Many of the worlds largest zinc mines are nearing the end of their life,
and what committed projects are scheduled to come on line might not be enough
to fill the void. It is here that the stock builds on both the LME and SHFE and off
market might come into play. It also explains Chinas near $2.1bn investment into
international zinc mines and projects, to date.
Short-term outlook
Chinas zinc imports in the first eight months of 2010 are less than half
those of the same period in 2009, while SHFE stocks are a sizeable 0.26 Mt,
up 51% from the start of the year. Add a market surplus and high LME and
off market stocks and the short-term outlook for zinc appears weak. This is
neatly symbolised by the fact that some metal is held in term financing
deals. However we expect the metal to nevertheless be driven by cross
commodity macro currents and by its more promising medium-term
prospects where mine supply will fall short of demand. Short-term LME
three-month zinc price: $2,350/t-$2,460/t.
Chinese zinc prices, yuan/t, unless otherwise stated
14 October 2010 Current YoY %chg Last mth YoY %chg
SHFE spot price 18,455 18% 17,500 20%
SHFE three-month price 18,750 18% 17,745 21%
SHFE six-month price 19,145 19% 18,120 21%
Chinese zinc ingot (99.995% min) 18,700 21% 17,450 20%Chinese zinc conc (55% min) S China 13,000 31% 11,850 25%
Chinese zinc conc. (55% min) N China 12,800 31% 11,650 26%
Zinc conc TC (50% min, cif) China ($/t) 115 -41% 75 -59%
Zinc price, LME, $/tonne
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
14-Sep 28-Sep 12-Oct
3m
27m
Source: VM Group
Zinc stocks, LME, Mt
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Oct-09 Feb-10 Jun-10 Oct-10
Source: VM Group
Zinc forward curve, LME, various
dates, spot = 100
95
100
105
110
115
120
Spot 3m 15m 27m 63m
13/10/2010
1m ago
1yr ago
Source: VM Group
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Zinc data
Zinc mine production, Mt World zinc demand, Jan 2009-Oct 2009,
y-o-y % change
China: imports and exports of
unwrought zinc, 000t
0.0
0.5
1.0
1.5
Jan-08 Jan-09 Jan-10
EU North AmericaChina Asia (ex China)Peru Australia
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Jan Apr Jul Oct Jan Apr -100
-50
0
50
100
150
2000 2003 2006 2009
ExportsImportsNet
Source: ILZSG, WBMS, VM Group Source: ILZSG, CHR Metals, VM Group Source: China Customs
SHFE/LME price differential (inc VAT) Zinc concentrate TC, cif China, $/t US construction spending, y-o-y %
change
-300
-250
-200
-150
-100
-500
50
100
150
200
250
Oct-09 Mar-10 Aug-10 0
50
100
150
200
250
300
350
Mar-07 Mar-08 Mar-09 Mar-10 -20%
-15%
-10%
-5%
0%
5%
2006 2007 2008 2009 2010 Source: SHFE, LME, VM Group Source: Asian Metal, VM Group Source: USCB
Zinc supply & demand balance, 000t2006 2007 2008 2009 2010 2011
SupplyTotal mine production 10,321 10,975 11,501 11,204 11,931 12,002
% chg y-o-y 5.9% 6.3% 4.8% (2.6%) 6.5% 0.6%China 3,117 3,740 3,829 4,334 4,795 5,712
North America 1,371 1,388 1,356 1,120 1,300 1,504South America 491 471 475 450 489 577
Europe 2,436 2,486 2,429 2,001 2,208 2,503Australia 463 498 498 500 525 520
Total refined production 10,573 11,189 11,481 11,250 12,326 12,794% chg y-o-y 5.5% 5.8% 2.6% (2.0%) 9.6% 3.8%
DemandTotal refined consumption 11,005 11,250 11,048 10,524 11,810 12,503
% chg y-o-y 5.9% 2.2% (1.8%) (4.7%) 12.2% 5.9%Implied balance (432) (61) 433 725 516 292
Total stocks 851 641 825 1,123 1,404 1,6583-month LME price ($/t) 3,252 3,243 1,894 1,669 2,132 2,300
Source: CHR Metals, ILZSG, WBMS, VM Group
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Lead
LME lead stocks have crept up from 193,000t in June 2010 to reach 194,345t
at the end of September and 197,625t as at 15 October, which implies that eitherdemand is weak or supply plentiful. Replacement battery demand is largely
insensitive to economic cycles, suggesting that global lead supply has been more
than sufficient to meet demand. Reports of drawdowns of Chinese off-market
lead stockpiles might be one cause of the lack of LME stock drawdowns, but we
also attribute it to runaway zinc mine production levels over the past year, where
lead is often recovered as a by-product and to rapidly growing lead refinery
capacity in China. One supportive factor is that an estimated 75m lead-acid
battery units will be replaced in China by the end of the year, a 19% increase on
2009, while refined lead production has risen by 7% year-on-year, to 2.54 Mt, in
the first eight months of 2010.
