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INSIDE COMMODITIES
Monday, October 13, 2014
LME ALUMINIUM-OUTLOOK
MARKETS SNAPSHOT
Click on the chart for full-size image
Global oil futures lost more than a dollar after Saudi Arabia and Kuwait signalled a willingness to bear with lower prices to defend market
share. London copper climbed after Chinese data painted a slightly
brighter picture of the world's second largest economy. European
stocks were expected to open lower mirroring Asian markets.
Wall Street closed negative on Friday.
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Contract (AS OF 0614 GMT)
Last
Change
YTD
NYMEX light crude
$84.78
-1.21%
-12.80%
NYMEX RBOB gasoline
$2.24
-0.78%
-18.96%
$762.50
-0.16%
-19.12%
$3.83
-0.67%
-8.77%
$1,234.25
0.92%
1.50%
-9.71%
ICE gas oil
NYMEX natural gas
Spot Gold
TOP NEWS
 Global Economy-China offers hint of growth prospects,
Germany expects more bad news
LME Copper
$6,701
0.84%
LME Aluminium
$1,936
0.31%
7.22%
CBOT Corn
$3.36
0.52%
-20.85%
CBOT Wheat
$5.01
0.40%
-17.64%
R2,175
-0.32%
-17.94%
Malaysia Palm Oil (Ringgit) (3M)
Index (Total Return)
Latest Close
Change
YTD
 Privately, Saudis tell oil market: get used to lower prices
Thomson Reuters/Jefferies CRB
276.2628
-0.29%
-1.60%
 Kuwait says OPEC unlikely to cut output to support
S&P GSCI
4291.7169
-0.21%
-10.63%
Rogers International
3248.18
-0.49%
-12.21%
Dow Jones - UBS
134.6268
-
-
Cont Commod Indx
491.3173
-0.46%
-3.30%
Latest Close
Change
YTD
US STOCKS (DJI)
16544.1
-0.69%
-0.20%
US DOLLAR INDEX
85.502
0.46%
7.34%
US BOND INDEX (DJ)
339.12
0.02%
6.80%
prices -Kuna
 For chart watchers, oil in 'technical graveyard' facing
deeper rout
 U.S. cotton industry accuses Beijing of breaching world
trade rules
 USDA raises record U.S. Corn, soybean crops again
 Speculators cut cocoa long, shorts in sugar, cotton CFTC
Index (Total Return)
 China copper imports rises 14.7 pct on-month in Sept
ECONOMIC WATCH
 India's JSW steel "very close" to deal for London mining -
GMT
Source
 Zambia to change mining tax, lift underground royalty to
8 pct
CLICK HERE FOR TECHNICAL CHARTS
Indicators
Unit
Reuters
Prior
07:00
SK
Core Inflation mm
pct
0.1
-0.3
07:00
SK
Headline Inflation mm
pct
0.1
-0.2
07:00
SK
Core Inflation yy
pct
0.1
0
07:00
SK
Headline Inflation yy
pct
-0.1
-0.2
23:01
GB BRC Retail Sales yy
pct
1
1.3
INSIDE COMMODITIES
October 13, 2014
MARKET MONITOR
Global oil futures lost more than a dollar after Saudi Arabia
and Kuwait signalled a willingness to bear with lower prices to
defend market share, although better-than-expected trade data
from China pared the losses. Brent crude oil briefly touched
Gold prices jumped sharply in Asia as worries over the global
economic outlook sent investors scuttling towards safe-haven
bullion amid a sell-off in equities and the dollar. Spot gold rose
to a high of $1,234.80 an ounce before paring some gains to
trade up 0.8 percent at $1,233.15. U.S. gold futures jumped to
$1,235.70, their highest since Sept. 23.Silver, platinum and
palladium also gained.
its lowest at $89.01 in early trade.
The dollar fell to a one-month low against the yen, as heightened worries about the health of the global economy continued
to shore up the safe-haven Japanese currency. The euro last
traded at 136.02 yen up 0.1 percent on the day. The Austra-
Chicago corn dropped, stretching its losses into a second
straight session after a report from the USDA showed the country's output of the grain was set to exceed the already-forecast
record high levels. Chicago Board of Trade front-month
lian dollar gained 0.6 percent to $0.8734.
corn futures fell 0.3 percent to $3.33 a bushel.
London copper climbed after Chinese data painted a slightly
brighter picture of the world's second largest economy. Three-
European stocks were expected to open lower mirroring Asian
markets with concerns about faltering global economic growth
weighing on equity markets across the world. Wall street closed
negative on Friday.
month copper on the London Metal Exchange climbed
0.7 percent to $6,691 a tonne. The most-traded December
copper contract on the Shanghai Futures Exchange rose 0.4
percent to 47,790 yuan($7,802) a tonne.
