anz commodity call dec12

7/30/2019 ANZ Commodity Call Dec12

1/21

ANZ RESEARCH

5 DECEMBER 20 12

I N S I D E

Summary 1 Macro Backdrop 2Charts of the Month 3 Commodity Calls 4Feature Note 7Trade Ideas 1 0Technical Views 1 1Commodity Prices 1 3CFTC Table 1 4

Calendar Heatmap 1 5Forward Curves 1 6Moving Averages 1 7Forecasts 1 8Contacts 1 9Disclaimer 2 0

CONTRI BUTORS

Mark Pervan

Global Head of Commodi ty St rategy+61 3 8655 9243

[email protected]

Nick T reve thanSen io r Comm od i t y S t ra teg ist+65 6681 8714

[email protected]

Nata l i e Rampono

Comm od i t y St ra teg is t+613 8655 9258

[email protected]

Paul DeaneSenior Agr icu l tura l Economist+613 8655 9078

[email protected]

Victo r Th ianp i r i ya

Agr i cu l tu ra l S t ra teg i s t+65 6681 8869

[email protected]

Tim Riddel lHead of Global Market s Research,Asia+65 6681 8718

[email protected]

COMMODITY CALL

I MPROVI NG CHI NA DATA TO OFFSET US FI SCAL W OES

We expect commodity markets to finish the year on a positive but choppy note,

with the expectation of stronger Chinese demand in 2013 offsetting the short

term concerns of the US fiscal cliff. Chinese data has improved in the past

couple of months and the uncertainty of the new leadership structure is

passing. Although we dont expect much in the way of new stimulus in the

coming month, investment funds will front-run a better China backdrop for the

New Year. Base metals and oil should be best supported, with investment funds

more lowly weighted in these markets. We would caution the near term outlook

for the bulks with tight liquidity issues likely to create difficult conditions for the

pivotal Chinese traders.

FEATURE ARTI CLES

This months Feature Articles includes a note on changes to our commodity

price forecasts. Mild price downgrades were made with most of the adjustments

to the current (Dec12) quarter. The second note highlights feedback from a

recent marketing trip to China, with a focus on domestic sentiment and the

steel market. The final note shows the risks to aluminium markets from rising

physical stockpiles and supply.

KEY TRADESSell Iron Ore pressure from Chinas tight liquidity & seasonal slow-down

Protected Long Brent positive crude, but rising risks from US fiscal cliff

Existing Long Copper Redefined upside capped by US fiscal cliff risks

Soybean Bull Spread prices not high enough to limit demand

ANZ CHI NA COMMODI TY I NDEX

FI GURE 1. POSI TI VE BUT CHOPPY END TO THE YEAR

400

420

440

460

480

500

520

540

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

ANZ CCI

Points

Period in Reference

Source: ANZ Commodity Strategy


2/21

ANZ Commodity Call / 5 December 2012 / 2 of 21

MACRO BACKDROP

A POSTI VE BUT CHOPPY END TO THE YEAR

Prices to improve as investment funds front-run a

better China outlook for 2013

Gains will be choppy, with uncertainty over the US

fiscal cliff likely to linger up to the January 1 deadline

Although already in play, base metals, oil and grain

markets look set to outperform softs and bulks

We expect commodity markets to finish the year on a

positive but choppy note, with the expectation of

stronger Chinese demand in 2013 offsetting the short

term concerns of the US fiscal cliff. Chinese data has

improved in the past couple of months and the

uncertainty of the new leadership structure is passing.

Although we dont expect much in the way of new

stimulus in the coming month, investment funds will

front-run a better China backdrop for the New Year.

Base metals and oil should be best supported, with

investment funds more lowly weighted in these markets.

We would caution the near term outlook for the bulks

with tight liquidity issues likely to create difficult

conditions for the pivotal Chinese traders. In ag markets,

grain prices should start to outperform in the period

ahead, but South American weather concerns will remain

important to both grain and oilseed markets.

A more upbeat mood by investment funds is already inplay. We calculate global commodity index positions rose

USD21 billion or 7% in November, reversing the USD20

billion sell-off in October. The US commodity futures

market looks a little more cautious. CFTC non-

commercial positions for copper and oil have been pared

back, although several agricultural markets remain

heavily net long. We think heightened chatter over the

US fiscal cliff has been a major drag, although this could

swing both ways over the coming month, as we get

closer to the January 1 resolution deadline. Our baseline

view is for a resolution, although we expect the market

will second-guess right up to the cut-off date.

December should also usher in any pre-emptive

commodity index rebalancing for the New Year. The

annual price moves dont look as extreme as 2011, but

funds may look to support West Texas Intermediate

crude oil, coffee, cotton and sugar after weaker

performances in 2012. On the flipside, we could see

some soft selling in the stronger performing corn,

soybeans, wheat and natural gas markets.

The buzz of improving Chinese data should continue,

although a seasonal slowdown in northern Chinese

activity (for the cooler months) should start to emerge.Mid year cuts in the official interest rates is now

appearing in stronger housing numbers and the monthly

PMI data is back over the key 50-point expansion level.

The political changeover has also gone smoothly,

potentially restoring some lost confidence amongst

industrial participants over the year. That said, we dont

expect strong guidance or stimulus from the incoming

government until the official handover is completed in

March next year.

Underlying Chinese data has been encouraging, but may

slow towards the end of the year. Crude oil imports have

rebounded strongly in the past two months and the key

power and steel industries were unseasonably strong in

October. Although imports may again be stronger in

November, they should ease in December in line with

recent weakness in freight markets and closing import

price arbitrages for most key commodities. Chinese

liquidity conditions should also tighten, with the maturity

of a lumpy level of reverse repurchase agreements in the

coming weeks and the seasonal slowdown in banklending to end the year.

Data elsewhere looks mixed. The November US economic

numbers on balance looked weaker, but industrial

activity has been impacted by Hurricane Sandy.

December should pick up off a lower November base, but

the onset of the Christmas holiday period should keep

gains in check. Encouragingly, Europe has been less

eventful, but Japan has been slowed by Chinese boycotts

of most export products. This will likely linger, with the

government forecasting lower Japanese steel output for

the fourth quarter.

The bell-weather energy markets should provide a

positive sentiment backdrop, with cooler northern

hemisphere weather boosting stronger heating demand

and prices over the next couple of months. However, we

expect the positive-pull to be milder this year, with high

levels of Chinese coal stocks and rising US oil supply

dampening the impact of tightening inventory levels.

Stockpile levels elsewhere look ample. Exchange-

domiciled base metal stocks have been trending higher,

while Chinese restocking of producer and consumer

inventories appears mostly complete.

China has also been in a restocking phase in agricultural

commodities over the last 12 months, which has been an

important factor in keeping prices elevated. Grain,

oilseeds and sugar have seen a sharp pick-up in Chinese

imports, which has elevated Chinas prominence in global

agricultural markets. For the January to October 2012

period, Chinas sugar imports reached 3.3 million tonnes

(mt), the highest level in over a decade, while total grain

imports over the same period have surpassed 10mt for

the first time since the mid 1990s. In oilseeds, year-to-

date soybean imports are up 16%y/y while edible oil

import volumes have grown 26%y/y. We expect strong

import demand to continue for grains, but the restocking

phase for sugar and oilseeds looks more complete.


3/21


CHARTS OF THE MONTH

FI GURE 2. RI SI NG US OI L PRODUCTI ON OFFSETSDECLI NE I N MATURE NORTH SEA OI L SUPPLI ES

FI GURE 3. STEEL TRADERS LI QUI DATI NG STOCKPI LES

TO RAI SE CASH, RATHER THAN UNDERLYI NG DEMAND

2.5

3.0

3.5

4.0

4.5

5.0

05 06 07 08 09 10 11 12

3.5

4.0

4.5

5.0

5.5

6.0

6.5

North Sea Oil Output US Oil Output (RHS)

mbbls/day mbbls/dayOI L PRODUCTI ON

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

07 08 09 10 11 12

3,000

3,500

4,000

4,500

5,000

5,500

Domestic stocks China Rebar Price (RHS)

m tonnes USD/tCHINA STEEL STOCKPI LES

Sources: Bloomberg, ANZ Commodity Strategy Sources: Bloomberg, ANZ Commodity Strategy

FI GURE 4. CHI NAS POWER PLANT COAL I NVENTORYLEVELS STI LL WELL ABOVE 5- YEAR AVERAGES

FI GURE 5. GOLD PRI CES STARTI NG TO LOOK CHEAPCOMPARED TO SI LVER

0

5

10

15

20

25

30

35

08 09 10 11 12 13

days of supply 5-year average

Days

1 5

2 5

CHI NA POWER PLANT DA YS OF SUPPLY

30

40

50

60

70

80

90

04 05 06 07 08 09 10 11 12

Gold/Silver ratio 5-year average

times

5 6

5 1

gold expensive

gold cheap

GOLD/ SILVER RATI O

Note: LME prices adjusted for 17% Chinese VAT

Sources: Bloomberg, ANZ Commodity StrategySources: Bloomberg, ANZ Commodity Strategy

FI GURE 6. US SOYBEAN EXPORTS SHOW LI TTLE

SIGN OF SLOWI NGFI GURE 7. NOVEMBER RAI NFALL (% OF NORMAL)SHOWI NG DEFICI T I N SOUTH BRAZI L

CUMULATI VE EXPORT I NSPECTI ONS

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Sep Oct Nov

m tonnes

2012 2011 2010

Sources: Bloomberg, ANZ Commodity Strategy Sources: NOAA, ANZ Commodity Strategy


4/21


COMMODITY CALLS

COMMODI TY COMMENTS Bear ish Neu t ra l Bul l ish

ENERGY

Oil markets should start to firm over the coming weeks, but could remain vulnerable to rising risk aversion from US

budget negotiations, economic distortions from Hurricane Sandy, and uncertainty over Chinas liquidity conditions.

