News

PRECIOUS-Gold prices dip as dollar holds up on higher US bond yields

Date Nov 14 2017 16:02:35 Source:Reuters

    Nov 14 (Reuters) - Gold prices inched down on Tuesday, with the dollar holding steady on higher U.S. Treasury yields amid uncertainty over the outlook for tax reforms in the United States.     

    Higher U.S. bond yields can pressure gold prices as they reduce the appeal of non-yielding bullion, while a stronger dollar makes the metal costlier for holders of other currencies.

    Spot gold  XAU=  was down 0.1 percent at $1,276.29 per ounce at 0355 GMT. U.S. gold futures  GCcv1  for December delivery fell 0.2 percent to $1,276.30.    

    "Gold prices continued to trade in a very tight range as investors await cues from global markets," ANZ said in a note. 

    "Rising bond yields and the lack of progress of U.S. tax reforms have seen investors move to the sidelines in the gold market."

    U.S. Treasury two-year note yields hit a fresh nine-year high on Monday, as the yield curve resumed its flattening and investors priced in a 25-basis-point interest rate hike by the Federal Reserve in December.

  Meanwhile, Congressional Republicans pushed ahead on Monday on a U.S. tax code overhaul as a Senate panel considered the issue, but risks lay ahead with major intraparty disputes unsettled and President Donald Trump returning soon from Asia as the debate heats up.

    "There is not much speculative interest (in gold) this morning. The U.S. treasury bond yields are also putting some pressure (on prices)," said a Hong Kong-based trader.

    "We see limited upside potential for gold as the dollar is  strong," the trader added. 

    Spot gold may break support at $1,274 per ounce and fall to the next support level at $1,263, as suggested by a wedge and a Fibonacci ratio analysis, according to Reuters technical analyst Wang Tao. 

    Hedge funds and money managers raised their net long position in COMEX gold by 7,027 contracts to 173,562 contracts  in the week to Nov. 7, U.S. Commodity Futures Trading Commission (CFTC) data showed on Monday.    

    That marked the first time speculators had raised their net long position in eight weeks.

    The dealers also increased their net long position in silver by 7,675 contracts to 65,461 contracts, CFTC data showed.

    In wider markets, the dollar index  .DXY , which tracks the U.S. currency against a basket of six major rivals, held steady at 94.487, while sterling arrested a recent slide, which followed concerns about Theresa May's ability to stay on as British prime minister.  USD/ 

    Among other precious metals, silver  XAG=  fell 0.5 percent to $16.96 per ounce and platinum  XPT=  declined 0.4 percent to $928.55. 

    Palladium  XPD= , which touched a near two-week low of $981.70 earlier in the session, recovered to gain 0.3 percent to $992.72 an ounce.

Edited by SHMET

China Oct aluminium output falls 2.3 pct on-month -stats bureau

Date Nov 14 2017 16:00:58 Source:Reuters

 

    BEIJING, Nov 14 (Reuters) - China's primary aluminium production fell for a fourth straight month in October, government data showed on Tuesday, hit by high costs and the closure of illegal capacity, with further decreases expected soon as winter output restrictions kick in.

    The world's top aluminium producing country churned out 2.55 million tonnes of the metal last month, down 2.3 percent from 2.61 million tonnes in September and versus 2.73 million tonnes in October, 2016, according to the National Bureau of Statistics (NBS).  urn:newsml:reuters.com:*:nL4N1MT0IC

    Year-to-date aluminium production came in at 27.23 million tonnes, up 3.7 percent year-on-year.

    China's aluminium production has been declining since June's record-high of 2.93 million tonnes following the closure of illegal smelting capacity.

    It remains on course for a record-high in 2017, but the year-on-year growth rate has slowed dramatically from double digits in February-April. 

    Output is set to dip further in the coming months as China imposes its first ever winter restrictions on aluminium production, part of the government's battle against pollution.

    However, the cuts, which are getting under way in smog-prone cities as northern China's heating season begins this week, may not be as severe as initially expected. 

    China's overall non-ferrous metals output in October came in at 4.46 million tonnes, up from 4.44 million tonnes in September and versus 4.55 million tonnes in October, 2016.

    Year-to-date nonferrous production stood at 45.22 million tonnes, up 3.4 percent from the same period last year and still on course for a record-high.

 

 

 

 

 

 

Edited by SHMET

Cracks open in aluminium raw materials supply chains: Andy Home

Date Nov 14 2017 15:59:52 Source:Reuters
    LONDON, Nov 13 (Reuters) - China's winter heating season has arrived and the aluminium market is still struggling to work out what impact it will have on the country's production. 

    The question returned again and again at last week's ARABAL conference in Oman but consensus answer came there none.

    Capacity will certainly close as part of the government's drive to improve air quality in the region around Beijing. But potential offsets both from earlier "illegal" capacity closures and from higher output in unaffected parts of the country make the exact calculations fiendishly difficult. 

