BASEMETALS

SPECIAL MONTHLY

REPORT ON

COPPER NICKEL LEAD ZINC ALIUMINUM

JUNE 2018

1

BA

SE

ME

TA

LS

BASE METALS PERFORMANCE (May 2018) (% change)

BASE METALS PERFORMANCE (January - May 2018) (% change)

SHFE

LME

MCX

SHFE

LME

MCX

June 2018

1.75

-1.34

4.91

6.30

12.59

0.07

-0.75

1.62

5.77

11.15

-0.51

2.02

1.53

9.27

8.58

-4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00

Copper

Zinc

Aluminium

Lead

Nickel

-1.92

-1.36

7.52

3.91

26.00

-4.64

-6.32

1.96

-1.98

23.98

-7.79

-4.56

-2.99

5.52

17.69

-10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00

Copper

Zinc

Aluminium

Lead

Nickel

CO

PP

ER

COPPER

Overview and outlook

Copper ended in green in the month of May as Chile

strike concerns in Escondida mine and good demand

from China supported the prices but tensions over U.S

and China over tariffs and rise in inventories capped

the upside. Copper moved in range of 448.95-474.50.

Tamil Nadu closed a big copper smelter run by

London listed Vedanta Resources after 13 people died

in protests demanding the closure of the plant on

environmental grounds.

Copper can take support near 450-460 range

while upside will remain capped near 500.

Moreover labour settlement in Chile raised prospects

for a deal at top mine Escondida. Unionized workers at

BHP's Spence copper mine in northern Chile agreed to

a new collective labour contract.

Profits earned by Chinese industrial firms in April rose

at their fastest pace in six months, data from the

National Bureau of Statistics showed recently, as

factories benefited from higher prices and strong

demand.

Sterlite Industries Ltd's copper smelter unit in

Tuticorin closed

Tamil Nadu Pollution Control Board ordered closure of

Sterlite Industries Ltd's copper smelter unit in Tuticorin

in the wake of alleged noxious gas leak from it.

Key news

Possibility of Chile mine strike supported

copper

Copper jumped higher to trade above $3.25 a pound

($7,165 a tonne), the highest since end-February

recently, as worries about supply disruptions in key

producing region resurface. Workers at the Escondida

copper mine in Chile put down quite a marker in the

third round of contract negotiations with part-owner

and operator BHP. The union is demanding a one-time

bonus equivalent to 4% of dividends distributed to

BHP shareholders in 2017. But Global miner BHP

stated that it had responded to the latest contract

proposal from unionized workers at its Escondida

copper mine in Chile, the world’s largest, triggering a

new round of talks that could last a month or more.

2

June 2018

Source Kitco metals

NIC

KE

L

Nickel

Overview and outlook

Nickel ended the month in green amid Nickel prices got

support from falling stockpiles which are at the lowest

since 2014, underlining a deficit in the metal used for

stainless steel and fear of supply constraints on Norilsk

Nickel

Nickel moved in range of 910.50-1025.30 in MCX.

Uncut cathodes in Rotterdam fall to $220-265 per

tonne Shanghai nickel premiums remain flat on thin

trading .Start of summer slowdown continues to

pressure European nickel market Premiums for uncut

cathodes fell with participants saying the start of

summer slowdowns have started to weigh.

Nickel can move with upside bias as it can take

support near 990 and can face resistance near

1080 in the month of June 2018

Key news

Electric vehicles demand and drawdown in

stock supporting Nickel

Nickel has surged 17% in 2018 with the market gripped

by 'electric vehicle fever' and buoyed by an exaggerated

draw on exchange stocks. Higher prices are squeezing

Chinese stainless steel margins.

Nickel pig Iron demand

NPI intrinsically correlates with the LME price because

of the contained nickel units that are amenable to the

major stainless steel demand base (c.70% of primary

nickel demand, 80% if including scrap). This overlap in

demand will remain sizeable and keep the market

pegged together for some time yet and indeed pegged to

the purchasing power of the Chinese stainless steel

mills.

NPI prices have also been dragged up 8% year-to-date

in the wake of the LME and are also approaching

unaffordable levels. Chinese stainless steel producers

using NPI are, in turn, still considering extended

maintenance, switching to carbon steels, or cutting

production altogether as they struggle to break-even at

current prices. Bulls who see nickel going higher must

suppose the current 10% NPI discount can go even

wider if these mills are to keep producing. At these

discounts, this again should spur more replacement of

refined by NPI and ultimately weigh on refined prices.

3

Source Kitco metals

June 2018

4

LE

AD

Lead

Overview and outlook

The battery metal lead gained higher in the month of

May as good demand and supply constraints

supported the global sentiments. Lead prices moved

in range of 150.65-171.80 in the month of May.

According to the National Bureau of Statistics (NBS)

“Profits earned by Chinese industrial firms in April

rose at their fastest pace in six months as factories

benefited from higher prices and strong demand. The

data suggests China's industrial sector is still seeing

solid growth momentum despite curbs on pollution

and rocky trade relations with the United States. The

higher April data should help ease concerns of

slowing momentum in China's economy as the

country implements tougher pollution controls on

"smokestack" industries and cash-strapped regional

governments cut back on big investment projects,

curbing demand for building materials.

