MacQ Commodities Comment

Base metals stock changes; some more bullish trends emerging

Feature article
The latest trends in reported stock changes are more bullish in copper, nickel and zinc (declining stocks) and less bearish in aluminium (stocks still increasing, but at a slowing trend rate).

Latest news
Base metals traded sharply higher on Wednesday, as April private employment figures in the US finished above expectations. Copper recovered from Tuesday’s losses to close 4.7% higher, despite a 1.8% stock increase, as workers went on strike at Xstrata’s Lomas Bayas mine (65ktpa).

China’s iron ore imports in April rose to a record 53.5mt, according to preliminary reports from the Ministry of Transport. If confirmed, this would mark the second month in a row in which imports have exceeded 50mt, up more than 24% from April 2008. Stocks of iron ore at Chinese ports, at 74.5mt, are near record highs, up by around 10mt over March and April.

Freight rates boomed on Wednesday, with the BDI surging by 168 points (8.9%) to end at 2,065. Capesize spot rates rose by 15.7%. Vale, Rio Tinto and BHP Billiton chartered 69 capesize vessels last month, surpassing fixtures in April and May 2008, at the top of the bulk shipping market.

Speaking at the Macquarie Australia Conference, Ian Ashby, President of BHP Billiton Iron Ore, said that the company would fall “a few million tonnes” short of its previous 130mt iron ore production target in the current financial year after a number of accidents at its operations. BHP Billiton remains committed to expanding its iron ore capacity in the Pilbara from around 129mt currently to 205mtpa by 2011. BHP Billiton has not made any voluntary cuts to production as its marketing approach aims to displace higher-cost production by targeting spot-market sales.

Alcoa Inc. said that production will be curtailed by 40% (870kt) at the Suriname Aluminium Co. (Suralco) alumina refinery in Paranam, Suriname. The facility, which has a production capacity 2.2mtpa, is a joint venture between Suralco (55%) and NV BHP Billiton Maatschappij Suriname (BMS).