Monday, April 25, 2016
An Overview
Base Metals Quarterly Report
Prepared By:
KCTL Research
PRICE REVIEW: LME
4200
4300
4400
4500
4600
4700
4800
4900
5000
5100
5200
31-M
ar
23-M
ar
17-M
ar
11-M
ar
7-M
ar
1-M
ar
24-F
eb
18-F
eb
12-F
eb
8-F
eb
2-F
eb
27-J
an
21-J
an
15-J
an
11-J
an
5-J
an
LME COPPER 3MO ($)
7000
7500
8000
8500
9000
9500
10000
4/J
an
11/J
an
18/J
an
25/J
an
1/F
eb
8/F
eb
15/F
eb
22/F
eb
29/F
eb
7/M
ar
14/M
ar
21/M
ar
28/M
ar
LME NICKEL 3MO ($)
PRICE REVIEW- LME
1200
1300
1400
1500
1600
1700
1800
1900
2000 4-J
an-1
6
11-J
an
-16
18-J
an-1
6
25-J
an-1
6
1-F
eb-1
6
8-F
eb-1
6
15-F
eb-1
6
22-F
eb-1
6
29-F
eb-1
6
7-M
ar-
16
14-M
ar-
16
21-M
ar-
16
28-M
ar-
16
LME ALUMINUM 3MO ($) LME ZINC 3MO ($) LME LEAD 3MO ($)
GLOBAL PMIs
Global manufacturing sector, including
the metals, is showing modest
improvement or at least stabilizing.
The U.S. index from the Institute for
Supply Management rebounded to 51.8
in Q1, 2016, the first sign of growth in
seven months.
China's figure topped 50 for the first time
since July in Q1, 2016, signaling a
recovery.
The EU reading rebounded to 51.6 from
a one-year low. Japan's index slipped to
49.1, the lowest in three years.
CHINA PMIs
China's metals demand may be
stabilizing as manufacturing shows
sign of a recovery.
The March official manufacturing PMI
inched up to 50.2, its first time above
the growth threshold of 50 in eight
months.
The new orders index reached a 17-
month high of 50.2. Overcapacity
cuts, such as the recently announced
reduction of 100-150 million metric
tons in crude steel output, may be
key to resolving the metal industry's
slump.
US FACTORY DATA SHOWS CONTRACTION
Despite a marked improvement in manufacturing
sentiment, the headline industrial production index
slumped significantly in Q1, as output dropped in
March and both January, February levels were
revised lower.
Headline industrial production declined -0.6%
during March, significantly below the -0.1%
estimate.
Manufacturing production declined -0.3% following
a smaller -0.1% decline in the previous month. The
details indicated weakness was concentrated in
motor vehicles where the output fell by -1.6%.
The capacity utilization rate declined further due to
the slump in industrial output. The overall utilization
rate fell to 74.8% from 75.3% prior, which is the
lowest level since late 2010.
COPPER
HIGHER CHINESE IMPORTS DOES NOT MEAN HIGHER DEMAND
-400
-300
-200
-100
0
100
200
300
400
500
600
700
Jan-1
5
Fe
b-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-15
Aug-1
5
Sep-1
5
Oct-
15
No
v-1
5
Dec-1
5
Jan-1
6
Fe
b-1
6
Mar-
16
China Monthly Unwrought Copper and Product Imports ('000 Metric Tons) SHFE - LME Arbitrage (USD/Metric Ton)
China's import of unwrought copper and
products jumped 36% in March’16 from
the prior month to 570,000 tons, the
highest monthly amount since data
became available in 2001.
The surge may not point to a recovery in
domestic market copper demand, given
that inventory also climbed.
Bonded warehouse inventory, a form of
non-exchange reported stock, jumped
34% sequentially to 510,000 tons.
The imports have been on the back of
more arbitrage opportunities.
