Gold dips on firm dollar amid hopes for easing U.S

Date Mar 09 2018 15:00:52 Source:Reuters

   March 9 (Reuters) - Gold prices extended losses into a third session on Friday as the dollar strengthened against the yen on hopes of easing tensions between the United States and North Korea and ahead of U.S. non-farm payroll data later in the day.

    U.S. President Donald Trump said on Thursday he was prepared to meet North Korean leader Kim Jong Un for the first U.S.-North Korea summit, marking a potentially dramatic breakthrough in nuclear tensions with Pyongyang. 

    "We are seeing reactions to the Trump-Kim Jong Un's potential for a discussion prompting a risk-on trade and that is putting some pressure on safe haven assets," said a Hong Kong based trader. 

    Spot gold was down 0.3 percent at $1,317.41 per ounce at 0405 GMT and was on track to post its third weekly decline. U.S. gold futures were down 0.3 percent at $1,318.1.

    Against the yen, the dollar rose 0.4 percent to 106.66 yen, inching away from a low of 105.24 yen on March 2, the greenback's weakest level since November 2016.  

    The U.S. dollar had tumbled to 16-month lows against the safe-haven yen late last week as fears of a trade war rattled markets after Trump announced his plan for imposing tariffs on imported steel and aluminium.

    "We are moderately bearish on gold prices, and see the rising yield environment as a headwind," analysts at Societe Generale said in a note.

    "That being said, we think U.S. rate hikes are already priced in for 2018, and ETF holdings have been very stable in recent history," analysts said, adding that they see gold prices at $1,275 per ounce in six months. 

    Spot gold may fall more into a range of $1,307-$1,312 per ounce, as it has pierced below a support at $1,317, according to Reuters technical analyst Wang Tao.  

    Investors were waiting on the release of the U.S. jobs report later on Friday that will include data on non-farm payrolls and average hourly earnings.

    "I think today the market might get a little short, feeling that we will have good numbers and that risk is on," the Hong Kong based trader said. 

    In other precious metals, silver fell 0.5 percent to $16.41 per ounce. 

    Platinum dipped 0.6 percent to $946.50 per ounce, while palladium declined 0.3 percent to $974 per ounce. 

Edited by SHMET

Why electric vehicles could fracture the nickel market

Date Mar 09 2018 14:55:58 Source:Reuters

   LONDON, March 8 (Reuters) - China's Ministry of Finance made some minor but significant tweaks to its nickel import tariffs at the start of this year.

    The import duty on melting-grade nickel cathode was doubled from 1 percent to 2 percent, while that on nickel sulphate was cut from 5.5 percent to 2 percent.

    Why the differentiation?

    The reason is that nickel sulphate is a form of the metal highly suited to the production of precursor battery materials.

    China, already a leader in the electric vehicle (EV) battery sector, is evidently laying the ground for stimulating imports of nickel in the most readily usable composition for lithium-ion battery processing.

    Batteries are still a relatively small part of nickel's usage profile, representing about 4 percent of global demand, according to the International Nickel Study Group.

    But everyone knows that ratio is only going to increase as the electric vehicle revolution builds momentum.

    As it does, however, it could fragment an already cracked market, both in terms of the supply chain and pricing.



    Most of the world's nickel production -- about 70 percent of it -- is used as an alloying input in the production of stainless steel.

    The type of nickel used for stainless production was historically, in ascending order of price, stainless steel scrap, ferronickel and refined metal.

    But the Chinese initiated a materials revolution around the middle of the past decade in response to nickel's extraordinary bull run to more than $50,000 a tonne in 2007.

    Looking for cheaper alternatives, they unearthed a technology that had been explored but never developed, namely nickel pig iron (NPI).

    An explosion in this form of the metal has generated far-reaching consequences, including a whole new nickel ore supply stream from Indonesia and the Philippines, the offshoring of NPI production and even stainless steel production to Indonesia and the crash in the nickel price to less than $10,000 in 2016.

    Producers of more conventional types of nickel are still struggling to adjust. Witness the decision late last year by Vale, the world's largest producer, to mothball production capacity. 



    Nickel's existing dynamics, beholden as they are to the needs of stainless steel producers, are highly problematic for the EV sector.

    Most of the world's current production growth is taking place in the NPI segment of the market.

    NPI production is forecast to hit 700,000 tonnes this year, compared with global refined output of 2.08 million tonnes in 2017, according to Wood Mackenzie ("Nickel: Five things to look for in 2018", January 2018).

    Global mine output, the research house says, will increase by more than 10 percent this year but just about all of that will come from Indonesia and the Philippines in the form of nickel ore destined for NPI processing.

    The problem is that none of this material is suited for production of the nickel sulphate powder desired by battery makers.

    It's not impossible to transform NPI into sulphate, but it's neither economical nor logical. As a result, to quote Wood Mackenzie, "about half of global nickel production is not available" for battery usage.

    The incentive to build new capacity to produce the right sort of nickel, however, is simply not there because of the price impact of the NPI boom.

    The London Metal Exchange (LME) nickel price is today trading around the $13,000. That's an improvement on the sub-$10,000 pricing that persisted over the course of 2016 and the first half of 2017.