Sales of new passenger cars in China amounted to 1.21m in September,below the peak (so far) in January 2010 of 1.32m units, but this volume indicates
that the market has steadied after a slowdown in Q2 2010 sales. The sales rate
should extend into Q4 2010, but sales in 2011 could be hit by the end of the
governments car subsidy schemes, and some sales will have been brought
forward to 2010.
Global refined lead production for Jan-July 2010 increased by 2.6% from a
year ago, to 5.107 Mt. With expected increases in capacity in Australia, India,Mexico and China, the global market will end 2010 in surplus by almost 40,000t
and grow to more than 90,000t in 2011, even though Chinese new car sales will
continue growing strongly.
Short term outlook
We expect Chinese car sales in Q4 2010 to be high but if government-
backed incentives are slimmed down in 2011 that would be very bearish for
the lead price. China has built so much lead production and refining
capacity that any dip in demand will see inventories rise rapidly. However,
prices will find support from the new lead futures contract to be launch on
the SHFE, while in the immediate term, macro drivers are clearly
supportive. Short-term LME three-month lead price: $2,100/t-$2,300/t.
Chinese lead prices, yuan/t, unless otherwise stated
12 August 2010 Current YoY %chg Last mth YoY %chg
Lead ingot (>99.99%) 16,300 19% 14,900 11%
Lead concentrate (60% min) 13,950 24% 12,350 14%
Lead concentrate TC (cif) China ($/t) 25 -29% 25 -29%
Lead price, LME, $/tonne
2,100
2,200
2,300
2,400
2,500
14-Sep 28-Sep 12-Oct
3m
27m
Source: VM Group
Lead stocks, LME, Mt
0.00
0.05
0.10
0.15
0.20
0.25
Oct-09 Feb-10 Jun-10 Oct-10
Source: VM Group
Lead forward curve, LME, various
dates, spot = 100
95
96
97
98
99
100
101
102
Spot 3m 15m 27m 63m
13/10/2010
1m ago
1yr ago
Source: VM Group
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Lead data
World refined lead output, 000t Refined lead consumption, 100=Aug
2005
Chinese lead trade, past two years, 000
tonnes
0
100
200
300
400
500
600
700
800
900
Jan Jul Jan Jul Jan Jul
China
North America
EU
Rest of world
0
50
100
150
200
250
Jan Jul Jan Jul Jan Jul
Germany China
US Japan
South Korea
-30
-20
-10
0
10
20
30
40
2007 2008 2009
Exports
Imports
Source: ILZSG, WBMS, VM Group Source: ILZSG, WBMS, VM Group Source: China Customs
North American battery shipments,
million units
Passenger cars sold or produced, 000
units
Lead TC, cif China, $/t
7
7
8
8
9
9
10
Jan 08 Oct 08 Jul 09 Apr 10 0
200
400
600
8001,000
1,200
1,400
1,600
1,800
2005 2007 2009
JapaneseChineseUS
0
50
100
150
200
250
300
350
400
Jan 08 Jan 09 Jan 10 Source: Battery Council International Source: JAMA, NBS, BEA Source: VM Group
Lead supply & demand balance, 000t
2006 2007 2008 2009 2010 2011
SupplyTotal mine production 3,573 3,690 3,985 3,864 4,249 4,453
% chg y-o-y 3.5% 3.3% 8.0% (3.0%) 10.0% 4.8%China 2,715 2,788 3,121 3,605 4,002 4,290
US 1,313 1,303 1,282 1,276 1,295 1,305Europe 1,625 1,745 1,780 1,702 1,695 1,739
Total refined production 7,981 8,177 8,548 8,805 9,216 9,650% chg y-o-y 4.8% 2.5% 4.5% 3.0% 4.7% 4.7%
DemandTotal refined consumption 8,054 8,357 8,481 8,583 9,178 9,554
% chg y-o-y 3.7% 3.8% 1.5% 1.2% 6.9% 4.1%
Implied balance (72) (179) 67 222 38 96
Total stocks 284 234 301 521 559 654
3-month LME price ($/t) 1,282 2,558 2,089 1,721 2,124 2,320
Source: WBMS, ILZSG, VM Group
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Tin
Although the tin price hit new nominal records in October, the price is still
35% off its all-time real high set in 1980 of $40,935/t (adjusted by the US implicitprice deflator, 100=2000). Considering its current set of supportive supply-
demand fundamentals, we see the price moving higher yet.