COPPER – MINE PRODCUTION STILL REMAINING HIGH
-6
-4
-2
0
2
4
6
8
10
12
14
1000000
1100000
1200000
1300000
1400000
1500000
1600000
1700000
1800000
1900000
2000000 Jun
-11
Sep-1
1
De
c-1
1
Mar-
12
Jun-1
2
Se
p-1
2
De
c-1
2
Mar-
13
Jun-1
3
Se
p-1
3
De
c-1
3
Mar-
14
Jun-1
4
Se
p-1
4
De
c-1
4
Mar-
15
Jun-1
5
Se
p-1
5
De
c-1
5
World Mine Copper Production (mt) (L1)
World Mine Copper Production Yoy (%) (R1)
Copper mines boosted output by
41% in Peru and 17% in China, the
second and third largest producers,
offsetting Chile's 11% decline in
January.
Chile is the world's largest mined-
copper producer, accounting for
about 30% of global supplies.
Copper-mine production may rise
3.6% in 2016, according to a
Bloomberg estimates, with output
ramping up in Peru at Freeport-
McMoRan's Cerro Verde mine and
MMG's Las Bambas site
COPPER – BALANCE SHEET
Copper production for 2016 is expected to jump by
around 1.90%, which a year earlier posted around 7%
annual growth
Topmost producer Chile can ramp up their production
levels by 3.70% as per our estimates
From consumption side, Y/Y growth in 2016 can be
around 3.50%, a little less than the last year where it
increased by 4.80%
Demand from China is expected to pick up by 10%
compared to 3% increase in the previous year on the
back of lower prices and increased infrastructure
As per latest ICSG report, global world refined copper
market showed a 56,000 tonnes surplus in January,
compared with a 50,000 tonnes deficit in December
Production (MT)
Region 2014 2015 2016(E)
World Total 1612996 1727378 1759509
Asia Total 313875 398965 385183
Australia 81417 81600 82817
Canada 57043 65152 65368
Chile 523500 495300 513620
China 136000 153200 156655
Europe Total 132680 131969 131633
Indonesia 36741 47476 38448
NAFTA Total 225231 227868 245673
Peru 114068 186450 165510
Consumption (MT)
Region 2014 2015 2016(E)
World Total 1881301 1971782 2039487
Asia Total 1406058 1471624 1569616
China 1054207 1089495 1201537
Europe Total 262052 267581 242669
Germany 73247 90984 74692
Japan 80194 74910 79410
NAFTA Total 156442 169657 171054
COPPER – WAREHOUSE STOCKS & CANCELLED WARRANTS
LME copper cancelled warrants have
been slumping since Mar’16, which
witnessed around 10% jump in Feb’16
M/M.
Deliverable stocks in Shanghai Exchange
is showing downside move in April, which
has been continuously building up since
past three months.
LME copper stocks is slumping since
Feb’16.
With degrade in Chinese appetite, extra
copper is being exported by the country.
Chinese government companies which are
the largest consumer in the country like
State Grid and Railways have curtailed
their future spending in order to pay back
their previous debts.
COPPER: FUNDAMENTAL OUTLOOK
Copper has China as its main and largest consumer, where a slight recovery in the PMI, imports and industrial
production has helped some recovery in the first quarter.
Going ahead, the metal is likely to dance to the tunes of trends in the real demand from China as the actual
demand from China is still unclear. The high amount of imports are expected to be on the back of arbitrage
opportunities and the financing deals and not due to the real demand.
Additionally, Tibet is likely to add 1,63,000 MT towards supply in an already oversupplied market while the
global surplus is even expected to remain high on lower demand.
The confusing picture in the LME, Shanghai inventories and the cancelled warrants also points towards a bleak
demand. This in turn is likely to keep the prices of the metal under check over the medium term.
Overall, with copper remaining in oversupplied markets where the pace of demand is not showing signs of
sustainable improvement, the prices are likely to remain weaker in the upcoming quarter. With some supply
disruptions coming some minor pullbacks can not be ruled out but looking at the broader fundamentals, the
recommendation remains to sell on rise.
COPPER: TECHNICAL OUTLOOK
Expected Trend: Bearish
Trend determining technical factors:
1. Prices are moving with a lower highs and lower
lows formation in monthly chart, forming a
bearish trend channel.
2. Short term exponential moving averages 8, 13
and 21 periods supporting for bearish trend.
3. MACD is in negative zone in monthly chart,
which holds bearish view for coming months.
4. RSI-14 is reading at 39.50 in monthly chart,
there is a down side potential till 30 mark.