Investors have already taken a more cautious view, with speculative net long positions declining 17% in November to

a 4-month low. But this leaves room for some upside should the macro-context improve in the US and China. A pick-

up in seasonal demand, with the height of winter in Jan/Feb, could also convince funds to re-position into lowly-

weighted oil markets. Interestingly, the Brent-WTI spread remains wide around USD22/bbl. US prices remain heavily

influenced by choppy US-centric risk sentiment, while Middle East tensions continue to put a floor on Brent.

US crude oil supply still remains at sticky-high levels (10% higher than 12 months ago), but rising refinery run rates

from a pick-up in winter heating oil demand, have seen levels tighten slightly as we reach the end of the year.

Although, greater swings in US oil markets are expected (than Brent), triggered by the impending fiscal cliff. Brent

should be supported by risks from the Middle East, with recent clashes between Israel and Hamas and a revolt inEgypt drawing attention to the sensitivity of the region. Chinese winter demand for seaborne (Brent) oil markets

should continue to improve in Dec, with colder weather starting a bit earlier than usual. Buying ahead of the Chinese

New Year holidays (10 Feb) will also likely be supportive for Jan prices.

BULKS

Not surprisingly, the iron price recovery has faltered, with the 40% rebound in prices over September and October

looking too strong compared to the 13% recovery in steel prices. Price gains looked fuelled by restocking and

arbitrage activity rather than stronger underlying demand and both events now appear to be passing. The key Baltic

Capesize market has declined 10% since the start of November, which should show up in lower Chinese iron ore

imports in December (although November volumes should remain strong). Encouragingly, Baosteel has tweaked its

December steel price contracts higher implying steady to firmer demand to see the year out. However, this might not

be enough to boost iron ore prices, with steel mill margins virtually non-existent over the past month.

Coking coal is tracking iron ore up and down, but with a lot less volatility. Prices look to have bottomed in mid

September, but the recovery appears shortlived, with the short term sentiment around steel demand remaining

uncertain. That said, Chinese coking coal imports in October rose for the first time in four months but pressure on

Chinese steel mill margins remains a barrier for higher prices. Coking coals largest seaborne consumer, Japan is also

under pressure with lower steel product exports to China over the past few months starting to bite. Further downward

pressure on spot prices may become apparent in the short term as steel mills try and wield not-so-common pricing

control on first quarter 2103 contract prices negotiations through December.

Thermal coal looks the brightest of the three bulk markets although thats not saying much. Seasonal demand is

starting to come into play as cooler weather drives stronger heating demand in China, Europe and the US. Chinesepower plant stockpile levels have declined from a very high 31 days of supply a month ago to a more reasonable 25

days currently. Cooler weather in China may also become a supply-side factor. A forecast cold Northern China winter

could hinder the transport of a large proportion in Chinese coal supply to key Southern and Eastern Chinese

provinces. This is not unusual for this time of year, but if snow storms become severe and protracted, seaborne prices

would be better supported.


5/21


COMMODITY CALLS


BASE METALS

Our view towards base metals for December remains guardedly optimistic. Sentiment is improving on the basis of

better Chinese data, but the US fiscal crisis and year-end caution will temper the upside. We also see some risks from

a seasonal liquidity squeeze in China ahead of new lending approvals in the New Year. Copper prices are expected to

end the year just below USD8,000/t. Copper is facing some headwinds from high levels of bonded stocks in China (>1

million tonnes). Much of this metal is linked to a structural shift in inventories. Nevertheless, these stocks will keep

seasonal arbitrage opportunities to a bare minimum and limit further price gains early in 2013.

We see limited upside in aluminium for the rest of the year after a 7% surge in prices in late November and early

December. A rally in nickel from mid-November also seems to be running out of steam, having gained 10%. We note

that Indonesian nickel ore exports in October recovered to almost 2.5 million tonnes, a rise of 12% up from the same

time last year and four times more than in June. Refined nickel supply, displaced by production from low-grade ores,

is expected flow into LME storage in December, but the direction may turn later in the first quarter of 2013 whenseasonal demand patterns improve.

PRECI OUS METALS

Our view on gold is torn between a more positive fundamental view on the market and weaker technical patterns

which point to a retest of the lows around USD1,530 an ounce struck earlier this year. We are biased more towards

the positive given rising ETF holdings, which have hit a series of record highs, and strong sale of US Mint gold coins.

Fundamentals, including the likelihood of continued central bank buying, and our weak longer-term dollar outlook, are

also likely to support prices.

In keeping with its more industrial demand make-up, silver prices may see support from growing confidence about

China towards the end of the year. On a recent visit to China we noted increasing appetite for silver from speculative

investors attracted by the volatility in the silver price. Volatility cuts both ways, and we also remain concerned about

solar panel makers, which continue to seek ways to cut the amount of silver they use. The gold-silver ratio, currently

at 51, suggests gold will outperform silver. Our 2012 year-end forecast for the ratio is 52 and is well below the

average for this year of nearly 54. Taking all these factors together, our preferred trade of the two remains gold.

GRAI NS

Grain prices should consolidate at these levels and then start outperforming the broader agricultural complex by early

2013. The dismissal in the last month of requests by US Governors to reduce the existing US ethanol mandate has set

one of the pre-requisites enabling prices to rally. However one other shadow still persists grain prices remain

susceptibility to a less than favourable outcome on current US fiscal negotiations. Short term investor (spec)

positioning is extremely long in both corn and wheat markets, leaving them particularly vulnerable to bouts of

negative financial market sentiment.

That aside, enough weather concerns exist short term to keep grain price risks skewed to the upside. Temperatures in

eastern Ukraine and southern Russia remain warmer than normal, delaying dormancy in newly planted wheat crops.

Some reports estimate as much 25% of the Ukraine and Russian winter wheat crops could be at risk of winterkill if

temperatures suddenly drop. The US HRW wheat crop is in poor condition and also experiencing delayed dormancy in

some regions. Lastly, persistent wet weather in Argentina, the worlds second largest exporter of corn, continues to

see delays in the amount of corn planted. Over one third of the Argentine corn crop is now expected to be planted late

in December. Overall grains remain one of our preferred plays and we continue to hold trades established last month

a corn bull spread and a long ASX Milling /short Chicago wheat spread.


6/21


COMMODITY CALLS


SOFTS

Sugar prices are expected to track sideways in December. Seasonally, prices are unlikely to fall as the market is most

susceptible to diminishing seaborne supplies as Brazils sugar exports fall away. However many markets globally are

also contending with new domestic production replenishing supplies and capping prices. The Asian region is

particularly well covered by new production at this time of the year. Crushing is now in full swing in China, India and

Thailand. Mills in Thailand, the worlds second largest exporter, have already crushed over 1 million tonnes (mt) of

cane this season - a pace slightly ahead of last year. Despite this positive start to Thailands 2012-13 crush, we view

full season production coming in lower than current expectations as one of the few upside price risks left in the

market. Thailands north and north-east cane growing regions have been particularly dry over the last 6 months.

Prices remain susceptible to this scenario given CFTC spec positioning indicates funds are dramatically underweight.

Cotton prices remain stuck within a tight 6USc/lb band a trend in place since June 2012 and unlikely to change in

the month ahead. The greatest unknown in the market continues to revolve around Chinas level of cotton imports in2013. But given we dont expect any clarity on this until well into the new year, this is unlikely to be a driver of prices

near term. However a combination of this policy uncertainty and the slowdown in the European economies is still

keeping participants in the textile pipeline cautious with inventory low and orders prompt at spinning and weaving in

key regions. Cottons near term competitive position in the textile market has also been hindered in the last month by

a 2% fall in polyester staple prices while raw cotton prices have firmed by 3%.