TOP NEWS
Privately, Saudis tell oil market: get used to lower prices
Global Economy-China offers hint of growth prospects,
Germany expects more bad news
Saudi Arabia is quietly telling oil market participants that Riyadh
is comfortable with markedly lower oil prices for an extended
period, a sharp shift in policy that may be aimed at slowing the
expansion of rival producers including those in the U.S. shale
patch.
Some OPEC members including Venezuela are clamoring for
urgent production cuts to push global oil prices back up above
$100 a barrel. But Saudi officials have telegraphed a different
message in private meetings with oil market investors and analysts recently: the kingdom, OPEC’s largest producer, is ready
to accept oil prices below $90 per barrel, and perhaps down to
$80, for as long as a ye`r or two, according to people who have
been briefed on the recent conversations.
The discussions, some of which took place in New York over
the past week, offer the clearest sign yet that the kingdom is
setting aside its longstanding de facto strategy of holding prices
at around $100 a barrel for Brent crude in favor of retaining market share in years to come.
The Saudis now appear to be betting that a period of lower
prices – which could strain the finances of some members of the
Organization of the Petroleum Exporting Countries – will be
necessary to pave the way for higher revenue in the medium
term, by curbing new investment and further increases in supply
from places like the U.S. shale patch or ultra-deepwater, according to the sources, who declined to be identified due to the
private nature of the discussions.
The conversations with Saudi officials did not offer any specific
guidance on whether - or by how much - the kingdom might
agree to cut output, a move many analysts are expecting in order to shore up a global market that is producing substantially
more crude than it can consume. Saudi pumps around a third of
OPEC’s oil, or some 9.7 million barrels a day.
China's economy, the second largest in the world, gets a spot
check this week with a barrage of data due that should indicate
how successful Beijing has been in supporting growth.
It may be even more pertinent than usual, given that the Federal
Reserve has been surprisingly cautious about the U.S. economy
and with euro zone powerhouse Germany suddenly appearing
to stagger.
The world economy may not be on the brink of falling back into
recession, but it is hardly on fire.
The International Monetary Fund, for example, has lowered its
growth expectations for this year and next in Europe, Japan and
China, among others.
Since April, Beijing has taken steps to keep up growth, including
cutting reserve requirements for selected banks and hastening
construction of railways and public housing.
Some of this week's Chinese data - inflation, trade, bank credit,
money supply and FX reserves - will pave the way for third quarter gross domestic product numbers on October 21.
Annual GDP growth quickened slightly to 7.5 percent in the second quarter from 7.4 percent in the previous three months, but
the economy was losing steam going into the third quarter as
the property market slowed.
Analysts at UBS are expecting a mixed picture, with better export numbers offset by weaker import numbers, softer inflation
and modestly slower credit growth.
That points to continuing slack domestic demand with year-onyear GDP easing back some more. UBS is expecting growth of
7.1 percent, while HSBC has pencilled in 7.3 percent.
Either number would signal the slowest year-on-year expansion
in China since the first quarter of 2009 and the fourth quarter of
2001 before that.
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INSIDE COMMODITIES
October 13, 2014
TOP NEWS (Continued)
Kuwait says OPEC unlikely to cut output to support prices Kuna
For chart watchers, oil in 'technical graveyard' facing
deeper rout
OPEC is unlikely to cut oil production in an effort to prop up
prices because such a move would not necessarily be effective,
Kuwait's oil minister Ali al-Omair was quoted as saying by state
news agency KUNA on Sunday.
Brent crude oil settled at $90.21 a barrel on Friday after earlier
falling to $88.11, the lowest since December 2010, as Saudi
Arabia said it raised production last month, adding to perceptions that the kingdom is looking to defend market share, rather
than prices.
Oil ministers from the Organization of the Petroleum Exporting
Countries (OPEC) are scheduled to meet in Vienna on Nov. 27
to consider whether to adjust their output target of 30 million
barrels per day (bpd) for early 2015.
"I don't think today there is a chance that (OPEC) countries
would reduce their production, especially since the target that
OPEC has given itself is 30 million bpd, which we have not
reached until now," Omair said, according to KUNA.
World oil prices are on the brink of sliding another $10 or more,
according to chart analysts who say the over 20 percent drop
since June has wiped out key support levels and left behind a
"technical graveyard".
On Friday, Brent crude dropped to its lowest level in nearly four
years before ending near flat at $90.21 a barrel. A combination
of unrelenting supply from the U.S. shale oil boom and disappointing demand from Europe and China has walloped markets,
with Saudi Arabia reluctant to curtain output.
According to analysts who use historical chart patterns to anticipate price movements, the worst may not be over.
On a weekly chart, Brent futures had earlier closed in on $88.49
a barrel - the pivot support level representing a 76.4 percent
Fibonacci retracement of their most recent high and low from
February to June of 2012.