Monthly MCCc1 4/30/2013 - 1/31/2017 (BOM)
Price
INR
Kg
280
320
360
400
Value
INRKg
Value
INRKgQ2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2013 2014 2015 2016
Exchange Action Entry Target Stop Loss
LME Sell 5100-5120 4500/4300 5400
MCX Sell 338-340 300/285 365
ALUMINIUM
ALUMINUM- CHINESE EXPORTS DECLINE ON LOWER PREMIUMS
China's exports of unwrought
aluminum and related products fell 11%
during Jan-Mar 2016 to 1.08 million
tons Y/Y, mainly on a lower overseas
premium.
Average premiums producers charged
in addition to the LME price tumbled
76% in Singapore and 62% in the U.S.
from a year earlier.
Domestic aluminum prices gained 9%
over the first quarter, while overseas
prices only rose about 1%.
March exports jumped 50% from the
prior month as shipments picked up
after the Chinese New Year.
ALUMINUM- CHINESE OUTPUT MIGHT BE TOPPING OUT
China's primary aluminum output is
slowly coming down as smelters take
steps to cut capacity and delay the
ramp-up of new projects in a bid to
underpin prices.
The latest available data show
production was 2.53 million tons in
December, down 8% from an all-time
high in June.
The nation may have cut 4.91 million
tons of capacity in 2015, according to
the China Nonferrous Industry
Association and about 15% of capacity
in 2014.
ALUMINUM- BALANCE SHEET
Aluminum production in 2015 witnessed a growth of more than
1% on Y/Y basis.
Overall in 2016, production levels might witness a jump of more
than 5% Y/Y.
Total Asian contribution for aluminum production is around 65%
and in 2016, it is expected to show a growth rate of 10% Y/Y.
From consumption side, global consumption slumped by around a
percent.
Global consumption in 2016 shall witness a growth more than 7%
Y/Y in which China would be the top contributor.
Overall consumption from China shall witness a Y/Y growth of
around 13%.
Total aluminum output in China as per IAI in March was around
2.62 million tonnes from 2.07 million tonnes in Feb.
Production (MTs)
Region 2014 2015 2016(E)
World Total 4451491 4503405 4742839
Asia Total 2979411 3017085 3344659
Australia 136400 137600 129192
Canada 241750 257863 248766
China 2293117 2310068 2592661
Europe Total 658428 696217 632551
NAFTA Total 383041 371287 369210
Russia 295400 295700 276342
Consumption (MTs)
World Total 4354023 4318102 4636817
Asia Total 3007694 3057684 3345108
China 2250465 2269729 2568175
Europe Total 596510 612279 568054
NAFTA Total 538393 473895 551621
Russia 51370 57663 54798
ALUMINUM- WAREHOUSE STOCKS AND CANCELLED WARRANTS
Aluminum stocks at LME warehouses
showed a monthly decline since
starting of this year.
As per latest update, stocks jumped
more than 50% in April month.
Cancelled warrants of aluminum on the
other hand has been rising on monthly
basis from starting of this year.
Last year the cancelled warrants
showed monthly decline in almost
every months.
On YTD basis, March’16 witnessed
biggest gains in cancelled warrants this
year.
ALUMINUM: FUNDAMENTAL OUTLOOK
Supply and demand dynamics are improving outside China, with slower growth in capacity, more facility
closures and a better outlook for demand. In China, by comparison, low-cost capacity continues to come online.
China accounts for 50% of total demand and supply of global Aluminum therefore its China and the rest of the
world as the major players of Aluminum.
Use of aluminum in the power grid is supportive for prices, while the opening of new industrial parks in China is
also likely to boost the Al demand. However, we have already seen a good rally in the prices from lower levels,
therefore further gains hereafter are uncertain.
Prices can remain capped on account of direct power sales as it could pare the cost for smelting by-passing
grids which could bring some savings to the old and high cost smelters, that would keep them in operation.
Overall the outlook remains bleak as the slowdown in the property segment is likely to weigh on the Al prices,
whereas higher prices is further expected to postpone the demand.
ALUMINUM- TECHNICAL ANALYSIS
Expected Trend: Bearish
Trend determining technical factors:
1. Prices are moving in a wave pattern in
weekly chart, currently impulse wave
1-wave 4 has completed and wave 5
is in progress.