    In London three-month aluminium  CMAL3  is trading around $2,120 a tonne, some way off the five-year high of $2,215 hit earlier this month. 

    That suggests the market is taking a slightly more relaxed view about the size of the looming production hit, particularly in light of rapidly building stocks on the Shanghai Futures Exchange. 

    However, attention is now turning to the knock-on impacts of the winter industrial capacity cuts on key raw materials in the aluminium smelting process, particularly alumina and carbon anode. 

    Both have recently jumped in price and both featured heavily in last week's discussions, both on and off-stage, in Oman.  

    Carbon anode was already a ticking time bomb for aluminium smelters, but one over which they have little control. 

    The disruptive impact from alumina price volatility, by contrast, is to some extent a self-inflicted injury after a collective shift in pricing methodology. 

    

    Graphic on relative price performance by aluminium and alumina: http://tmsnrt.rs/2zSMOrb

    

    END OF THE NATURAL HEDGE

    The London aluminium price has climbed by almost 25 percent this year.

    Alumina  AALc1 , the key metallic input to the smelting process, has jumped by almost 50 percent to about $465 a tonne. 

    It, too, is reacting to the potential for significant capacity closures in the most smog-prone parts of China. 

    As with the metal link in the supply chain, nobody is quite sure how much alumina will be lost over the coming winter heating months. Alumina demand, meanwhile, is a function of smelter operating rates, embedding the alumina price between two "known unknowns". 

    Until very recently, alumina price volatility wasn't a big deal for aluminium smelters, even though it is one of their most important costs along with power. 

    That's because, outside China at least, most of them had alumina supply contracts linking the price to that of primary aluminium. 

    It was, as Ali Al-Baqali, deputy chief executive at Aluminium Bahrain, told ARABAL delegates, a natural hedge. 

    And now that natural hedge has gone. 

    Led by Alcoa  AA.N , the smelter sector has largely dropped any linkage between alumina and aluminium pricing over the past five years. 

    Alcoa now prices about 85 percent of its third-party alumina sales using some form of alumina price index, according to the company's third-quarter results. 

    So do most other producers. At a stroke, the global smelter sector has lost control over one of its most important production costs. 

    In theory, it could use the CME's new alumina contracts to hedge its exposure. 

    In practice, however, the contracts are too illiquid to allow wholesale hedging. One contract hasn't traded at all, while the other one, indexed to Platts' assessment of the Australian market, has recorded cumulative volumes of only 541,000 tonnes since its launch last year. 

    The London Metal Exchange (LME) has committed itself to studying a possible alumina contract but it will face the problem that the industry itself hasn't decided on a benchmark price. 

    Smelters typically contract to buy alumina using a ratio of three different price assessment indices, a hotchpotch formula that will bedevil any easy hedgeable solution. 

    

    CARBON TIME BOMB

    You can't make aluminium without alumina and you can't make it without an anode either. 

    And, according to Robert Dickie, senior consultant at U.S. research house Harbor Aluminum Intelligence, "there is no viable alternative to the carbon anode", produced from petroleum coke and liquid pitch. 

    This part of the aluminium supply chain is also being upended by China's environmental winter cuts. 

    But it has been tightening steadily for several years, with analysts warning as long ago as 2015 of a pending supply crunch.

    China is one of the world's major producers of carbon anode but, even before this year's round of seasonal cuts, it was directing ever-increasing amounts to meeting domestic demand, cutting exports in the process. 

    The world outside of China has been scrambling ever more desperately for replacement supply. 

    "There's just not enough coke," Ritchie says.

    With petroleum coke accounting for only a very small part of oil refiners' revenues and most of that coke not the right sort of material for making carbon anodes anyway, there is little prospect of any supply response any time soon. 

    A market rebalancing will have to come from the demand side.

    What this means is that smelters must "blend, blend and blend" low-sulphur anode coke with other forms of fuel coke, said Yasmin Brown of Jacobs Consultancy. 

    Unfortunately, none of the speakers appearing on the raw materials panel at the conference could produce any evidence that this is actually happening. 

    Too many procurement and research and development departments still operate in their own mutually exclusive silos.

    

    RAW MATERIALS CRUNCH

    Such has been the market's fixation on Chinese aluminium production that these equally unstable components of the smelting process have tended to be overlooked. 

    The Chinese winter cuts have exposed underlying pricing and supply stresses in both the alumina and carbon anode sectors. 

    And since both are core but currently unhedgeable cost components, there are plenty of implications for aluminium pricing, adding another layer of complexity to an already multi-dimensional puzzle.

    But the implications may well prove even more significant than a flow-through into metal ingot pricing. 

    With all eyes on China and how its producers fare over the next few months of mandated capacity closures, there is growing speculation about potential smelter restarts in the rest of the world. 