Among the biggest supportive factor is the continued failure of Indonesia todeliver tin volumes as it did in the recent past. The latest tin trade data for
September shows Indonesias refined tin exports down 11% year-on-year in
September, to 6,904t. Bad weather has been blamed but there are numerous
structural causes, including the depletion of easily accessible on-shore resources,
the crackdown on illegal mining, and taxes that have put some operators into the
red. The latest setback was for PT Timah to announce that it could not meet all itsdelivery obligations, due to an 11% fall in production from year ago levels. Chinese production has also disappointed, with the latest enforced closure ofcapacity by Beijing at a number of tin smelters in order to meet a five-year energy
efficiency target being the immediate cause of tins latest surge higher. Weak
production from Peru and the moratorium on tin exports from the Democratic
Republic of Congo have also not helped.
Short term outlook
Tin remains the most illiquid LME base metal (apart from cobalt andmolybdenum) and there is therefore always a greater risk of sharp price
swings in either direction. Technically, tins relative strength index reads at
more than 80 (as at 15 October), suggesting a price fall in the near term is
imminent, but fundamentals appear too convincing for any correction to
last long. We expect prices to challenge the $28,000/t level by November
and $30,000/t shortly afterwards. Demand remains very strong for tin in
electronics soldering and tins end-users have no real substitutes. The
only producer who could possibly pump out more metal is China and tin
production is just not important enough a strategic issue for China to be
interested in doing so. The majority of Chinas tin-users are involved in the
electronics industry and they will simply put up their prices of finished
goods, largely destined for export markets. Short-term LME three-month tin
price: $28,000/t-$29,000/t.
Chinese tin prices, yuan/t, unless otherwise stated
14 October 2010 Current YoY %chg Last mth YoY %chg
Chinese tin ingot (99.9%) 159,000 36% 147,500 26%
Chinese tin concentrate (60% min) 139,500 30% 131,500 20%
Tin price, $/tonne
21,500
22,500
23,500
24,500
25,500
26,500
27,500
14-Sep 28-Sep 12-Oct
3m
27m
Source: VM Group
Tin stocks, LME, 000 tonnes
0
5
10
15
20
25
30
Oct-09 Feb-10 Jun-10 Oct-10
Source: VM Group
Tin forward curve, LME, various
dates, spot = 100
87
89
91
93
95
97
99
101
Spot 3m 15m
13/10/2010
1m ago
1yr ago
Source: VM Group
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Tin data
Tin mine production, year-on-year %
change
World refined tin production and
consumption, 000t
China tin output and imports, tonnes
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
Jan-09 Jun-09 Nov-09 Apr-10
Indonesia
China
Peru
Bolivia
17
19
21
23
25
27
29
31
33
35
Jan-08 Sep-08 May-09 Jan-10
Production
Consumption
0
5,000
10,000
15,000
20,000
25,000
30,000
Mar-08 Mar-09 Mar-10
Imports
Output
Source: WBM, VM Group Source: WBMS, VM Group Source: China Customs, NBS
China tin concentrate and ingot prices,
000 yuan/t
Japan electronics production, billion yen China computer production, million
units
40
60
80
100
120
140
160