OI LSEEDS

Soybean prices have retraced half of the price fall from Novembers peak of $15.50, after a brief dip below the

$14.00/bu mark. Speculators have rebuilt part of their net long positions across the soybean complex after a bout of

liquidation early in November, but remain short of the record long position reached at the height of the US drought.

We expect soybeans to trade with little directional conviction through December, with the WASDE report expected to

show few surprises. However we would look to establish a position this month, entering a soybean bull spread on dips

as the US supply rationing task is large enough to warrant tighter spreads (see trade section). South American

weather will still be important for short term price direction. The market remains concerned over dryness in southern

Brazil and rains in Argentina, and until the market is comfortable that South American crops are in good shape, prices

will be reluctant to push lower.

Palm oil spent November retracing the gains made in October. Malaysian Palm Oil Board data showed a sharp monthly

increase in exports during October to 1.76mt, leading to only a marginal stock build to 2.50mmt, in line with our

expectations. High stocks at origin and destination are continuing to hold down prices, but record exports to China in

November may indicate that palm oil stocks were run down faster than expected. However, declines in November

export volumes to other destination markets kept overall Malaysian palm oil exports unchanged from October. Our

expectation that Malaysian stocks will reach close to 3.0mt by December remains unchanged, but appears priced ingiven this level is consistent with market expectations. Near-term, export performance will continue to drive markets.


7/21

Commodity Call / 5 December 2012 / 7 of 21

FEATURE NOTES

PRI CE FORECAST UPDA TE

Mild downgrades to commodities, with most of theadjustments made to the current (Dec12) quarter

Escalating risk aversion weighing on prices going

into 2013, but second half should improve

Biggest downgrades to oil and base metals

We have trimmed our commodity forecasts by an

average 2.5% for the next 12 months, with most of the

adjustments made to the current quarter. The biggest

surprise has been the increase risk aversion to the US

fiscal backdrop despite the event being well telegraphed.

The Chinese leadership handover has been less eventful,

but important all the same. We continue to remainupbeat on the demand outlook for 2013, particularly in

the second half of the year. The biggest revisions have

been made to oil and base metal prices. Iron ore is an

exception, with prices recovering strongly off a low base.

We made our biggest downgrade to US West Texas

Intermediate (WTI) oil prices and mildly reduced Brent

forecasts. Uncertainty over the US fiscal cliff and the

temporary impact of Hurricane Sandy on demand has

been the main catalyst. Weve also underestimated the

influence of US shale production, which has contributed

to strong output this year to 16-year highs, swelling US

crude oil inventories to near record levels.

FI GURE 8. ANZ COMMODI TY PRI CE REVI SI ONS

1 2 Q4 1 3 Q1 1 3 Q2 1 3 Q3 1 3 Q4

Copper USD/lb 3.60 3.75 3.90 4.00 4.05

Aluminium USD/lb 0.91 0.94 1.00 1.04 1.06

Lead USD/lb 1.02 1.04 1.05 1.06 1.07

Nickel USD/lb 7.80 8.10 8.40 8.90 9.40

Zinc USD/lb 0.90 0.94 0.98 1.02 1.04

Gold USD/oz 1,780 1,820 1,850 1,870 1,890

S ilver USD/oz 34.1 35.0 35.5 36.0 37.0

Platinum USD/oz 1,640 1,690 1,820 1,835 1,860

Palladium USD/oz 670 700 760 780 800

WTI Crude USD/bbl 90 96 100 101 103

Brent Crude USD/bbl 114 118 120 118 119

Iron Ore (C IF C hina) USD/t 112 118 122 126 128Iron Ore (FOB Aust) USD/t 103 107 111 115 117

Prem Coking Coal USD/t 170 165 180 190 200

Thermal C oal (FOB Newc) USD/t 90 95 102 104 106

Copper % (5.3) (6.3) (5.3) (3.6) (4.7)

Aluminium % (7.1) (2.1) (2.0) (1.0) (0.0)

Lead % (1.0) (0.0) (0.0) (0.0) (0.0)

Nickel % (7.1) (6.9) (5.6) (2.2) (0.0)

Zinc % (6.3) (1.1) (2.0) (0.0) (0.0)

Gold % - - - - -

Silver % - - - - -

Platinum % (3.5) (4.0) - - -

Palladium % (4.3) (5.4) (3.8) (6.0) (3.0)

WTI Crude % (9.1) (9.4) (9.9) (9.8) (8.0)

Brent Crude % (1.7) (1.7) - - 1.7Iron Ore (CIF China) % 1.8 2.6 1.7 0.8 -

Iron Ore (FOB Aust) % 7.2 3.1 2.5 1.6 0.7

Prem Coking Coal % - (5.7) (2.7) (2.6) -

Thermal Coal (FOB Newc) % - - - - -

E n d o f Qu a r t e r P r i c e s

C h a n g e i n f o r e c a s t s

Source: ANZ Commodity Strategy

Additionally, we think the wide spread between Brent and

WTI crude markets will persist longer - at least for thefirst half of 2013. Ongoing geopolitical risks and high US

oil supply makes it hard to see the price gap closing

before this time.

We have made no adjustments to thermal coal forecasts.

Chinas plans to further liberalise thermal coal markets

by removing artificial caps on domestic coal prices could

be a turning point for better seaborne prices. However,

the market will be weighed down for the next 3-6 months

by ample Chinese supply. Coking coal prices have been

downgraded an average 3.5% over the next 12 months

mainly reflecting a slower than expected price recovery

from oversold levels in September. Increased availabilityof Mongolian exports has also trimmed the outlook.

Iron ore is our only upgrade, with bigger revisions made

to our Australia FOB contract prices. This reflects the

strong upward volatility in spot prices in the current

quarter inflating the average price for the period on

which the contract outcome is calculated. The price

upgrades in to 2013 are more modest to reflect a drop in

spot market volatility and to account for some restoration

of Chinese steel mill profitability.

The biggest base metal downgrades have been made to

copper and nickel down an average 5.0% and 4.4%

over the next 12 months. Copper has the additional drag

of increased mine supply next year, inflating our forecast

copper supply surplus to 200,000 tonnes from an

113,000 tonne deficit in 2012. In nickel, resilient China

Nickel Pig Iron (NPI) output has been the surprise, with

producers appearing to skirt increased export duties on

Indonesian laterite ore, by drawing down on stockpiled

ore and acquiring additional ore from the Philippines.

Our short term aluminium forecasts were too optimistic,

in line with our higher oil prices numbers. We over-

estimated the cost curve impact, with many of the high

cost producers surviving from higher than expected

physical premiums. The inelastic high-cost Chinese

smelter supply is also a recurring theme we are seeing in

Chinese iron ore and steel capacity.

Our mildly bullish gold and silver forecasts remain

unchanged. Gold and silver backed ETF holdings continue

to hit, or have returned to, record highs - and sales of US

gold coins hit a 28-month peak in November. More

broadly, the key themes in the gold market of the past

two years Central Bank buying and worries about low,

or negative real interest rates will persist and underpin

our end 2013 forecast of USD1,890/oz.

We have cut platinum and palladium by an average3.9%, but see upside risks owing to their limited supply

base and in the case of palladium, the end of stockpile

sales by Russia. However, thrifting and the patchy

outlook for European auto demand will limit the upside.


8/21


FEATURE NOTES

CHI NA MARKETI NG TRI P W ARY SHORT TERM

Participants cautious short term, with tight liquidityand leadership changeover dampening activity

Stable, not strong, growth expected for 2013

Steel industry still struggling, needing either lower

raw material prices or higher steel prices

Inventory restocking has run its course, but steel

stocks look lower than expected

We've recently returned from a marketing trip to China

and the mood seemed one of caution short term but

growing confidence for 2013. The political changeover

appeared to have been a big distraction for 2012, and

many seemed relieved that the process was passing. The

consensus view was that the new government would

likely implement a stable growth footing but that an

aggressive stimulus push was unlikely. As a result, many

thought the outside view on China was too optimistic and

that a growth level of around 7% rather than 8% was

more realistic going forward.

Despite improving headline numbers, the clients we

spoke to felt the current market conditions were still very

challenging. Tight liquidity was a problem for many steel

and iron ore traders who were resorting to selling

stockpiles at cost or even at a loss to raise cash. Banks,

who normally reduce lending activity at this time of the

year, were especially cautious of commodity traders

which had experienced quite volatile market conditions

(including force majeure shipments) over the past 3-6

months. One trader told us that it had been the quietest

November he could remember and that making money in

China had become a lot more difficult than it used to be.