    But, as Vale has shown, it's still the sort of pricing landscape in which established producers are as likely to shutter existing production capacity as to bring on new operations.

    This is a major potential headache for the ever-growing EV segment of the nickel market.

    In fact, it is a double problem for battery makers because low nickel prices have also served as a deterrent to new cobalt production, another key lithium-ion battery input.

    Outside of the African copper belt, cobalt tends to be found as a by-product in nickel deposits.

    Many smaller miners of such deposits closed during the market downturn of 2015 and 2016 and the nickel price hasn't moved enough to revitalise any of them.



    Future demand for nickel sulphate is only going to accentuate the existing structural tensions between different types and chemistries of nickel.

    That's the nature of the stuff. It comes in so many different varieties that the tradeable commodity is constantly shape-shifting.

    Take the London Metal Exchange (LME) contract, for example.

    Although the exchange's physical delivery criteria are uniform in terms of minimum purity and impurity levels, they allow for a wide variety of shapes, ranging from pellet to briquettes to cut cathode.

    The LME's decision to delist two Russian brands of full-plate nickel, for the quite understandable reason that Nornickel no longer produces them, has changed the essence of the contract.

    Russian full-plate, which used to account for just about all LME stocks, has been shipped to China, where it is still deliverable against the Shanghai Futures Exchange (ShFE).

    Full-plate nickel currently accounts for less than 20 percent of total registered stocks. The share of stocks in bagged briquettes, by contrast, has risen from zero at the start of 2012 to 79 percent.

    The coming electric vehicle revolution opens up a whole new schism between nickel in metallic form and in chemical form.

    Premiums for chemical nickel are already diverging as battery makers have to pull extra units from the stainless or super-alloy process streams.

    The obvious outcome is for the nickel market to split into two distinct entities, and the LME has already indicated it is considering launching a new contract for nickel sulphate. The exchange is also, by the way, studying a cobalt sulphate contract for exactly the same reason.

    Because right now the "nickel market" is still in lock step with its traditional stainless steel demand base. That base is actively working against the efficient evolution of a separate supply chain stream to feed battery demand.

    The tensions are growing all the time.

    The EV story is a strong, slow-burn bull case for higher nickel prices.

    Nickel sulphate prices, not nickel pig iron prices.


Edited by SHMET

Asia's biggest exporters bristle over U.S. tariffs, fanning trade war fears

Date Mar 09 2018 14:34:02 Source:Reuters

    TOKYO March 9 (Reuters) - Major Asian nations reacted sharply to U.S. President Donald Trump's decision to impose tariffs on steel and aluminium imports on Friday, warning of damage to relations amid industry calls for retaliation.

    Japan said the move would have a "big impact" on the countries' close bilateral ties, while China said it was "resolutely opposed" to the decision and South Korea said it may file a complaint to the World Trade Organization.

    Trump on Thursday pressed ahead with the imposition of 25 percent tariffs on steel imports and 10 percent for aluminium on Thursday, though he announced exemptions for Canada and Mexico, and said exceptions could also be made for other allies.

    China, which produces half the world's steel, will assess any damage caused by the U.S. move and "firmly defend its legitimate rights and interests," the country's Ministry of Commerce said. 

    The tariffs would "seriously impact the normal order of international trade," the ministry said.

    The European Union, Brazil and Argentina said overnight they should not be targeted or would seek exemptions, and Japan, South Korea also said they would seek exceptions.

    South Korea, a key Washington Asian ally, is the third largest steel exporter to the United States, after Canada and Brazil.

    "We should prevent a trade war situation from excessive protectionism, in which the entire world harm each other," Trade Minister Paik Un-gyu told a meeting with steelmakers.

    Trade tensions between China and United States have risen since Trump took office. China accounts for only a small fraction of U.S. steel imports, but its massive industrial expansion has helped create a global glut of steel that has driven down prices.

    China's steel and metals associations urged the government to retaliate against the United States, citing imports ranging from stainless steel to coal, agricultural products and electronics.

    It was the most explicit threat yet from the country in an escalating trade spat.

    The dispute has fuelled concerns that soybeans, the United States' most valuable export to the world's second largest economy, might be caught up in the trade actions after Beijing launched a probe into imports of U.S. sorghum, a grain used in animal feed and liquor. 

    "The cost of a trade war will be tremendous and it will make everyone unhappy," Junichi Makino, chief economist at SMBC Nikko Securities in Tokyo, said in a report on Friday.


    Trump's declaration coincided with the signing by 11 countries of a new Trans-Pacific trade pact that the United States withdrew from last year.

    A senior South Korean official said the tariffs would impact the renegotiation of the bilateral free trade deal with the United States that is currently underway.

    The official said ways had to be found to address steel overcapacity in China as South Korea was the top importer of Chinese steel, although shipments from China were 21 percent down in 2017 from the previous year.

    He said the United States has raised concerns over South Korea’s “transshipment” of Chinese steel, although the trade ministry has argued that only 2.5 percent of steel exported to the United States uses Chinese material.