2. Wave 5 expected target is minimum
Rs.90.20 which is 61.8% of Fibonacci
projection level of wave 3 to wave
3. RSI-14 approached over bought zone
which may limit rally for coming
weeks.
4. Trend line resistance seen at 111.50,
which may act as crucial resistance
for coming week.
Exchange Action Entry Target Stop Loss
LME Sell 1680-1690 &
1740-1750 1470/1400 1820
MCX Sell 110.00-110.50 &
115.00-115.50 98/91 121
NICKEL
CHINA NICKEL IMPORTS vs STAINLESS STEEL PRODUCTION
Chinese Ni based stainless steel
production in 2015 slumped around 4%
on Y/Y.
As per latest updates available, the
same slumped more than 20% in Feb
month on M/M basis.
China customs refined nickel imports
last year almost doubled compared to
2014 average imports.
In 2016, as per latest updates, imports
slumped by around 15% M/M basis in
Feb month.
With decline in domestic demand, SS
production has gone down despite of
magnified imports by China.
0
10000
20000
30000
40000
50000
800000
1000000
1200000
1400000
1600000
1800000
China customs refined Ni imports(metric tonne) China Ni based SS prod(metric tonne)
CHINA IMPORTS vs SHANGHAI FUTURES DELIVERABLE STOCKS
0
10000
20000
30000
40000
50000
60000
70000
Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16
China customs refined Ni imports(metric tonne)
Shanghai futures ex Ni deliverable stocks total(metric tonne)
Nickel deliverable stocks at Shanghai
futures YTD moved up more than 2 times
compared to last year.
INSG report released in the month of March
showed around 8,100 tonnes deficit in Jan
month.
As per the data, the production of nickel in
January month fell around 6.20% i.e. from
162,100 tonnes in Dec’15 to 151,900 tonnes
in Jan’16.
Demand in Jan’16 stood around 160,000
tonnes, up from 158,300 tonnes in Dec’15,
though down by 2% from a year ago.
Nickel mine supply in Jan’16 month slashed
by 11% to 158,064 tonnes from 177,600.
NICKEL – GLOBAL SUPPLY SCENARIO
0
50000
100000
150000
200000
250000
-40
-20
0
20
40
60
80
Jan
-16
Oct
-15
Jul-
15
Ap
r-15
Jan
-15
Oct
-14
Jul-
14
Ap
r-14
Jan
-14
Oct
-13
Jul-
13
Ap
r-13
Jan
-13
Oct
-12
Jul-
12
Ap
r-12
Jan
-12
Oct
-11
Jul-
11
Ap
r-11
Jan
-11
Oct
-10
Jul-
10
Ap
r-10
Jan
-10
Global Nickel Mine Production (mt) Global Nickel Mine Production Yoy (%)
A 70% plunge in nickel prices
since 2014 resulted in a 6.1%
contraction in global mined nickel
production in 2015.
Despite of 23% decline in mine
production from Philippines it is
still world’s biggest exporter to
China post Indonesian ban.
Mine supply could rebound if
downstream operations start up in
Indonesia. Norilsk, the world's
largest nickel producer, projected
its 2016 output at 225,000-
235,000 tons, about 10,000 tons
more than last year.
NICKEL: SUPPLY DEMAND
Nickel production last year witnessed a yearly growth of
around 1%
This year, production levels are estimated to witness a jump of
around 10%
China’s Y/Y production in 2016 is estimated to grow around
35% and thus the whole Asian output shall surge by 20%
From consumption side, global demand in 2016 is estimate to
move down by more than 10%, which last year witnessed a
growth more than 35%
Total Asian consumption in which China is the top most
contributor is estimated to move down by around 18% on Y/Y
basis
Production (MTs)
Region 2014 2015 2016(E)
World Total 163078 164573 181486
Asia Total 72283 72766 88077
Australia 12334 10400 12894
China 50096 44800 61399
Europe Total 42776 41206 40478
NAFTA Total 11724 13300 11930
New Caledonia 6021 7385 7388
Norway 7700 7734 7763
Consumption (MTs)
World Total 121401 166683 161044
Asia Total 84371 125576 124550
China 60280 85278 91596
Europe Total 21616 24999 19960
NAFTA Total 12870 10067 11648
NICKEL- WAREHOUSE STOCKS AND CANCELLED WARRANTS
50000
100000
150000
200000
250000
400000
420000
440000
460000
480000
LME Ni warehouse stocks(tonnes) LME Ni cancelled warrants(tonnes)LME nickel warehouse stocks jumped by
40% Y/Y in 2015
Cancelled warrants in 2015 jumped more
than 35% on yearly basis
Both cancelled warrants and warehouse
stocks have been declining on monthly basis
since Feb’16
Mar’16 witnessed biggest cancelled
warrants fall on monthly basis since Jan’12
On monthly basis, Ni stocks at LME
warehouses jumped more than 5%, which
was biggest gains since Oct’14, suggesting
dull demand for the metal
NICKEL: FUNDAMENTAL OUTLOOK
Concerns about an economic slowdown in China and the strong U.S. dollar caused the price of nickel to dive
along with other commodities.