On inventories, total steel mill stockpiles were at a lower

than expected 11 million tonnes, down from about 12-13

million tonnes earlier in the year. We found this strange

because of the high level of steel production and falling

prices through the middle of the year implying excess

supply and rising inventory builds. This partly confirmed

that the falling rebar market had been heavily influenced

by speculative activity and not necessarily associated

with fundamentals over this period and possibly that

stronger seasonal demand had soaked up excess supply.

The sharp swing in iron ore prices in August/September

looks inventory-led, with substantial consumer

destocking and restocking activity occurring. Steel mill

yard iron ore stocks had fallen to a low 10-15 days by

end of August but were now back to around 25 days of

supply (mills normally operating at around 30 days).

Sticky high domestic iron ore production was partly afunction of captive supply and government owned

capacity kept open at a loss (a bit like in steel to sustain

social stability through the key leadership changeover).

Operating costs may have been overestimated with

feedback suggesting a high cost floor closer to USD110/t

rather than USD120/t. And official data could be missing

a good proportion of high cost Hebei iron ore output

(which goes unreported) where capacity is still very

sensitive to prices under USD120/t.

In coal, stockpiles are high. Late import arrivals from

delayed shipments in the third quarter had swollen power

plant stockyards meaning winter restocking wouldnt be

substantial. The National Development and Reform

Commissions (NDRCs) decision to lift annual capped

coal prices was seen as a sign that domestic supply

conditions had improved.

Steel demand conditions are, not surprisingly, weak. The

construction, manufacturing and shipbuilding sectors are

most under pressure. Steel demand will grow by asmaller-than-expected 3-4% in 2013 and most of that

because 20 million tonnes of new capacity is being

commissioned. Construction demand will remain

challenging, but improving auto and manufacturing

output will prop up activity. The new government will

keep a lid on property speculation suggesting real estate

activity would be skewed to the public housing programs.

Steel mill margins are again in paper-thin territory

somewhere between break-even to 1%. The sharp

rebound in iron ore prices hasnt been matched by similar

gains in steel. The unconsolidated nature of the steel

industry doesnt help, with the top 10 producers onlycommanding 10% of domestic market share, making it

difficult to pass on higher raw material prices. The high

level of state-owned enterprise (SOE) supply (75% of

total steel output) is also more inelastic to demand

meaning most will run, even in a loss-making market.

There doesnt appear to be as much concern about the

high level of Chinese steel capacity. Total steel capacity

sits supposedly around 900 million tonnes for a 720

million tonne production level implying a utilisation rate

of 80% - an acceptable level for western world

producers. Interestingly, it is believed many steel mills

over-inflate their capacity potential (counting out-datedor closed facilities) in the aid of achieving a more

streamlined approval process for new capacity

brownfield expansions (existing assets) being a lot easier

to approve than Greenfield ones (completely new).

The topic of overcapacity generally in China is an

interesting one. One client talked of Chinas addiction to

industrial growth over the past 20 years purely for

growths sake regardless of market demand. Chinas

provincial leadership performances have been very much

measured on GDP, which has created a race to expand

industrial output. The view was the new government is

keen (and would need) to address this inefficiency, butthat heavy industry consolidation was probably still a

long rather than short term goal. One idea touted was for

heavy industry to be centralised back to Beijing to create

super-large participants in each key industry.


9/21


FEATURE NOTES

FACI NG UP TO ALUMI NI UMS PHYSI CAL CLI FF

(Initially published on 27 November, 2012)

An end of aluminium financing in 2014 could sink

prices by some 20% from forecasts

Timing of unwind linked to rising market interest

rates, not Fed announcements

Around 8 million tonnes of metal could hit the

market in space of three to six months

The aluminium market is facing a supply shock in 2014

when prices could drop by 20% or more in a very short

period. We expect around 70% of on-warrant and off-

warrant stocks, or about 8 million tonnes of metal tied up

in financing deals, to come to the market around themiddle of 2014 (Figure 9). The trigger will be rising

interest rates, which will make contango financing

unprofitable.

Contango financing - buying cash metal at a discount,

selling forward at premium, then using the difference to

cover the cost of storage, interest, and make a profit -

has increased materially since the global financial crisis.

Low interest rates have caused investors to seek yields in

alternative investment structures and financing metal

remains a relatively low-risk opportunity. However,

margins can rapidly shrink as costs, primarily interest

and warehouse rents, go up.

The metal locked away in these deals could amount

around 8 million tonnes or 15%-20% of global supply.

This would add to our estimated surplus of around 1.2

million tonnes for 2014. We reflect some of these risks in

our price forecasts, which show a dip to USD2,182/t at

the end of 2014, down from USD2,315/t at the end of

the first quarter of that year. (Figure 10).

However, those are end-quarter numbers and we see

significant risks that prices could spike down below

USD2,000/t should these trades unwind and the metal

comes back to the market in 2014. Compared with

current prices around USD1,950/t, a fall to USD2,000

does not seem too dramatic. But smelters today earn an

additional physical premium of USD150-250/t on top of

the LME price due to the limited availability of material.

Even then, about a third of global smelters are operating

at a loss.

Of the two factors rents and interest rates that drive

the economics of financing, we see interest costs as the

key variable. Market interest rates will pre-empt any sign

of Federal Reserve move to withdraw the extraordinarily

loose monetary policy introduced since 2008. These will

be the spark for stockholders to exit the financing trade

quickly, even though Fed fund rates may remain

unchanged.

Costs of funds vary for these deals. For those with a

better credit rating, costs of funds are around 1%, while

lower rated participants may pay 2%. Assuming cost of

funds of 2% per annum and an aluminium price of

USD2,050, annual interest charges would amount to

USD41/t of metal.

Based on a 2% cost of funds, total costs, excluding

incidentals are USD85/t to USD96/t. Assuming the cash

to 12-month spread remains steady at USD100/t and

rents of 12 cents to 15 cents per tonne per day, a run up

in market interest rates by less than 100 basis points

would wipe out the economics of the trade.

The fall in prices will bring consumers and other value

investors to the fore, but we believe they will appreciate

the unique opportunity that the liquidation will offer. In

the run up, we would expect to see consumers shift to

hand-to-mouth operations. This should support the front-

end of the curve with more business being done on a

nearby or cash basis and will further weaken the

economics of the contango trade as it reaches the tipping

point.

FI GURE 9. ALUMI NI UM EXCHAN GE STOCKS

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

00 01 02 03 04 05 06 07 08 09 10 11 12

Shanghai stocks LME stocks

m tonnes

Estimated off-

warrant stocks

Re p o r t e d s t o c k s

+ 2 7 0 %

Source: Thomson Reuters, ANZ Research

FI GURE 10 . ANZ 6-MONTH LI BOR OUTLOOK

USD/tonne

1,800

1,900

2,000

2,100

2,200

2,300

2,400

12 13F 14F 15F 16F

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Aluminium price

6mth Libor (RHS)

%

Source: ANZ Research


10/21


TRADE IDEAS

I RON ORE OI L

The iron ore market is vulnerable to a sell-off as steel

traders remain under pressure from tighter liquidity

conditions in China near-term. A seasonally weakerconstruction period should also be a drag on iron ore

demand.

Sel l May13 I ron Ore Swap

Entry: Sell May13 Iron ore swap at USD112.5/t

Target: USD108/t

Stop Loss: USD115/t

Timeframe: 2 months

We remain broadly positive towards crude oil into

2013, but we see risks from rising risk aversion,

particularly if the US goes over the fiscal cliffdeadline. With the cost of volatility relatively cheap,

we propose to go long Brent and buy put options.

Protec ted Long Brent

Entry: Buy Mar13 at USD108.50/bbl; Buy Feb13

USD100 puts at USD0.85/bbl

Target: USD116.50/bbl

Stop Loss: USD104.00/bbl

Timeframe: 2 months

FI GURE 11. I RON ORE SWAPS

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

J F M A M J J A S O N D

90

95

100

105

110

115

120

125130

135

Aggr Open Interest Swap May13 (RHS)

USD/tContracts

Sources: Bloomberg, ANZ Commodity Strategy

FIGURE 12 . OI L VOLATI LI TY

25

27

29

31

33

35

37

Jan-12 Apr-12 Jul-12 Oct-12

0

2

4

6

8

10

12

14

16

Implied Volatility Put Price

% USD/bbl


COPPER SOYBEANS

We want to redefine our existing long copper trade.

Worries about the fiscal situation in the US mean

prices may not reach our target of USD8,330/t in the

time frame we proposed. We have cut our target to

USD8,100/t and raised our stop loss to USD7,800/t.

Long Copper Out r i gh t

Entry:Buy LME 3-month copper under USD7,700/t

Target: USD8,100

Stop Loss: USD7,800

Timeframe: 3 months

The US soybean supply rationing task is still ahead of

the market and large enough to warrant tighter

spreads (more backwardation). The best chance for a

rally is in Q1 2013 before South American soybeans

reach the export market.