    The official also expect higher U.S. tariffs to put South Korean carmakers, Hyundai Motor and Kia Motors, at a disadvantage in the U.S. market as it would increase their costs.

    In Sydney, Prime Minister Malcolm Turnbull sounded confident of getting favourable treatment as Trump spoke of Washington's strong relationship with Australia, a major exporter of iron ore but exports little steel and the United States was not a major customer.

    "I was pleased to see the president acknowledge the strong points I have been making to him. There is no case for imposing tariffs on Australian steel," Turnbull told reporters in Sydney.

    India's steel ministry said in a note to the trade ministry last month that U.S. import tariffs were expected to lead to a loss of $130 million in exports which were expected to total 333,656 tonnes for the year ending on March 31.

    Shares in China's steel and aluminium makers fell on Friday morning. Baoshan Iron & Steel was down 3.6 percent by 0451 GMT, while Hesteel and Beijing Shougang were down more than 1 percent.

    In South Korea, shares in Posco were down 3.6 percent, while in Tokyo Japan's biggest steelmaker Nippon Steel & Sumitomo Metal was down 0.7 percent.

    Chinese steel futures slumped to their weakest level since November. 


Edited by SHMET

Shanghai rebar falls nearly 2 pct amid trade war fears

Date Mar 08 2018 13:50:10 Source:Reuters

MANILA, March 7 (Reuters) - Chinese steel futures fell almost 2 percent on Wednesday, dropping along with other riskier assets in Asia after a key advocate for free trade in the U.S. government resigned, stoking worries Washington will proceed with steep tariffs that could risk a trade war.

Asian equities and other commodities from oil to copper also headed south after Gary Cohn, Trump's top economic adviser and a voice for Wall Street in the White House, said on Tuesday he would resign. 

Chinese stocks reversed early gains to end lower as investors exercised caution, waiting for the impact of U.S. President Trump's plans to impose 25 percent tariffs on steel imports and 10 percent on aluminium.

The most-active rebar on the Shanghai Futures Exchange closed down 1.6 percent at 3,890 yuan a tonne after falling as far as 3,885 yuan earlier, its lowest since Feb. 23.

It was the fourth daily drop for the construction steel product as investors await a recovery in demand.

Construction activity in top steel consumer China is only resuming gradually after last month's Lunar New Year holiday and steel stocks have risen to nearly one-year highs as traders look ahead to a pickup in demand.  

"Slowing steel demand growth in China should curb any strong steel supply growth, but elevated margins remain a key upside risk to our steel production outlook," Commonwealth Bank of Australia analyst Vivek Dhar said in a note.   

Production restrictions on most Chinese cities covered by Beijing's winter curbs will end on March 15. While some cities, including top steel-producing Tangshan, have declared they will continue with output limits after mid-March, most mills are looking forward to maximising output.

China's infrastructure push and environmental crackdown had helped increase margins at steel producers, which this year remain well above the five-year average.     

Dhar said China's plan to close another 30 million tonnes of steel capacity this year would still leave about 200 million tonnes of spare capacity that "gives enough headroom for Chinese steel production to rise".   

The most-traded May iron ore contract on the Dalian Commodity Exchange ended 0.5 percent lower at 517.50 yuan a tonne, near a one-month low of 515.50 yuan touched earlier.   

Coking coal slid 2.3 percent to close at 1,347.50 yuan per tonne, after hitting a one-month trough of 1,338.50 yuan. Coke fell 1.5 percent to 2,151 yuan.       

Iron ore for delivery to China's Qingdao por fell 1.2 percent to $76.07 a tonne on Tuesday, its weakest since Feb. 6, according to Metal Bulletin.

    ($1 = 6.3274 Chinese yuan)


Edited by SHMET

Beny Steinmetz's mining firm BSGR enters administration to protect itself

Date Mar 08 2018 13:40:33 Source:Reuters

LONDON, March 7 (Reuters) - Mining company BSG Resources (BSGR) on Wednesday said it had voluntarily entered into administration, adding it had taken the decision to protect itself as it faces legal action.   

BSG Resources, the mining arm of billionaire Beny Steinmetz's businesses, is caught up in legal disputes in relation to the vast Simandou iron ore project in Guinea.   

As well as facing legal action, BSGR, which denies any wrong-doing, is suing financier George Soros for $10 billion in damages over lost contracts. Soros has sought to have the lawsuit dismissed. A judge put the case on hold in November.   

Dag Cramer, who is a director of BSGR, said going into administration was to protect the company against "any adverse or malicious development out of our control".    

"It's very, very simple. This is not a liquidation. This is not a bankruptcy. We have voluntarily put ourselves into administration," he told Reuters.   

He said he would be staying on as a director and the technical procedure would not affect daily operations of subsidiaries or the company's determination to "go the distance" with its arbitration over Guinea.

  BSG Resources is a private company registered in Guernsey whose subsidiaries include the Koidu diamond mine in Sierra Leone.

  A BSGR spokesman told Reuters that Steinmetz does not sit on BSGR's board or have an executive role, but "is the beneficiary of the foundation that owns BSG Resources".  

Edited by SHMET