    Right now, however, to judge by the mood at last week's conference, there is little chance of any would-be restart sourcing sufficient carbon anode to re-energise its potlines. 

Edited by SHMET

BREAKINGVIEWS-Rio Tinto could have high-grade chairman in Davis

Date Nov 14 2017 15:58:30 Source:Reuters
    SINGAPORE, Nov 14 (Reuters Breaking views) - Rio Tinto RIO.L could have a high-grade chairman in former Xstrata boss Mick Davis. Big miners usually prefer statesman-like chairmen to dealmakers. So Davis, who Sky News and the Financial Times say is frontrunner for the job, would be an odd choice for the $90 billion giant at this point in the commodity cycle. But he's smart, thinks big and would keep headstrong Chief Executive Jean-Sébastien Jacques on his toes.

    Davis is justly admired as the man who turned a jumble of coal mines bought from sister company Glencore  GLEN.L  into an ambitious, new-generation miner. Not everything worked for Xstrata: a bet on platinum in 2008 was a disaster, and the

group's eventual absorption into Glencore proved controversial. But most other deals, like the bid for miner Falconbridge in 2006, did.

    In life after Xstrata, he again turned to deals - or tried to. Few materialised. Rio, by contrast, has spent much of the past four years atoning for the M&A mistakes that cost Tom Albanese his job in 2013. Last year's appointment of Jacques handed control to a younger, more technocratic leader.

    Having a conventional grandee in charge of the board is no guarantee of future conservatism, in either deals or investment. Jan du Plessis, a board veteran with an impeccable pedigree, presided at Rio over both top-of-the-market deals and the cuts and writedowns that followed.

    Still, Rio's Anglo-Australian rival BHP Billiton BHP.AX sent a strong signal by hiring a former packaging executive, Ken Mackenzie, to the top job. BHP is admittedly fighting off an activist investor, but this appointment hints at a miner centered on industrial processes and ruthless efficiency, not volumes.

    Dismissing Big Mick, as he is sometimes dubbed, would be a mistake for three reasons. First, the industry needs to reinvent itself and Davis has shown vision. He ran Xstrata much as a private-equity investor would. That was before many others in the industry had switched their focus from digging up as much metal as possible to generating solid returns on equity.

    Second, he would have valuable industry expertise. That experience at the literal coalface is unusual for big miners.

And third, he is a strong personality who could hold the chief executive and his team to account. That sounds like a valuable mixture.

     

    CONTEXT NEWS

    - Sky News and the Financial Times reported on Nov. 13 that former Xstrata boss Mick Davis was the frontrunner to become the next chairman of Rio Tinto, respectively citing a "City source" and people familiar with the matter.

    - Davis built Xstrata into a mining heavyweight, and sold the company to shareholder Glencore in 2013. He later set up a mining fund, X2 Resources, but struggled to find deals. He is also chief executive of Britain's ruling Conservative Party.

    - Rio, the London and Sydney-listed miner, said in March that Chairman Jan du Plessis would retire and it planned to announce a replacement by the end of 2017. Du Plessis, who has been appointed chairman of BT, the telecoms carrier, will depart by no later than Rio's 2018 annual general meeting in Australia.

Edited by SHMET

China's avg daily steel output falls in October m/m-stats bureau

Date Nov 14 2017 15:57:12 Source:Reuters
    SHANGHAI, Nov 14 (Reuters) - China's average daily crude steel output fell for a second straight month in October from the previous month, government data showed on Tuesday, as the world's top steelmakers curbed output to help reduce smog over winter.

    Daily steel output dipped 2.5 percent to 2.334 million tonnes in October, from 2.394 million tonnes in September, according to Reuters' calculations based on the data from the National Bureau of Statistics.

    Monthly output still rose 0.7 percent to 72.36 million tonnes in October, which has one day more than September, and was also up 6.1 percent from a year ago, according to the data.

    Steel mills in big producing cities including Tangshan and Handan in Hebei province have been ordered to largely cut production in the winter months as the government tries to crack down pollution and clear its skies. 

    "The fall is within expectations due to the government's crackdown on environmental pollution and a one-week national holiday at the start of the month," Qiu Yuecheng, an analyst with the steel trading platform Xiben New Line E-Commerce in Shanghai.

     Qiu expected average crude steel output to fall below 2.3 million tonnes in November as 28 cities will fully implement output curbs between mid-November and mid-March amid the government's push to reduce smog.

    The capacity cut and output curbs driven by the environmental crackdown have boosted Chinese steel prices  SRBcv1 , which have risen 46 percent so far this year. 

    China has met its target for cutting steel capacity by 50 million tonnes this year. Total steel output in the first 10 months rose 6.1 percent to 709.5 million tonnes, data showed.

 

Edited by SHMET
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