Soybean Bul l Spread

Entry: target +90USc/bu on pullback

Target: +170c/bu

Stop Loss: +50c/bu

Timeframe: 3 months

FI GURE 13 . 3- MONTH COPPER PRI CE

7,000

7,200

7,400

7,600

7,800

8,000

8,200

8,400

8,600

8,800

Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13

USD/t

Target:

$8,100/t

Stop Loss:

$7,800/t

Forecast


FI GURE 14 . SOYBEAN BULL SPREAD

(20)

20

60

100

140

180

220

260

300

Jun Aug Oct Dec Feb Apr

USc/bu

03/04 12/13 11/12

08/09 02/03 93/94



11/21


TECHNICAL VIEWS

GOLD & SI LVER range r edef in ing rem ains in p lay

Last months focus was on the potential of redefining

broad range support. Although anticipated declines failedto unfold, the core technical theme remains intact. If

rebounds falter, gold and silver downside could reopen.

GOLD g a ins shou ld be l im i ted

After an early spike below USD1,675, Novembers price

action was held within a tight USD1,705-1,755 range.

Risk of flipping this range to the upside should not be

denied, but it would be seen as re-affirming USD1,800-

05 as range resistance before anticipated declines unfold.

The style of pullbacks will remain critical, especially if

current rebounds falter in front of USD1,740. A break

below USD1,700-05 would re-ignite potential forretesting the USD1,525-50 area if not triggering

retracements towards USD1,450 (38.2% of the rally from

2008s USD682 low). A close above USD1,805 is needed

to reduce the bias for redefining broad range support.

SI LVER Range bound , bu t b i as to se l l i n to s t reng t h

Silver effectively held 50% of recent range at USD30.75

in early November. Although subsequent solid rebounds

throw some doubts over an early and deep slide, the

range defining bias remains firmly in play.

Daily momentum indicators suggest that recent rebounds

may have run their course at USD34.39 and any slippagebelow USD33.25 could trigger a swift retest of USD30.75

if not a measured move to 29.85. This should still be

seen in the context of a range redefining slide to retest

the past years series of lows in the USD26.00-20 area.

A push above 34.50 will reduce the risk of a near term

fall, but close above 35.65 is needed to throw doubt on

the longer term downside bias.

Downs ide techn i ca l r i s k pe rs i s t s i n p rec i ous meta l s ,

bu t base meta l s may bounce w i t h i n b road co r rec t i ons .

STEEL REBAR Ret racem ent rebou nds r esume

Although activity on Shanghais Futures Exchange hasmoved into the May 2013 Rebar contract (currently

CNY3547 per MT and shown in Figure 17), the January

2013 contract (not shown) provided the technical profiles

because of its longer period of being the active contract.

September signalled a turn in trend as Rebar rebounded

off 3,277 (May13 contract) into the 3,700s. A prolonged

consolidation developed from early October, but this now

appears to have completed at 3,464. The current push

above 3535 could develop into a series of secondary

retracements, confirmed above 3,600, and measured

moves through recent 3,720 highs to 3,855, possibly the

4,000s, into early 2013.

A close below 3,500 would at least postpone, if not

undermine, the potential for sound retracement rallies.

FIGURE 15. GOLD ( USD/ oz) DAI LY W. RSI & S. STOCHS

FIGURE 16. SI LVER (USD/ oz) DAI LY W. RSI & S.STOCHS

FI GURE 17. MAY 20 13 REBAR DAI LY W. RSI & S.STOCHS

Sources: Bloomberg, ANZ Research


12/21


TECHNICAL VIEWS

LME COPPER ( 3-m ont h) Rebounds w i th in rang es

Copper prices based almost precisely on rising trendsupport in front of USD7,500 in early November, as

shown in both weekly and daily bar charts (Figures Y and

YY). Notably this occurred with a distinct turn in daily

momentum (see Figure YY). This should allow for further

gains over coming weeks.

Although the above appears positive, the technical profile

for copper is that it is still entrenched within a

consolidation pattern which is itself part of larger scale

corrections off the 2011 USD10,190 high. Within this

context, current gains are merely interim gyrations.

Weekly and daily charts show how standard retracement

levels acted as resistance in Q112 and then again inSeptember and also that a narrowing (triangle) range

appears to be forming.

Current rebounds are neatly testing the psychological

retracement and previous support/resistance level of

USD8,000, a break of which should trigger a flip to the

next retracement and resistance level of USD8,410 and

could even allow for larger moves to retest Q112 highs

around USD8,765.

However, even if rebounds gain traction, they are likely

to falter in early 2013 as the broader consolidation

patterns become dominant.

Interim slippage needs to remain above 7800 (stops

definitely below 7775) to avoid an early failure and risk a

retest and potential break of rising support.

SOYBEANS - Beans in to t he m id- t eens

The Chicago Board of Trade January 2013 soybean

contract is shown in Figure YYY. Beans have rebounded

since mid-November after testing a relatively pivotal

combination of highs seen back in April and May and a

61.8% retracement of the rally which developed from

late 2011 into early September 2012. Daily momentum

indicators also made a notable positive turn in mid-

November. The rebounds off 13.72 (cents per bushel)are now testing declining resistance at 14.50 and could

trigger a swift test of 1484 amidst potential retracements

towards 15.28 and 15.75 into 2013.

If beans fail to sustain a break of the downtrend, the

style of interim dips will be critical in determining

whether a secondary push higher develops. Ideally dips

should hold above 14.40 in order to allow for an early

push higher, but even if this minimal support level is

broken, an interim corrective pattern could still build a

base for a secondary push towards the 15.28-15.75

target area.

A slump below 14.00 is needed to negate the current

positive profile into 2013.

Tim Riddel l

FI GURE Y. LME COPPER W EEKLY W . RSI & S. STOCHS

FI GURE YY. LME COPPER DAI LY W. RSI & S.STOCHS

FI GURE YYY. SOYBEANS DAI LY W. RSI & S.STOCHS

Sources: Bloomberg, ANZ Research


13/21


COMMODITY PRICES (% CHANGE)

LONDON M ETALS EXCHANGE (UDS/lb, USD/t) LONDON M ETALS EXCHANGE (kt)

Aluminium 0.95 2,094 10.2 11.2 8.2 (1.5) 1.9 Aluminium 5,207 2.4 6.9 5.9 14.3 4.6

Copper 3.62 7,979 4.1 4.9 8.2 1.5 2.6 Copper 248 2.1 7.9 7.5 (36.1) (33.2)

Nickel 7.98 17,598 10.5 10.7 9 .8 (0.7) (6.9) Nickel 136 4.8 14.7 26.5 50.2 50.7

Zinc 0.92 2,029 10.5 11.8 7.7 (1.4) 9.0 Zinc 1,199 2.5 26.1 27.7 62.7 46.2

Lead 1.02 2,258 7.6 14.9 19.8 8.0 8.8 Lead 362 13.0 16.8 4.0 (1.2) 3.0

Tin 9.92 21,862 8.4 12.8 12.6 9.5 9.6 Tin 12 0.6 3.7 (9.7) (0.8) (0.3)

SHANGHAI (RMB/t) SHANGHAI (kt)

Copper 57,025 0.5 1.1 4.9 (2.6) 3.2 Copper 197 2.2 24.0 25.1 241.8 111.4

Aluminium 15,170 0.1 (1.5) (4.7) (6.8) (5.1) Aluminium 465 4.3 27.5 44.7 161.9 123.4

Zinc 15,600 2.5 3.1 3.5 (3.3) 2.8 Zinc 307 2.2 2.7 (10.3) (16.8) (15.8)

Lead 14,825 (2.0) (2.5) (1.7) (6.0) (3.3)

COMEX (USD/t) COMEX

Copper 8,046 4.8 5.6 10.2 1.8 3.4 Copper 64.4 13.5 26.6 9.0 (26.5) (26.8)

OIL & GAS - US DOE (mbbls)

Gold (USD/oz) 1,715 2.2 1.3 5.6 (1.8) 6.9 Crude 374 (0.3) 3.7 (2.2) 11.8 13.5Gold (AUD/oz) 1,644 1.3 0.3 (1.8) (3.8) 6.3 Gasoline 204 2.9 0.8 1.6 (2.7) (7.2)

Silver (USD/oz) 33.4 8.1 5.3 17.2 2.5 12.6 Distillate 112 (5.1) (10.5) (6.2) (19.1) (22.0)

Platinum (USD/oz) 1,603 3.8 4.1 10.9 3.5 12.4 Refinery utilisation (%) 88.6 1.6 (2.9) 0.6 4.7 4.2

Palladium (USD/oz) 684 13.6 8.5 11.6 6.2 2.7

CBOT (US/bu)

