PRECIOUS-Gold prices ease on outlook for U.S. rate hikes

Date Jan 09 2018 15:17:35 Source:Reuters

    Jan 9 (Reuters) - Gold prices inched down on Tuesday amid expectations for more U.S. interest rate hikes this year.

    Spot gold XAU= was down 0.1 percent at $1,319 an ounce by 0314 GMT, after falling as far as $1,315.40 early in the session. 

    Last week, prices touched their highest since Sept. 15 at $1,325.86.

    U.S. gold futures GCcv1 were mostly unchanged at $1,320 an ounce. 

    The dollar hit a more than one-week high against a basket of other major currencies on Monday. DXY, pressuring gold. But, the greenback fell to a session low of 112.49-yen JPY= on Tuesday after the Bank of Japan trimmed the amount of its buying of Japanese government bonds.  

    Investors are betting on further U.S. interest rate hikes after Friday's payrolls data did nothing to challenge the outlook for monetary policy tightening by the U.S. Federal Reserve.

    Atlanta Fed President Raphael Bostic, who is a voting member of the central bank's policy board, said on Monday that two hikes might be needed in 2018, in light of weak price pressures.

    "Gold will be under pressure (in the short term) as the dollar will strengthen on U.S. tax reforms and rate hike expectations," said Ji Ming, chief analyst at Shandong Gold Group.

    "However, the market will get used to the rate hike expectations soon and the dollar will lose its strength, pushing gold higher," Ming added.

    "We can expect prices to go past 2017 highs in the second half of 2018."

    Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

    Spot gold may test resistance at $1,329 per ounce, as suggested by a Fibonacci retracement analysis and a triangle, according to Reuters technical analyst Wang Tao.

    "Support for gold is at $1,311.40. Moving average convergence divergence and momentum indicators are biased to the upside and we remain bullish on gold," ScotiaMocatta analysts said in a note.

    Among other precious metals, spot silver XAG= fell 0.4 percent to $17.11 an ounce.

    Platinum XPT= dropped 0.9 percent to $963.70, after hitting 3-1/2-month peak on Monday at $973.60.

    Palladium XPD= was down 0.2 percent at $1,098.10 an ounce.




Edited by SHMET

New year, new highs for zinc as market tightens further: Andy Home

Date Jan 09 2018 15:16:48 Source:Reuters

    LONDON, Jan 8 (Reuters) - Zinc has started the new year with a bang, hitting a fresh 10-year high of $3,380 per tonne in the first week of trading on the London Metal Exchange (LME). 

    The only historical reference point for zinc at such levels is the bull market of 2005-2007, when LME three-month metal CMZN3 topped out at $4,600. 

    Few seem to be expecting a return to such extreme pricing but, with funds adding length in both London and Shanghai, there are still many betting that zinc's two-year bull charge isn't over just yet. 

    They evidently agree with Goldman Sachs, which has revised upwards its price forecasts to $3,300 on a three-month basis, $3,500 on a six-month basis and $2,800 on a 12-month basis. 

    Even as a supply response starts to build after two years of rising prices, Goldman's view is that "the market is likely to get even tighter in the first half of (this) year." ("Zinc: tightness to persist through 1H2018", Dec. 18, 2017). 

    Events in the three weeks since the bank issued that forecast have served only to reinforce its core message.



    LME time-spreads eased steadily over the last two months of 2017 to the point that the benchmark cash-to-three-months period CMZN0-3 was valued at $10 contango in the middle of December, compared with $91 backwardation in October. 

    This loosening spread structure looked anomalous given the daily declines in LME-registered stocks. 

    Either it was signalling more metal was on its way to the LME warehouse network or it was no more than a temporary mismatch of short and long positioning across the front part of the curve. 

    It's the latter interpretation that now looks the most likely. 

    Absolutely zero fresh metal has arrived in the LME storage system and time-spreads have tightened up again. 

    That cash-to-three-month period, for example, closed last week valued at $26 backwardation. 

    More LME spread tightness looks almost inevitable. 

    Not only is headline inventory still ticking lower on a near daily basis but Friday's LME stocks report showed 25,075 tonnes of net new cancellations as metal is prepared for physical load-out. 

    All the cancellation action took place at New Orleans, which shouldn't come as a shock since the U.S. port now holds all but 1,700 tonnes of the 180,325 tonnes left in the entire system.

    Excluding cancelled tonnage, LME "live" stocks are now just 139,250 tonnes. 

    Sure, that's still higher than last year's July low point of 69,850 tonnes, but with no arrivals since the middle of October, exchange stocks liquidity is fast becoming a focal point of zinc's narrative of supply deficit. 



    One possible reason for so little metal being available for LME delivery, despite the reappearance of a premium for cash metal, is a sharp pick-up in Chinese imports. 

    China's pull on metal from the rest of the world was distinctly subdued in the first half of 2017, net imports actually falling by 40 percent year-on-year to 170,000 tonnes.