180
Mar-07 Mar-08 Mar-09 Mar-10
Tin I ngot 99.9%
Tin Conc 60%
0
500
1,000
1,500
2,000
2,500
Jul-07 Jul-08 Jul-09 Jul-10 0
5
10
15
20
25
Oct-09 Jan-10 Apr-10 Jul -10 Source: Asian Metal Source: JEITA Source: NBS
Tin supply & demand balance, 000t2006 2007 2008 2009f 2010 2011
SupplyTotal mine production 334 353 314 306 313 329
% chg y-o-y (4.4%) 5.7% (11.0%) (2.7%) 2.3% 5.1%China 132 147 129 136 140 142
Indonesia 77 78 70 62 60 65South America 65 58 61 58 61 60
Rest of world 54 40 43 40 40 39Total refined production 351 348 334 331 335 336
% chg y-o-y 0.5% (0.9%) (4.1%) (1.0%) 1.3% 0.3%Demand
Total refined consumption 363 354 341 311 349 355% chg y-o-y 6.1% (2.5%) (3.5%) (9.0%) 12.3% 1.8%
Implied balance (12) (6) (7) 20 (14) (19)Total stocks 34 32 31 52 44 373-month LME price ($/t) 8,758 14,532 18,442 13,337 20,152 25,000
Source: WBMS, VM Group
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Steel
LME steel billet price performance paints a bleak picture of underlying supply
and demand. Three-month LME steel rose just 6% during Q3, to $463/t, incontrast to the double-digit gains in base metals and a more than 7% appreciation
in precious metals. Chinese physical steel billet prices have fared no better, rising
just 5% over this period, as measures by Beijing to close inefficient still mills and
consolidate the industry take time to dent the surplus inventory built up over the
past 12 months most of which is in semi-finished product form.
Although Chinese crude steel production fell slightly month-on-month to51.64 Mt in September 2010, (an annualised 608 Mt, just outside government
targets), the runaway production levels during Q1 2010 and Q2 2010 will see
crude steel production outstrip steel use by about 60 Mt in 2010. The resultingexcess is finding its way onto the international markets in the form of steel
products, with exports more than double those of 2009 in the first nine months of
2010, at 34 Mt, and net exports rising 14% month-on-month, to 1.66 Mt, following
two months of decline. Iron ore imports into China in September also suggest that
Beijings effort to reduce steel output is having limited success.
The planned joint venture between BHP Billiton and Rio Tinto to merge theiriron assets in Australia was abandoned in mid-October, symbolising the
prospects of strong iron ore demand well into the future. Regulatory hurdles were
cited for the reason of the termination of the JV agreement, but it might alsoreflect the fact that Rio Tinto, which holds the stronger of the iron ore assets in
Australia, has significantly improved its balance sheet and thus no longer needs a
cash injection from BHP.
Short-term outlook
Apparent steel use in the US might rise by an estimated 30% in 2010, due
largely to government stimulus measures, but the ending of these will see
usage grow by less than 10% in 2011, well below 2007 levels. Steel demand
in the EU has followed a similar pattern, while Chinese and other emergingeconomies will continue to dominate supply and demand. Steel prices will
therefore vary across regions but should see an overall appreciation. In the
short-term we expect only modest gains in the LME billet contract. Short
term LME steel price: $500/t.