OIL & GAS (USD/bbl) Wheat 864 (0.1) (2.9) 41.0 38.0 32.3

WTI Cushing (US) 88.9 4.8 (7.8) 6.8 (11.9) (13.6) Corn 753 1.8 (5.9) 36.5 26.5 16.4

Brent Crude (UK) 112.0 5.8 (3.0) 13.4 1.5 0.2 Soybeans 1,439 (5.8) (18.1) 14.4 26.7 19.1

Tapis (Asia) 114.1 3.2 (6.0) 5.4 (3.3) (2.1) Soybean Oil (US/lb) 49.7 1.0 (12.9) 2.4 (1.0) (5.1)

Gasoil 0.5% (Sing) 125.7 1.3 (5.3) 11.2 0.6 2.9 Soybean Meal (USD/st) 435 (8.6) (18.5) 10.2 50.8 38.9

Fuel Oil 180cst (Sing USD/t) 605.5 (1.7) (12.1) (2.7) (12.7) (13.2) KCBOT (US/bu)

THERMAL COAL (FOB USD/t) HRW 913 0.5 0.8 43.4 34.0 27.4

Newcastle 89.1 12.2 1.8 (0.3) (13.4) (16.4) MGE (US/bu)

Richards Bay 84.1 5.9 (4.9) (6.7) (24.5) (27.2) HRS 937 (0.4) (1.2) 26.7 10.9 10.3

Qinhuangdao 107.2 0.0 0.6 (15.7) (22.9) (21.1) ASX (AUD/t)

Wheat 300 1.2 (3.7) 19.5 1.7 24.2

EURONEXT Liffe (/t)

COKI NG COAL (USD/t) Wheat 224 5.5 9.2 30.8 56.3 47.0

Australia FOB 161.4 7.7 (0.3) (26.6) (31.1) (29.5) EURONEXT Paris (EUR/t)

China CIF 171.2 5.6 5.2 (25.0) (28.2) (27.2) Wheat 270 0.3 2.2 29.1 51.0 38.0

India CIF 174.8 6.0 1.6 (26.0) (30.8) (28.8) Corn 253 2.4 (0.4) 21.1 37.5 28.6

STEEL (USD/t) Rapeseed 477 (0.5) (7.4) 3.8 23.8 19.0

HRC US (Short ton) 590 2.6 (4.1) (9.6) (3.7) (7.1) I CE Winnipeg (CAD/t)

HRC Russia 533 4.4 (4.5) (10.1) (9.0) (7.8) Canola 594 (1.5) (6.8) 5.4 18.3 13.4

HRC China 543 1.9 4.3 (11.8) (10.7) (11.1)

OTHER METALS

Uranium (USD/lb) 41.8 (4.0) (14.8) (19.7) (20.1) (20.1) I CE NY (US/lb)

Alumina (USD/t) 328 1.2 2.7 3.0 4.1 6.0 Sugar #11 19.3 (0.6) (2.2) 1.3 (17.5) (17.0)

Cobalt (USD/lb) 11.8 (9.2) (11.9) (23.0) (18.6) (19.2) Coffee 151 (2.7) (8.6) (4.4) (34.4) (33.6)

Molybdenum (USD/lb) 11.2 2.3 (4.7) (17.7) (17.4) (17.0) Cocoa 2,498 2.1 (4.3) 21.1 12.1 18.4

Coke (USD/t) 330 (2.9) 3.1 (9.6) (13.2) (12.0) Cotton 74 5.1 (4.3) 9.3 (19.5) (19.5)

Iron Ore Spot (USDt) 116 (3.7) 29.3 (14.4) Security (16.8) EURONEXT Li f fe (USDD/ t )

Sugar 516 (1.0) (8.2) (6.8) (15.9) (14.3)

Coffee 1,914 (3.1) (7.8) (11.3) (2.1) 5.7

Baltic Freight Rate 1,086 10.1 54.5 20.1 (41.8) (33.1) Cocoa (/t) 1,586 0.5 (6.5) 9.2 10.5 14.9

Baltic Capesize 2,199 (4.6) 87.6 69.4 (35.5) (25.6) MDEX (MYR/t)

Baltic Panamax 980 27.9 33.3 9.3 (42.4) (39.5) Crude Palm Oil 2,370 (5.0) #VALUE! (21.2) (25.1) (27.7)

AUD/USD - Aussie 1.043 0.9 1.0 7.5 2.1 0.6 S&P 500 1,416 0.1 0.7 10.8 13.8 12.6

NZD/USD - Kiwi 0.820 (0.6) 2.1 8.7 5.5 4.0 CRB Index 299 2.3 (3.4) 11.4 (4.6) (2.1)

DXY - USD trade weighted 80.2 (0.5) (1.3) (3.3) 1.9 0.7 S&P GSCI Agri Index 479 (0.3) (6.8) 23.7 15.0 10.2

EUR/USD - Euro 1.299 1.2 3.2 4.4 (3.0) (0.5) LME Metals Index 3,472 6.4 7.6 8.8 1.0 5.0

USD/JPY - Yen 82.5 2.5 5.2 5.7 5.8 7.5 Market Volatility Index (VIX 16 (9.8) (9.2) (40.5) (42.3) (32.2)

3 MTH 6 MTH

SPOT

SPOT 1 MTH

SPOT 1 MTH

1 MTHSPOT 3 MTH

12 MTH YTD3 MTH 6 MTH KEY I NDI CES12 MTH YTD SPOT 1 MTH 3 MTH

YTD

SPOT

6 MTH

12 MTH YTD

SPOT 1 MTHSOFTS/ PALM

12 MTH YTD

3 MTH 6 MTH

6 MTH

12 MTH

6 MTH 12 MTH YTD

SPOT 1 MTH 3 MTH 6 MTH 12 MTH YTD

YTD SPOT 1 MTH 3 MTH

AGRICULTURE 3 MTH

I NVENTORIES

1 MTH

KEY CURRENCI ES

6 MTH 12 MTH YTD

3 MTH YTD6 M TH 1 2 MTH

SPOT 1 MTH

PRECI OUS METALS

ENERGY

OTHER

FREI GHT

6 M TH 1 2 MTHBASE METALS 1 MTH 3 MTH

Note: Prices as of 30 November 2012

Sources: Bloomberg, globalCOAL, FIS, ANZ Commodity Strategy


14/21


CFTC DATA

SPOT 1 W K 1 MTH 3 MTH 6 MTH 12 MTH SPOT 1 W K 1 MTH 3 MTH 6 MTH 12 MTH

GOLD (t) WTI CRUDE OIL (mbbls)

Long 752 714 720 561 507 617 Long 356 359 375 372 352 325

Short 94 84 83 125 174 75 Short 176 132 122 94 111 106

Net Position 658 629 637 436 333 542 Net Position 180 227 253 277 241 220

Open Interest 2,020 2,257 2,235 2,014 2,264 2,012 Open Interest 1,522 1,499 1,579 1,470 1,443 1,303

SILVER (t) NATURAL GAS (1000 mmbtu)

Long 8,152 7,523 7,444 5,527 4,358 3,858 Long 2,595 2,473 2,937 2,427 2,471 1,700

Short 1,449 1,099 1,142 2,073 2,440 1,288 Short 3,549 3,306 3,544 3,115 3,606 3,409

Net Position 6,703 6,423 6,302 3,454 1,919 2,570 Net Position (954) (833) (607) (688) (1,135) (1,709)


COPPER (kt) RBOB GASOLI NE (m gallons)

Long 432 449 553 462 456 300 Long 4,561 4,297 4,386 4,202 3,862 3,136

Short 466 488 475 608 570 337 Short 1,431 1,386 1,467 1,223 680 1,006

Net Position (34) (39) 78 (146) (115) (37) Net Position 3,130 2,912 2,918 2,980 3,182 2,130


SPOT 1 W K 1 MTH 3 MTH 6 MTH 12 MTH SPOT 1 W K 1 MTH 3 MTH 6 MTH 12 MTH

CBOT WHEAT (m bu) I CE SUGAR (kt)

Non-Com Long 644 618 704 734 530 350 Non-Com Long 8,128 8,148 8,028 7,563 9,210 5,759

Non-Com Short 473 502 482 432 509 618 Non-Com Short 6,649 6,282 4,447 3,832 5,672 3,029

Net Non-Com Position 171 115 222 302 21 (268) Net Non-Com Position 1,479 1,866 3,582 3,731 3,538 2,729

Index Long 1,038 1,157 1,121 1,129 1,216 1,017 Index Long 15,220 14,978 14,434 14,130 14,143 11,792

Index Short 151 261 230 200 170 92 Index Short 1,226 1,206 1,168 1,477 1,890 2,062

Net Index Position 887 896 890 929 1,045 925 Net Index Position 13,993 13,771 13,266 12,653 12,253 9,730


