Base metal producers, traders and consumers are slowly leaving London after a thought-provoking LME Week. Here are some of the best interviews, features, commentaries and opinions this week:
STATE OF THE UNION
– The LME marked its 139th year of existence by moving to a new HQ in February, although the relocation did not take place without a major hiccup in the summer. And with ring-dealing member (RDM) numbers unchanged at nine from this time last year, the new mini-sized ring there represents something of a downsize.
– The metals market has started to show signs of recovery while funds return to the sector, LME ceo Garry Jones said during his welcome speech at the LME Seminar.
– The exchange needs to boost liquidity by further reducing its trading fees, fight back against over-regulation and ensure its own rules don’t disadvantage market users, particularly in the area of high-frequency trading, Red Kite Group co-founder Lord Farmer said in the keynote speech at the LME Dinner.
– But the LME and parent company Hong Kong Exchange & Clearing (HKEX) are doing everything they can to overcome multiple challenges, HKEX ceo Charles Li said, urging market participants not to “rock the boat”.
– An LMEshield pilot programme in China could inject life into the country’s stagnating metal-backed financing trade but a more conducive macroeconomic environment will be needed for a full revival, market participants said
– The CME is snapping at the heels of the LME in the copper market, with the gap in trading volumes between the two exchanges narrowing this year.
-The CME will introduce a precious metals spot spread to enable traders to manage risk between its Comex gold and silver futures and the London spot markets of the two metals, it said. It is also to expand its warehouse network into Asia for the storage of lead.
– New regulatory requirements in commodities could kill off sale and repurchase agreements, known as repos, by making them much less financially attractive, John MacNamara of Deutsche Bank said.
METALS AND MARKETS
– Base metals: winners and losers in year to date – the price trend in all six LME-traded base metals so far this year.
– China will remain a dominant presence in the global metals market, Metal Bulletin analyst William Adams said, warning against dwelling on the negatives too much while acknowledging the risks the country faces.
– The copper market has lacked excitement this year compared with other base metals and bulk commodities, Max Layton, head of European commodities research at Goldman Sachs, said.
– Corporate debt in China will reach a worryingly high level in the next five years unless the necessary reforms are carried out, Sarah Hewin, chief economist at Standard Chartered Bank, said.
– The most efficient aluminium smelters are not in the west, where government regulations and high energy costs have driven efficiency improvements, but where the main driver of increasing efficiency is simply to make more metal – China
– Delegates at Macquarie’s LME Week Base Metals Outlook Seminar expect copper and nickel to be the bull markets for 2017. There is more upside for nickel prices into next year even after this year’s 25% rise, Macquarie analyst Vivienne Lloyd said. The bank sees tin prices holding at current levels until the end of the decade, bolstered by rising demand and restricted supply of refined metal.
– Cobalt powder producer Shu Powders plans to build a refinery in South Africa following the purchase of a stake in the company by Chinese cobalt producer Jingmen GEM, Shu general manager Michael Oehlers told Metal Bulletin
– Electric vehicle (EV) manufacturers and their battery suppliers have been increasingly focusing their attention on securing cobalt supplies for future production from miners and traders, according to several sources in the market
– Production of cobalt ingots has ended after the only producer, Norilsk Nickel, halted output earlier this year to focus on cathodes.
– Copper cathode producers and buyers are discussing more alternative options for next year’s long-term contracts after contractual volumes sold during the past two years have shrunk, market participants told Metal Bulletin.
– LME users have warned that low LME inventories are making the market vulnerable to squeezes – nearly three years after the took action to get the record volumes of aluminium backed up in its global warehouse network flowing out into the physical market.
– Warehouse operators can finally take stock after three tough years – the LME has reached the end of its warehouse reforms. But regulatory scrutiny from the FCA – the UK’s financial watchdog – has toughened the exchange’s stance over rule breaches, with the warehousing industry bearing the brunt.
– LME copper inventories look set to rise sharply from January – lower contractual premiums for 2017 will make the business of cancelling incoming material and shipping it to China uneconomical, market sources believe.
– Katoen Natie Commodities will soon add Singapore to its locations of LME-approved warehouses, sources told Metal Bulletin on the sidelines of LME Week.
– Treatment charges and refining charges (TC/RCs) for annual copper concentrate supply in 2017 are widely expected to settle at around $95-102 per tonne/9.5-10.2 cents per pound – either side of this year’s level.
– The LME must overcome a general sense of scepticism and an increasingly crowded marketplace when it rolls out its new precious metals contracts next year.
London’s gold market needs a shot in the arm but the city will remain a leading location, panellists at this year’s LME Week seminar said.
– The LME is continuing to review incentive schemes put in place as part of its Liquidity Roadmap, designed to increase electronic trade on the LME. But criticism that the schemes have failed is unfounded, ceo Garry Jones argued.
– KGHM’s purchase of the Sierra Gorda mine in Chile was a mistake but the Polish miner has no plans to sell the asset, it said.
– The difference in the contractual copper cathode premiums offered in Europe for next year reflects Aurubis’ focus on regional market conditions as well as its provision of value-added services to downstream customers, executive chairman Juergen Schachler said.
– Aurubis expects copper treatment and refining charges (TC/RCs) to rise about 8-13% in 2017 – a strong spell for mine supply continues, executive chairman Juergen Schachler said.
– Codelco is committed to being “reasonable” with its 2017 copper premium offer to China and will lower the benchmark to a level that is closer to the spot market, senior commercial vice-president Rodrigo Toro said
– Copper prices are likely to average $2.15 per lb this year and $2.20 per lb in 2017, with the metal unlikely to return to its super cycle highs, Chile’s mining minister said.
– Anglo American plans to continue to exercise discipline in its asset disposal programme and remains in negotiations for further sales, the company’s ceo said.