U.S. cotton industry accuses Beijing of breaching world
trade rules
U.S. corn and soybean production in 2014 will be even higher
than the record forecast a month ago, but somewhat below market expectations, U.S. Department of Agriculture data showed
on Friday.
The USDA made surprise cuts to U.S. and global wheat ending
stocks for 2014/15, pushing wheat futures up 1.2 percent, while
corn fell 2.5 percent and soybeans eased 1 percent.
Domestic wheat stocks at 654 million bushels reflected higher
projected exports and feed usage.
At 14.475 billion bushels, the U.S. corn crop marginally trailed
average estimates, as did projected yields and harvested acreage.
"It's not 'bullish,' it's just 'not bearish.' The USDA did make modest reductions in harvested area, and they didn’t ramp up the
yields as much as expected," said Charlie Sernatinger of ED&F
Man Capital.
USDA raises record U.S. Corn, soybean crops again
Beijing's cotton price supports have breached global trade rules,
a U.S. industry association said, calling on U.S. regulators to
examine China's support levels in a sign of mounting tensions
between the world's top grower and the global market.
Prices paid to farmers by the Chinese government under the
country's farming policy exceed those allowed by the World
Trade Organization, the National Cotton Council (NCC) of America said in a testimony to the U.S. Trade Representative on Oct.
1. "An evaluation of recent policies suggests that China is far
exceeding" its commitments under the WTO protocol, said Wally
Darneille, NCC chairman and president and chief executive officer of Plains Cotton Cooperative Association, one of largest
U.S. grower cooperatives and marketers.
The NCC has estimated that Beijing's support has exceeded the
allowed level of 8.5 percent of the country's crop production
value for the past four years. It represented 29 percent of production value in 2014, and exceeded 30 percent in both 2012
and 2013, according to NCC estimates.
China copper imports rises 14.7 pct on-month in Sept
China's copper imports surged 14.7 percent from the previous
month in September, hitting a 5-month high, after importers increased term shipments on an expected rise in seasonal demand.
Arrivals of anode, refined copper, alloy and semi-finished copper products reached 390,000 tonnes in September, up from a
16-month low at 340,000 tonnes in August, data from the General Administration of Customs showed on Monday.
The monthly imports were down 14.8 percent from a year earlier, but in the first nine months, inflows rose 10.5 percent onyear to 3.59 million tonnes.
September arrivals were higher than expected, with term shipments rising because factories expected seasonal demand to
start from October, said Zhou Jie, a trading manager at China
International Futures (Shanghai).
Speculators cut cocoa long, shorts in sugar, cotton -CFTC
Speculators cut their net long position in cocoa futures and options to a four-month low and cut bearish bets in sugar and cotton in the week ended Oct. 7, U.S. Commodity Futures Trading
Commission data showed on Friday.
The data also showed speculators increased their net long position in arabica coffee on ICE Futures U.S.
In cocoa, noncommercial dealers cut their bullish stance by
14,694 contracts, their most in at least a year, taking the total to
53,871 contracts.
That was the lowest level since early June, coming as futures
prices fell from multi-year highs as fears of Ebola spreading to
top-producer Ivory Coast subsided.
3
INSIDE COMMODITIES
October 13, 2014
TOP NEWS (Continued)
India's JSW steel "very close" to deal for London mining Source
Zambia to change mining tax, lift underground royalty to 8
pct
India's third-largest steelmaker, JSW Steel Ltd, is nearing a deal
to buy embattled West African iron ore miner London Mining
Plc, a source with direct knowledge of the negotiations told
Reuters.
Trading in London Mining's shares, which have lost almost all of
their value this week, was halted on Friday afternoon.
"JSW is very close to a deal. It is almost 100 percent done," the
source said.
JSW could not be reached for comment.
London Mining, which owns the Marampa mine in Sierra Leone,
has been battling high costs, a sharp drop in iron ore prices and
the impact of the Ebola virus on the region.
The company warned last week that it did not have enough cash
to operate its only mine and that it was in talks about a potential
"strategic investment".
Zambia will increase underground mining royalties to 8 percent
from 6 percent as part of an effort to revamp the industry's tax
system, Finance Minister Alexander Chikwanda said in his 2015
budget speech on Friday.
The new system he outlined aims to collect revenue from the
industry at different stages of the production pipeline by introducing a 30 percent corporate processing and smelting tax.
Another 30 percent tax will be applied to income earned from
"tolling", industry-speak for an agreement to process another
producers raw materials.
Open cast mining operations in the southern African nation will
now be subjected to a "20 percent mineral royalty ... as a final
tax," Chikwanda said.
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INSIDE COMMODITIES
October 13, 2014
3 month TECHNICAL CHARTS (12 and 50 days Exponential Moving Average)
Click on the chart for full-size image
NYMEX Crude
ICE BRENT Crude
Spot Gold
Spot Silver
CBOT Corn
CBOT Wheat
(Inside Commodities is compiled by Atiqul Habib in Bangalore)
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