CBOT CORN (m bu) I CE COFFEE (kt)

Non-Com Long 1,861 1,821 1,983 2,157 1,439 1,429 Non-Com Long 574 566 493 496 533 396

Non-Com Short 355 357 303 278 666 631 Non-Com Short 947 959 728 730 641 260

Net Non-Com Position 1,505 1,464 1,680 1,879 773 798 Net Non-Com Position (373) (393) (235) (234) (108) 136

Index Long 1,967 2,086 2,137 2,158 2,393 2,117 Index Long 794 793 777 752 809 703

Index Short 146 278 323 362 386 294 Index Short 42 41 62 66 156 83

Net Index Position 1,820 1,809 1,814 1,796 2,007 1,823 Net Index Position 752 752 716 686 654 621


CBOT SOYBEANS (m bu) I CE COCOA (kt)

Non-Com Long 252 240 246 367 358 288 Non-Com Long 565 528 510 570 287 285

Non-Com Short 506 522 347 240 439 379 Non-Com Short 161 174 191 372 372 353

Net Non-Com Position (254) (282) (101) 127 (81) (92) Net Non-Com Position 404 354 319 198 (85) (68)

Index Long 929 931 1,021 1,005 1,073 966 Index Long 334 333 350 356 403 308


Net Index Position 656 656 624 595 763 804 Net Index Position 333 331 321 344 360 305


CBOT SOYBEAN OI L (kt) I CE COTTON (k bales)

Non-Com Long 3,504 3,364 3,830 3,997 2,886 1,907 Non-Com Long 5,697 5,659 6,896 6,367 5,594 4,361

Non-Com Short 2,573 2,735 2,621 2,351 2,773 3,363 Non-Com Short 4,706 4,770 2,934 3,582 4,831 2,393

Net Non-Com Position 931 629 1,209 1,646 112 (1,457) Net Non-Com Position 991 889 3,963 2,785 763 1,968

Index Long 2,857 2,935 2,791 2,739 3,170 2,659 Index Long 7,554 7,529 7,849 7,589 8,224 6,106


Net Index Position 2,680 2,667 2,583 2,368 2,505 2,416 Net Index Position 7,283 7,170 6,881 6,831 7,522 5,360


ENERGYMETALSACTUAL ACTUAL

AGRI CULTURE SOFTSACTUAL ACTUAL

Note: Data as of 27 November 2012



15/21


CALENDAR HEATMAP

CHI NA UNI T PERI OD MARKET ACTUAL PREVI OUS DATE

New Yuan Loans RMB bn OCT 590 505 623 12-Nov

Money Supply - M2 % YoY OCT 14.5 14.1 14.8 12-Nov

Exports % YoY OCT 10.0 11.6 9.9 10-Nov

Imports % YoY OCT 3.4 2.4 2.4 10-Nov

Producer Price Index (PPI) % YoY OCT -2.7 -2.8 -3.6 9-Nov

Consumer Price Index (CPI) % YoY OCT 1.9 1.7 1.9 9-Nov

Fixed Asset Investment (FAI) % YTD YoY OCT 20.6 20.7 20.5 9-Nov

Retail Sales % YoY OCT 14.4 14.5 14.2 9-Nov

Industrial Production % YoY OCT 9.4 9.6 9.2 9-Nov

Foreign Direct Investment (FDI) % YoY OCT 1.0 -0.2 -6.8 20-Nov

Conference Board Leading Index % MoM OCT - 1.5 0.2 21-Nov

PMI Manufacturing Points NOV 50.8 50.6 50.2 1-Dec

US UNI T PERI OD MARKET ACTUAL PREVI OUS DATE

FOMC Rate Decision % OCT 0.25 0.25 0.25 25-Oct

Change in Nonfarm Payrolls '000s OCT 125 171 114 2-Nov

Factory Orders % YoY SEP -5.9 -5.2 2.6 3-Nov

Producer Price Index (PPI) % YoY OCT 0.2 -0.2 1.1 15-Nov

Retail Sales (Less Autos) % YoY OCT 0.2 0.0 1.1 15-Nov

NY Empire Manufacturing % YoY NOV -8.0 -5.2 -6.2 16-Nov

Consumer Price Index (CPI) % YoY SEP 0.1 0.1 0.6 16-Nov

Philadelphia Fed % YoY NOV 2.0 -10.7 5.7 16-Nov

Industrial Production % MoM OCT 0.2 -0.4 0.2 17-Nov

Building Permits '000s OCT 864 866 890 21-Nov

Housing Starts '000s SEP 840 894 863 21-Nov

Leading Indicators % YoY OCT 0.1 0.2 0.5 22-Nov

Uni of Michigan Confidence Points NOV 84.5 82.7 84.9 22-Nov

Dallas Fed % YoY NOV 2.5 -2.8 1.8 27-Nov

Durable Goods Orders % YoY OCT -0.7 0.0 9.2 28-Nov

New Home Sales '000s SEP 390 368 389 29-Nov

GDP % YoY 3Q 2.8 2.7 2.0 30-Nov

Chicago PMI Points NOV 50.5 50.4 49.9 1-Dec

ISM Manufacturing Points NOV 51.5 49.5 51.7 4-Dec

Vehicle Sales (Total) '000,000s OCT 15.0 15.5 14.2 4-Dec

EURO- ZONE UNI T PERI OD MARKET ACTUAL PREVI OUS DATE

GDP % YoY 3Q -0.6 -0.6 -0.5 6-Sep

Retail Sales % YoY SEP -0.8 -0.8 -0.9 7-Nov

ECB Refinancing Rate % NOV 0.75 0.75 0.75 8-Nov

Zew Survey (Econ Sentiment) Points OCT - -2.6 -1.4 13-Nov

Industrial Production % YoY SEP -2.2 -2.3 -1.3 14-NovConsumer Price Index (CPI) % YoY SEP 1.5 1.5 1.5 15-Nov

Economic Confidence Points NOV 84.5 85.7 84.3 30-Nov

Unemployment Rate % YoY OCT 11.7 11.7 11.6 30-Nov

PMI Manufacturing Points NOV 46.2 46.2 46.2 3-Dec

JAPAN UNI T PERI OD MARKET ACTUAL PREVI OUS DATE

Tankan Lge Manufacturers Index Points 3Q -4.0 -3.0 -1.0 1-Oct

Consumer Confidence Points OCT 39.5 39.7 40.1 9-Nov

GDP % YoY 3Q -0.9 -0.9 0.1 12-Nov

Machine Tool Orders % YoY OCT - -6.7 -6.7 19-Nov

Leading Index Points SEP - 91.6 91.7 19-Nov

BoJ Target Rate % NOV 0.1 0.1 0.1 20-Nov

Industrial Production % YoY OCT -8.0 -4.3 -8.1 30-NovVehicle Production % YoY OCT - -12.4 -12.4 30-Nov Note: Blue is stronger than expected (+3%), orange is weaker than expected release (-3%).Source: Bloomberg, ANZ Commodity Strategy