    Indeed, China's lack of import appetite was a significant wrinkle in zinc's bull story. 

    The trend turned in July, however, with imports of refined zinc accelerating sharply. 

    November itself saw net imports hit 122,600 tonnes, the largest monthly tally ever, eclipsing the previous record of 120,000 tonnes dating from March 2009.

    The November count was boosted by the import of 50,903 tonnes of zinc from Spain, making it the second largest supplier in the first 11 months of 2017 after Australia, a more traditional source for Chinese importers.

    China imported less than 10,000 tonnes of zinc from Spain in both 2015 and 2016 and even if November's flood turns out to be a one-off, there is a sense of metal moving from off-exchange statistical shadows to plug supply-chain gaps. 

    The Shanghai zinc contract is backwardated beyond the first three trading months and registered stocks are also close to historical lows. 

    There was some rebuild over the last week but at 77,383 tonnes, inventory held in Shanghai Futures Exchange sheds is 82,000 tonnes lower than this time last year and 130,000 tonnes lower than in January 2015. 

    China is itself a major producer of zinc, both at the mined and the refined metal level. 

    But the country's ability to respond to physical tightness and higher prices has been severely constrained by the ongoing environmental campaign. 

    While China's zinc mines "used to be the swing producers in previous cycles", Goldman Sachs analysts argue that the country's zinc production in this particular price cycle "has disappointed and is likely to only increase slowly going forward."



    The steady attrition of LME stocks and the sharp pick-up in Chinese imports have reinvigorated the bull argument for higher zinc prices. 

    But, judging by the LME options market, the optimism comes with a sell-by date. 

    Call options confer the right to buy and, not entirely surprisingly, there is open interest on strikes such as $4,000, $4,400 and $4,500 in each of the next five months. 

    Beyond June, however, open interest almost totally disappears above the $3,800 strike, suggesting Goldman is not the only one looking for prices to peak around the middle of the year. 

    The only outlier on the 2018 call options heat map is the four lots (100 tonnes) of open interest on the $5,000 strike in December. 

    It's a relatively small bet but a big call that zinc's bull charge is going to be extended for longer and further than consensus. 

    Bullish exuberance? 

    Quite possibly, but until the LME stocks trend turns, tightness in both physical and paper markets looks set to the defining feature of the zinc market over the coming weeks and months. 


Edited by SHMET

As China restricts scrap, metal companies look to process copper abroad

Date Jan 09 2018 15:16:02 Source:Reuters

    BEIJING, Jan 8 (Reuters) - As China tightens restrictions on imports of foreign waste, Chinese metal recyclers and even smelters like Jiangxi Copper Co are increasingly looking to use Southeast Asian countries as an alternative location for the processing of copper scrap. 

    China relies on imports for around half of its scrap copper needs but told the World Trade Organization last year that it would stop accepting certain types of foreign solid waste, including metals, from 2018 if they did not meet stricter impurity thresholds.

    Analysts say this cuts off a key source of supply for the world's largest copper consumer and boosts refined copper makers, which are likely to see an increase in demand.

   Shanghai copper futures SCFcv1 were roiled last year by China's moves to ban imports of Category 7 scrap - such as coiled copper cable and waste motors - from 2019, with import

quotas already starting to dry up.

    And, in a more immediate development, traders in China now find themselves unable to import scrap copper if they cannot show they are scrap end-users.

    Manson Zeng, an entrepreneur based in China's bustling southern Guangdong province, decided to set up a trading platform for waste recyclers after realizing the policy changes would spell the end for his own waste import business. 

    He estimated that several hundred of the platform's members had gone to Southeast Asian countries to develop their businesses or were preparing moves.

    In the case of copper, the idea is to perform dismantling work overseas on Category 7 scrap procured from countries like the United States and convert it into higher-grade material that would not be subject to China's new import restrictions.  

    Elton Xu, the foreign trade department manager at Zili Copper Industry Co, a recycler of scrap copper in Hangzhou, said his company has started building a new processing factory in Thailand because of the policy changes.

    Having visited several potential sites in Southeast Asia, Zili decided to set up shop in an industrial park in Rayong on the Gulf of Thailand.

    The project, due to start up by the end of 2018, "will produce 50,000 tonnes per year of copper blister from 200,000 tonnes of hazardous waste and other complex materials," Xu said, adding that this would help Zili increase its annual output of copper cathode - used to make copper rods and wire - of 150,000 tonnes. Copper blister is partly purified copper.



    China's top three sources of scrap copper in 2017 were Hong Kong, the United States and Australia, which accounted for around 45 percent of imports in the first 11 months of the year.

    But customs data also point to a booming copper scrap trade between China and Southeast Asia. In the January-November period, Chinese imports of copper scrap from Thailand jumped 94.9 percent year on year to 146,185 tonnes. That followed a 355 percent jump in 2016 from the previous year.