Lead prices may get support on strong demand and

reduced supply following the closure of large zinc

mines due to depletion (lead is often a byproduct in

zinc mining). Lead production slowed in Muslim-

majority countries, due to Ramadan, and in India.

In the month of June battery metal can take

support near 160 while it has resistance near

176 in MCX.

Key News

Decline in stocks and stringent pollution

norms in China supporting Lead

Lead prices got support recently amid lower level of

stocks registered with the exchange. They have fallen

by 29,322 tonnes since the start of January to just

12,676 tonnes, the lowest level since February 2016.

Physical availability in China is being disrupted by

Beijing's rolling environmental inspections on the

secondary lead processing sector. Smelters producing

refined metal from scrap have been closed in Guizhou,

Jiangxi and Guangdong provinces, according to

Shanghai Metal Market.

ILZSG Estimates of Lead

Provisional data reported to the ILZSG indicate that

world refined lead metal demand exceeded supply by

37kt during the first quarter of 2018. Over the same

period total reported stock levels decreased by 26kt.

A 8.9% increase in global lead mine production

compared to the first quarter of 2017 was mainly due to

higher output in China, Morocco and Turkey.

Refined lead metal global output increased by 3.4%,

mainly influenced by a reported 4.6% rise in China.

Production was also higher in Australia and the United

States. In the Republic of Korea, output was 3.7% lower

compared to the first quarter of 2017.

Source Kitco metals

June 2018

5

ZIN

C

Zinc

Overview and outlook

Zinc prices ended the month of May in narrow range

on mixed fundamentals. Recently trade war tensions

between China and US coupled with surge in LME

inventories capped the upside. Zinc moved in range

of198.70-213.10.

In the month of June Zinc can trade sideways

as its prices can take support near 208 and

can face resistance near 225.

ILZSG estimates

According to preliminary data recently compiled by

the ILZSG, the global market for refined zinc metal

was in surplus by 25kt over the first quarter of 2018

with total reported inventories rising by 118kt over

the same period.

World zinc mine production remained stable

compared to the first quarter of 2017. This was

mainly the result of rises in Australia, Turkey and the

United States being offset by decreases in Canada,

China and India.

Higher refined zinc metal production in Australia,

Belgium, China, Norway and Peru was partially

balanced by decreases in India and the United States

resulting in an overall rise globally of 1.7%.

A modest 0.4% increase in global usage of refined

zinc metal was mainly influenced by rises in apparent

demand in China and India. In Europe, Japan,

Taiwan (China) and the United States, usage was

lower compared to the first quarter of 2017.

Chinese imports of zinc contained in zinc

concentrates rose by 21.9% to 362kt compared to the

first quarter of 2017. Net imports of refined zinc

metal rose by 82kt to total 136kt.

Lead and zinc Spread

Analysis: Lead and Zinc spread can move in range of -

49 to -39 in the month of June 2018.

Source:Reuters

June 2018

Source Kitco metals

6

AL

IUM

INU

M

Aluminum

Overview and outlook

Aluminum traded higher in the month of May on

stronger path as it moved in range of 149.50-161.55.

Russian aluminium producer Rusal has asked the

Russian government to purchase some of its output

in an effort to alleviate the pain inflicted by U.S.

sanctions. Global primary aluminum output fell to

5.256 million tonnes in April from a revised 5.372

million tonnes in March.

Aluminium prices can move sideways as it

can take support near 147 and resistance near

166 in MCX.

Russian automaker Avtovaz stated that it will

continue to buy aluminium from sanctions-hit Rusal

but was looking for alternative sources in case it has

to wind down business with the world’s biggest

producer of the metal.

Key News

US Midwest premium moves up

Aluminium premiums in the United States rose on

June 5 following the imposition of Section 232 tariffs

on material from Canada, Mexico and the European

Union, while a backwardation in forward spreads

pushed premiums in Asia and Europe lower.

US Imposing tariff to other countries

Aluminium

The duties of 10 per cent on aluminium, which

Washington claims are necessary on national

security grounds, were first announced earlier this

year as part of a crackdown by the US on China and its

flooding of cheap metals into global markets. The US

will begin levying tariffs on imports of steel and

aluminium from the EU, Canada and Mexico in a move

set to provoke retaliation and take the Trump

administration further down the path of a trade war

with some of the US’s longest standing allies.

China aluminium production rises 1.5 pct in

May

China’s aluminium production in May rose 1.5 percent

to 2.79 million tonnes from a year earlier. In the first

five months of the year, China produced 13.6 million

tonnes, a rise of 1.4 percent from the same period last

year, the data showed. Shanghai aluminium prices

ticked 0.8 percent higher in May, after a 4.8 percent

boost in April in the wake of U.S. sanctions on Russian

producer Rusal. The metal is on course to gain around

5.6 percent in Shanghai this quarter.

Source Kitco metals

June 2018

7

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June 2018