China is expected to boost its refined nickel imports for coming three years after the State Reserve Bureau
confirmed with the industry sources.
With fall in availability of nickel pig iron, which is an alternative used for production of stainless steel, China is
expected to buy refined nickel between 100,000 and 150,000 tonnes in coming three years.
This year, around 30,000- 60,000 tonnes have been purchased by the Chinese industries so far.
Total nickel inventory in China by the end of March 2016 was around 202,000 tonnes, which is around 300%
compared to March 2015 inventory levels.
Thus, with expected magnified demand from the Chinese market, Nickel shall show positive trend this quarter.
NICKEL: TECHNICAL OUTLOOK
Expected Trend: Bullish
Trend determining technical factors:
1. Last month candle stick formed an
inverted hammer pattern in monthly
chart and this month prices are trading
above it conforming the formation,
which is trend reversal in nature.
2. RSI-14 periods in monthly chart
turning up from over sold level of
17.95 and currently reading at 36.34
mark, which supports bullish trend for
coming months.
3. Resistance is seen at Rs.699 and
Rs.810, which are 23.6% and 38.2%
of Fibonacci resistance from Rs.1280
to Rs.520.50 respectively.
Exchange Action Entry Target Stop Loss
LME Buy 8880-8900 &
8400-8420 10400/11000 7600
MCX Buy 590-595 &
560-565 690/730 519
ZINC
ZINC- MINE PRODUCTION STALLING
0
200000
400000
600000
800000
1000000
1200000
1400000
-20
-15
-10
-5
0
5
10
15
20
Global Zinc Mine Production (mt)
Global Zinc Mine Production Yoy%
Closings of old zinc mines, such as
the 500,000-metric-ton Century site
and 150,000-ton Lesheen mine, and
planned cuts by big producers could
keep global output little changed in
2016 from last year.
Global zinc-mine output started the
year with a January decline of 2.2%,
or 1.05 million tons.
Australia's 6.8% increase in output
offset the 4.3% drop in China, which
accounts for 36% of global supplies.
GLOBAL REFINED ZINC STATUS
-100000
-50000
0
50000
100000
150000
Jan/0
8
Jun/0
8
Nov/0
8
Apr/
09
Sep
/09
Fe
b/1
0
Jul/10
De
c/1
0
May/1
1
Oct/11
Mar/
12
Aug/1
2
Jan/1
3
Jun/1
3
Nov/1
3
Apr/
14
Sep/1
4
Fe
b/1
5
Jul/15
De
c/1
5
Global Refined Zinc Balance (mt) China's refined zinc production
rose 1.3% in January, extending a
5.6% jump in 2015 that was fueled
by favorable treatment charges
and capacity expansion.
An announced cut of 500,000
metric tons at China's zinc
smelters has been slow to take
hold.
Global production in January still
shrank 1.4% from a year earlier to
1.14 million tons as concentrate
availability tightened due to
production cuts at mines.