16/21


FORWARD CURVES

2,100

2,200

2,300

2,4002,500

2,600

2,700

2,800

2,900

3,000

3,100

1M3M 6M 1Y 2Y

MYR/t PALM OI L

1,800

1,850

1,900

1,950

2,000

2,050

2,100

2,150

2,200

2,250

1M3M6M 1Y 2Y 3Y

USD/t ZINC

65

67

69

71

73

75

77

79

81

1M3M6M 1Y 2Y 3Y

US/lb COTTON

15,500

16,000

16,500

17,000

17,500

18,000

18,500

1M3M6M 1Y 2Y 3Y

USD/t NI CKEL

19.0

19.5

20.0

20.5

21.0

21.5

1M3M6M 1Y 2Y 3Y

US/lb RAW SUGAR

79

80

81

82

83

84

1M 3M 6M 1Y

Points USD DXY

90

95

100

105

110

115

1M3M6M 1Y 2Y 3Y

USD/bbl BRENT

1,460

1,480

1,500

1,520

1,540

1,560

1,580

1,600

1,620

1M 3M 6M 1Y

USD/oz PLATI NUM

650

700

750

800

850

900

1M3M 6M 1Y 2Y

US/bu CHI CAGO WHEAT

1,900

1,950

2,000

2,050

2,100

2,150

2,2002,250

2,300

2,350

2,400

1M3M6M 1Y 2Y 3Y

USD/t A LU MIN IU M

84

85

86

87

88

89

90

91

92

1M3M6M 1Y 2Y 3Y

USD/bbl WTI

105

110

115

120

125

130

135

140

1M3M 6M 1Y 2Y

USD/t I RON ORE

7,200

7,300

7,400

7,500

7,600

7,700

7,800

7,900

8,000

8,100

1M3M6M 1Y 2Y 3Y

USD/t COPPER

1,100

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1,500

1,550

1M3M 6M 1Y 2Y

US/bu SOYBEANS

590

610

630

650

670

690

710

1M 3M 6M 1Y

USD/oz PALLADIUM

CURRENT LAST MONTH LAST SIX MONTHS

140

150

160

170

180

190

200

210

1M3M 6M 1Y 2Y

USD/t COKI NG COAL

140

150

160

170

180

190

1M3M6M 1Y 2Y 3Y

USD/lb COFFEE

500

550

600

650

700

750

800

1M3M6M 1Y 2Y 3Y

US/bu CORN

3,600

3,800

4,000

4,200

4,400

1M 3M 6M 1Y

CNY/t HOT ROLLED STEEL

28.0

29.0

30.0

31.0

32.0

33.0

1M3M6M 1Y 2Y 3Y

USD/oz SI LVER

2,000

2,100

2,200

2,300

2,400

2,500

2,600

1M3M 6M 1Y 2Y

USD/t COCOA

1,620

1,640

1,660

1,680

1,700

1,720

1,740

1,760

1M3M6M 1Y 2Y 3Y

USD/oz GOLD

1,900

2,000

2,100

2,200

2,300

1M3M6M 1Y 2Y 3Y

USD/t LEAD

80

85

90

95

100

105

110

115

1M3M6M 1Y 2Y 3Y

USD/t NEWC THERMAL COAL




17/21


MOVING AVERAGES

SPOT PRI CE 5 0 - DAY 2 0 0 - D A Y

1,400

1,600

1,800

2,000

2,200

2,400

2,600

Oct-09 Jul-10 Apr-11 Jan-12 Oct-12

ZINCUSD/t

60

70

80

90

100

110

120

130

140


THERMAL COALUSD/t

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

10,000


COPPERUSD/t

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000


LEADUSD/t

900

1,100

1,300

1,500

1,700

1,900


GOLDUSD/oz

200

300

400

500

600

700

800

900

Oct-09 Jul-10 Apr-11 Jan-12

PALLADI UMUSD/oz

12

18

24

30

36

42

48


SI LVERUSD$/oz

100

140

180

220

260

300


USD/lb COFFEE

50

60

70

80

90

100

110

120

130


BRENTUSD/bbl

250

350

450

550

650

750

850


CORNUS/bu

1,900

2,100

2,300

2,5002,700

2,900

3,100

3,300

3,500

3,700


COCOAUSD/t

40

60

80

100120

140

160

180

200

220


COTTONUS/lb

800

1,000

1,200

1,400

1,600

1,800


SOYBEANSUS/bu

60

80

100

120

140

160

180

200


USD/t I RON ORE

400

500

600

700

800

900

1,000


WHEATUS/bu

3,200

3,400

3,600

3,800

4,000

4,200

4,400

4,600

4,8005,000


USD/t HOT ROLLED STEEL

100

150

200

250

300

350


COKI NG COALUSD/t

50

60

70

80

90

100

110

120


WTIUSD/bbl

2,000

2,400

2,800

3,200

3,600

4,000


PALM OI LMYR/t

10

15

20

25

30

35


US/lb SUGAR

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800


USD/t ALUMINI UM

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000


NI CKELUSD/t

72

74

76

78

80

82

84

86

88


USD DXYPoints

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900


PLATINUMUSD/oz




18/21


ANZ PRICE FORECASTS

ANZ FORECAST TAB LE

COMMODI TY Un i t Ju n - 1 2 Sep - 1 2 Dec- 1 2 Mar - 1 3 Ju n - 1 3 Sep - 1 3 Dec- 1 3 2 0 1 3 F 2 0 1 4 F 2 0 1 5 F 2 0 1 6 F LT

BASE METALS

Aluminium USD/lb 0.85 0.95 0.91 0.94 1.00 1.04 1.06 1.06 0.99 1.02 1.02 1.05

Copper USD/lb 3.49 3.72 3.60 3.75 3.90 4.00 4.05 4.05 3.80 2.97 2.97 2.80

Nickel USD/lb 7.57 8.36 7.80 8.10 8.40 8.90 9.40 9.40 9.00 8.60 8.60 8.00

Zinc USD/lb 0.85 0.94 0.90 0.94 0.98 1.02 1.04 1.04 1.12 1.12 1.12 1.02

Lead USD/lb 0.84 1.03 1.02 1.04 1.05 1.06 1.07 1.07 1.12 1.11 1.11 1.00

Tin USD/lb 8.52 9.94 9.80 10.00 10.10 10.30 10.50 10.50 9.20 8.30 8.30 8.00

Aluminium USD/t 1,880 2,080 2,010 2,070 2,200 2,290 2,340 2,340 2,180 2,250 2,250 2,310

Copper USD/t 7,690 8,210 7,940 8,270 8,600 8,820 8,930 8,930 8,380 6,550 6,550 6,170

Nickel USD/t 16,690 18,430 17,200 17,860 18,520 19,620 20,720 20,720 19,840 18,960 18,960 17,640

Zinc USD/t 1,880 2,060 1,980 2,070 2,160 2,250 2,290 2,290 2,470 2,470 2,470 2,250Lead USD/t 1,850 2,270 2,250 2,290 2,310 2,340 2,360 2,360 2,470 2,450 2,450 2,200

Tin USD/t 18,780 21,910 21,600 22,040 22,260 22,710 23,150 23,150 20,280 18,300 18,300 17,640

PRECI OUS METALS

Gold USD/oz 1,597 1,772 1,780 1,820 1,850 1,870 1,890 1,890 1,800 1,690 1,690 1,460

Platinum USD/oz 1,447 1,662 1,640 1,690 1,820 1,835 1,860 1,860 1,810 1,720 1,720 1,480

Palladium USD/oz 583 639 670 700 760 780 800 800 782 755 755 700

Silver USD/oz 27.5 34.5 34.1 35.0 35.5 36.0 37.0 37.0 35.5 29.7 29.7 26.0

ENERGY

WTI NYMEX USD/bbl 85 92 90 96 100 101 103 103 100 94 92 90

Dated Brent USD/bbl 97 113 114 118 120 118 119 119 110 102 98 95

Uranium USD/lb 51 47 46 50 53 55 58 58 65 70 72 70

BULKS

Iron ore Spot (CIF China, fines) USD/t 134 104 112 118 122 126 128 128 125 120 115 100

Iron ore Contract (FOB Aust, fines) USD/t 128 118 103 107 111 115 117 117 117 110 105 90

Coking coal - Premium hard USD/t 210 225 170 165 180 190 200 200 190 185 180 175

Coking coal - Hard USD/t 205 174 160 155 165 175 185 185 170 165 160 155

Coking coal - Semi-soft USD/t 147 147 115 110 125 140 150 150 150 145 140 135

Newc Thermal Coal (Spot) USD/t 87 85 90 95 102 104 106 106 113 115 111 100

Newc Thermal Coal (JPY Contract) USD/t 115 115 115 115 105 105 105 105 110 115 110 100

OTHER METALS

Alumina USD/t 234 261 251 259 275 287 292 292 273 281 284 289

Molybdenum USD/lb 12.9 11.4 11.5 12.0 12.5 13.0 13.2 13.2 14.0 14.5 14.8 15.0

Cobalt USD/lb 13.6 14.0 14.0 14.2 14.4 14.6 14.7 14.7 15.2 15.6 15.8 15.0

AGRI CULTURE

Corn US/bu 617 776 746 784 795 671 653 726 600 590 590 590

Wheat US/bu 641 883 865 908 888 819 777 848 690 641 641 641

Soybeans US/bu 1,452 1,638 1,465 1,500 1,450 1,350 1,300 1,400 1,200 1,070 1,021 1,021

Cotton US/lb 90 84 82 80 79 78 82 80 95 125 95 95

Sugar US/lb 21 21 20 20 19 20 21 20 20 20 20 20

Palm Oil MYR/t 3,200 2,951 2,482 2,700 2,800 2,900 2,900 2,825 3,000 2,750 2,750 2,750

Note 1: Base/precious metals, energy and bulk forecasts are end of period prices; Agriculture forecasts are average prices

Note 2: Historical data are actuals



19/21


ANZ CONTACTS

ANZ COMMOD I TY RESEARCH

Mark Pervan Global Head of Commodity Research +61 3 8655 9243 [email protected]

Nicholas Trevethan Senior Base/Precious Metal Strategist +65 6681 8714 [email protected]

Natalie Rampono Commodity Strategist +61 3 8655 9258 [email protected]

Paul Deane Senior Agricultural Economist +61 3 8655 9078 [email protected]

Victor Thianpiriya Agricultural Strategist +65 6681 8869 [email protected]

ANZ A SI A RESEARCH

Tim Riddell Head of Global Markets Research, Asia +65 6681 8718 [email protected]


20/21


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