    Two other emerging Southeast Asian scrapyards, Malaysia and the Philippines, were also among China's top 10 scrap copper suppliers, the latter's shipments jumping by over 520 percent. 

    A source at one scrap recycler in Malaysia said more Chinese companies had been setting up plants in the country over the past couple of years, importing scrap copper from around the world. But she said they only took high-quality copper scrap.

    Vietnam, Indonesia, Myanmar, Laos and India were named by industry sources as possible alternative scrap-processing destinations.

    And it is not just small, private players weighing such moves. Even the state-run Jiangxi Copper 600362.SS   0358.HK, which uses scrap as well as copper concentrate to make refined copper, is considering setting up facilities in Southeast Asia because of the import ban, company sources said. 

    "We want to find a country where it's convenient to ship to China," one Jiangxi Copper official said, adding that the company planned to send out teams to assess conditions on the ground. The official requested anonymity because he was not authorized to speak to the media. A Jiangxi Copper spokeswoman said she was unaware of the plans.

    A shift of Chinese processing capacity "will inevitably happen in other Asian countries, typically less mature economies," Michael Lion, president of Lion Consulting Asia, said at the Asia Copper Week conference in November. But he said that such facilities "do not exist to the extent they do in China" and "can't be recreated overnight."

    Scrap companies may be reluctant to invest overseas in case China changes its regulations again after seeing their impact, which could be "enormous", Lion said.    

    Speaking of China's new thresholds for impurities, which are 1 percent for nonferrous metals and 0.5 percent for waste electric motors, wires and cables, Lion said "it would be extremely difficult" for any scrap coming into China to conform with the new requirements. 

    "At the very best, there is going to be an enormous dislocation and disruption in the copper supply chain." 



Edited by SHMET

China issues stricter rules on building new steel capacity -industry ministry

Date Jan 08 2018 16:34:10 Source:Reuters

    SHANGHAI, Jan 8 (Reuters) - China has issued stricter rules on building new steel production capacity to replace obsolete facilities, the Ministry of Industry and Information Technology said on Monday.

    China, the world's top steel producer, will allow one tonne of new capacity to be built for each 1.25 tonnes of old capacity closed in environmental sensitive regions, effective this year,

the ministry said in a statement.  Speculators raise net long positions in COMEX gold, copper -CFTC NEW YORK, Jan 5 (Reuters) - Hedge funds and money managers raised their net long positions in COMEX gold and copper contracts in the week to Jan. 2, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.

    They also switched to a net long position in silver futures and options, the data showed.

    The dealers raised their net long position in gold by 42,731 contracts to 152,650 contracts, CFTC said. During that week, spot gold prices  XAU=  hit a three-month peak, extending a year-end rally in which the metal rose 4.4 percent in the last three weeks of 2017.

    The weaker U.S. dollar, in which gold is priced, helped to lift the yellow metal by more than 13 percent in 2017. Gold surged $55 an ounce in the last three weeks of the year alone.

    Technical analysts, however, warned that gold's rally had looked overstretched.

    Copper speculators raised their net long position by 13,604 contracts to 113,124 contracts, the data showed.

    Speculators switched to a net long position in silver of 16,006 contracts adding 23,111 contracts, after three consecutive weeks of being at a net short position, CFTC data showed.


Edited by SHMET

China's Hebei aims to cut 8 mln T of steel capacity in 2018

Date Jan 08 2018 16:33:32 Source:Reuters

    SHANGHAI, Jan 8 (Reuters) - China's top steelmaking province of Hebei will cut steel production capacity by as much as 8 million tonnes this year, an environmental official said in comments published on the provincial government website on Sunday.

    Gao Jianmin, head of the provincial environmental bureau, also said in the comments, made in a Friday briefing, that Hebei would shut 19 coal mines and cut coal production capacity by 10.62 million tonnes this year. It will also reduce coke capacity by 5 million tonnes.

    The heavily polluted province, which surrounds the capital Beijing, is on the frontline of the country's war on overcapacity and pollution, with China desperate to improve air quality across the country.    

    Hebei shut 27.54 million tonnes of steelmaking capacity and 21.32 million tonnes of ironmaking capacity last year. China as a whole is aiming to cut steel capacity by 100 million to 150 million tonnes over the 2016-2020 period as part of its efforts to reduce supply gluts.

    The region will also strengthen pollution checks and impose tougher punishments on companies and officials for violating regulations, in a further effort to cut pollution and smog.

    The provincial government has pledged to curb concentrations of hazardous smog particles, known as PM2.5, by 14 percent by 2020. It said last week that it met all its air quality targets for 2017. 

    The province promised in 2013 to cut total annual steel output by 60 million tonnes by the end of 2017. It said in November last year that it had exceeded the target, shedding a total of 69 million tonnes over the period.


Edited by SHMET