Chinese steel prices, yuan/t, unless otherwise stated
14 October 2010 Current YoY %chg Last mth YoY %chg
SHFE spot rebar 4,304 25% 4,450 22%
SHFE 3m rebar 4,274 18% 4,401 13%
SHFE 6m rebar 4,355 15% 4,439 10%SHFE 12m rebar 4,562 19% 4,518 11%
16mm Med plate (Q235b) China ($/t) 640 19% 680 26%
Iron ore (Indian 61%, cnf China), ($/dt) 147 82% 136.5 96%
Steel price, LME, Med, $/tonne
350
400
450
500
550
600
650
14-Sep 28-Sep 12-Oct
3m
27m
Source: VM Group
Steel stocks, LME, Med, 000 tonnes
0
10
20
30
40
50
60
70
80
90
Oct-09 Feb-10 Jun-10 Oct-10
Source: VM Group
Steel forward curve, LME, Med,
various dates, spot = 100
80
85
90
95
100
105
110
115
120
125
130
Spot 3m 15m
13/10/10
1m ago
1yr ago
Source: VM Group
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Steel data
Crude steel production, yoy %chg China export/imports, steel products,
Mt
SHFE steel rebar price curve, 100=spot
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
Aug Nov Feb May
Russia Japan
US China
Germany S.Korea
-10
-8
-6
-4
-2
0
2
4
2005 2006 2007 2008 2009 2010
Imports
Exports
Net
95
100
105
110
115
120
125
1 pos 5 pos 9 pos
6-mths a go
last month
current
Source: WSA, VM Group Source: China Customs Source: SHFE, VM Group
Japan steel products trade, Mt Germany, new orders of first processing
of steel, constant prices, euros,
2005=100
US construction, consumer durable and
equipment steel output, 100=2002 ($)
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Aug 08 Aug 09 Aug 10
Imports ExportsNet
0
20
40
60
80
100120
140
160
180
2005 2006 2007 2008 2009 2010 30
50
70
90
110
130
150
04 05 06 07 08 09 10
ConstructionDurableEquipment
Source: Japan Customs Source: German Federal Statistical Office Source: Federal Reserve
Crude steel production, Mt H1 08 H2 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 June July Aug
China 262.4 236.1 126.7 139.3 153.7 146.7 157.9 165.3 53.8 51.7 51.6
Year-on-year %change 9.5% (6.3%) 1.9% 0.9% 20.8% 34.7% 24.6% 18.7% 8.8% 2.1% (1.32%)
US 50.9 40.4 12.0 12.5 15.6 17.6 19.6 21.2 7.2 6.7 6.9
Year-on-year %change 5.1% (18.7%) (52.9%) (51.1%) (37.9%) 14.2% 63.5% 69.8% 65.0% 32.9% 23.7%
Russia 38.4 30.1 12.9 13.9 14.9 16.5 15.7 16.9 5.4 5.6 5.6
Year-on-year %change 4.8% (15.8%) (32.9%) (27.3%) (19.9%) 42.9% 22.3% 21.4% 11.5% 11.5% 11.6%
Germany 24.4 21.4 7.3 6.6 8.8 10.0 10.9 11.8 3.9 3.5 3.5
Year-on-year %change (0.5%) (10.8%) (39.7%) (46.9%) (25.4%) 4.3% 50.1% 80.1% 53.4% 29.7% 17.1%
India 27.2 27.9 13.4 13.9 14.1 15.1 16.1 16.2 5.4 5.8 5.7
Year-on-year %change 4.2% 3.3% (6.2%) 7.7% 1.2% 8.5% 18.7% 16.8% 16.8% 21.6% 19.5%
South Korea 27.6 26.1 10.5 12.3 12.7 13.4 13.2 14.8 4.8 4.8 4.5
Year-on-year %change 7.4% 0.8% (22.4%) (12.2%) (8.4%) 9.8% 26.9% 19.9% 20.3% 18.1% 7.3%Japan 61.9 56.8 17.6 19.1 24.2 26.6 26.5 28.1 9.4 9.2 8.9
Year-on-year %change 4.2% (6.5%) (42.9%) (38.5%) (20.4%) 0.8% 50.7% 47.0% 35.9% 20.4% 7.1%
Rest of world 164.7 136.7 51.0 54.6 57.7 65.4 67.9 73.4 23.7 22.2 20.9
Year-on-year %change 3.2% (10.8%) (36.9%) (34.8%) (25.9%) 11.2% 32.0% 34.3% 26.0% 17.4% 16.0%
Source: World Steel Association
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Fund activity
According to data from TrimTabs Investment Research and BarclayHedge
Ltd., hedge funds pulled in$11.3bn in August, their biggest inflow since February.The biggest chunk of cash, $9.04bn, went to funds with over $2bn under
management, furthering the trend towards the consolidation of a top-heavy
industry. Data from Hennessee Group show returns for September averaging
3.5%, a vast improvement on the performance of the last few months and their
best showing since May 2009.
In a move that will spur negotiations closer to a final conclusion,Francedropped its objection to the issuing of marketing rights to non-EU funds in the
form of an operating passport. Frances objection to the passport provision in the
EU proposals to regulate hedge funds and private equity had been a majorstumbling block in negotiations between member countries.
As the European initiative to regulate the hedge fund community continues tolimp along, the UK Financial Services Authority (FSA) has maintained its stance
in favour of balanced regulation, often citing the threat of funds fleeing in the face
of excess regulation or unworkable rules. The Credit Requirements Directive a
component of the EU proposals favours limiting pay across financial services
applying the same restrictions to hedge funds as are applied to banks. The terms
of this component, which will govern pay in the sector, are due to be finalised by
the end October. The FSA does not see hedge funds and banks as belonging tothe same species and is, according to Dan Waters, head of the FSA asset
management team, committed to ensuring unnecessarily burdensome
requirements are avoided.
August: still stuck in the summer doldrums
Funds struggled to stay in positive territory in August with average returns
of just 0.10% for the month, a drop from 1.25% in July. Funds with
commodity investment did better than the overall sample, returning 1.80%
while those with over 50% of their portfolio weighted towards commodities
returned 1.53% on average. Funds weighted towards energy were the top
performers with 2.33% returns, while metals funds followed close behind at
2.21%, and softs funds trailed in with returns of just 0.17%. This dull
performance did not affect assets under management (AUM) inflows, which
saw total industry assets climb to $1.17 trillion. According to a study by US-
based hedge fund observers AR Magazine, bigger is better in the current
investment climate. The biggest funds in the US fared much better than
their smaller more nimble counterparts during the first six months of this
year. Funds managing $1bn or more saw their assets remain stable or dip
while those with over $5bn recorded an increase. The findings confirm that
investors, particularly those responsible for institutional portfolios,
continue to favour bigger more established funds. According to the survey
Hedge fund returns in metals, %
monthly
-20
-15
-10
-5
0
5
10
15
20
Feb-09 Oct-09 Jun-10
Reuters-CRB precious
metals
Funds with >50% in
metals
Source: VM Group, Barclay Database
Hedge funds AUM, $bn
850
900
950
1,000
1,050
1,100
1,150
1,200
Jan-09 Sep-09 May-10
Source: VM Group, Barclay Database
Hedge fund returns by commodity
weighting, % monthly
(5)
(4)
(3)
(2)
(1)
0
1
2
3
4
5
Jan-09 Jul -09 Jan-10 Jul-10
All Funds
All with some commodity
investment
Funds with >50% AUM in
commodities
Source: VM Group, BarclayHedge
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Bridgewater Associates, established in 1975 and managing $51bn, ranks as
the biggest hedge fund in the US and managed to increase its assets by
$7.3bn in 2010. The second largest US-based firm, J.P. Morgans asset
management unit managing $41bn, took in $2.7bn in the same period.When average returns are so meagre, critical mass matters. Preliminary
data show a better performance in September, although at 3.5% these gains
still lag the major stock indices and commodity benchmarks.
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About VM Group
VM Group is a commodities research consultancy that covers not just conventional
energy, but also renewable energy, carbon, base and precious metals, andagricommodities. The VM Group comprises a uniquely skilled team that is highly
experienced in the analysis of the fundamentals of commodities and their geopolitical
impact and contexts.
VM Group work excels in macro-economic analysis, the generation of supply and demand
scenarios, costs analysis, derivative research and price forecasting. Confidentiality,
experience and independence are key elements in this advisory capacity. We deliver
excellence to those in need of external expertise, as well as those who wish to
supplement their own in-house resources. Our extensive international contacts mean we
are able to span the globe.
To see further how we can meet your research and consulting requirements, please email:
VM Group
100 Ashmill Street
London NW1 6RA
Tel: +44 20 7569 5930
Fax: +44 20 7569 5931
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VM Group disclaimer and copyright
This report was prepared by VM Group. VM Group has made all reasonable efforts to ensure that all information provided in
this report is accurate and reliable at the time of inclusion (the 1st of this month otherwise stated), however, there may be
inadvertent and occasional errors and lack of accuracy or correctness, for which VM Group cannot be held responsible. VM
Group and its employees have no obligation to inform the reader when opinions and information contained in this report
change.
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The contents of this report, all the information, opinions and conclusions contained are protected by copyright. This
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only with the full and appropriate citing of the original source.
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ABN AMRO disclaimer and copyright
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and may not be disclosed to a third party without ABN AMROs prior written consent. This document is provided for
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