LEAD- MINE SUPPLY MAY TIGHTEN
-40
-30
-20
-10
0
10
20
30
0
100
200
300
400
500
600
Jan-1
6
Dec-1
5
Nov-1
5
Oct-
15
Sep-1
5
Aug-1
5
Jul-15
Jun-1
5
May-1
5
Apr-
15
Mar-
15
Feb-1
5
Jan-1
5
Dec-1
4
Nov-1
4
Oct-
14
Sep-1
4
Aug-1
4
Jul-14
Jun-1
4
May-1
4
Apr-
14
Mar-
14
Feb-1
4
Jan-1
4
Dec-1
3
Nov-1
3
Oct-
13
Sep-1
3
Aug-1
3
Jul-13
Jun-1
3
Lead Mine Production (000's mt) Rate Of Change (12)
Mine closings and maintenance in
Australia and intensifying
environmental pressures in China
limit the growth of lead mine
output, which could also lead to a
decline in refined lead production.
The global balance in refined lead
may hinge on production and
demand in China.
Australia's production dropped
9.7%, due largely to maintenance
at the Paroo Station mine and the
shutdown of the Century mine.
China's output slid 25.2% amid the
imposition of stricter environmental
rules.
ZINC- BALANCE SHEET
Global zinc production in 2015 slumped by 3% on yearly
basis.
Chinese production in 2015 was down by more than
10%.
Worldwide production in 2016 is estimated to decline
around 0.40%.
From consumption side, overall consumption on Y/Y
basis in 2015 declined by 0.60%.
In 2016, expected consumption shall move up more than
a percent on yearly basis.
Consumptions from China shall grow by around 3% in
2016 and thus, could add positivity to the metal.
Production (MTs)
Region 2014 2015 2016 (F)
World Total 1173485 1137222 1133182
Asia Total 760748 733511 738530
China 543588 485673 503750
Europe Total 211126 205857 206571
NAFTA Total 99903 100074 97197
Consumption (MTs)
World Total 1148876 1141648 1154802
Asia Total 784719 783230 799824
China 572508 549762 565261
Europe Total 204614 201342 195525
NAFTA Total 100619 89466 99117
ZINC- LME WAREHOUSE STOCKS
20000
60000
100000
140000
180000
0
100000
200000
300000
400000
500000
600000
700000
LME Zinc cancelled warrants LME warehouse stocks Zn Zinc stocks at LME warehouses dropped by
more than 28% in 2015 on Y/Y basis
In 2016, warehouse stocks slumped more than
15% as per the latest updates
Cancelled warrants for zinc slumped more
than 25% in 2015
On monthly basis, cancelled warrants jumped
around 50% in November 2015, which was
highest monthly gains since September 2014
In 2016, cancelled warrants mostly witnessed
slumps other than Feb month, which showed
around 34% rise on monthly basis
Percentage of cancelled warrants to total
stocks last year was around 19%, which in
2014 was around 18%
ZINC: FUNDAMENTAL OUTLOOK
An announced cut of 500,000 metric tons at China's zinc smelters has been slow to take hold. Global production
in January still shrank 1.4% from a year earlier to 1.14 million tons as concentrate availability tightened due to
production cuts at mines.
Average zinc prices rose 13% to $1,683 a metric ton on the London Metal Exchange during 1Q, recovering from
the lowest price since the financial crisis, but still down 20% from a year earlier.
Mine closings and supply cuts from big producers may not be enough to boost near-term prices, yet a possible
shortage of concentrate could lead to declining refined zinc production. The global balance in refined zinc may
be pivotal for production and demand in China. For the upcoming quarter we remain bullish on Zinc and
recommend a buy
ZINC: TECHNICAL OUTLOOK
Expected Trend: Bullish
Trend determining technical factors:
1. V-bottom pattern has formed in weekly
chart and currently trading above neck
line with expected target of Rs.144
2. Currently prices are trading above
50% Fibonacci resistance of recent
fall.
3. Short term moving exponential moving
averages 8, 13 and 21 periods are
supporting for bullish trend in monthly
and weekly chart.
4. RSI-14 is reading at 57.78 in monthly
chart, there is an upside room till 70
mark.
Exchange Action Entry Target Stop Loss
LME Buy 1860-1870 &
1780-1790 2100/2190 1670
MCX Buy 123.00-123.50
& 118.00-
118.50 134/140 114
LEAD
GLOBAL LEAD PRODUCTION TO REMAIN MUTED
-50000
-40000
-30000
-20000
-10000
0
10000
20000
30000
40000
50000
0
200000
400000
600000
800000
1000000
1200000
Jan
-16
Sep
-15
May-1
5
Jan
-15
Sep
-14
May-1
4
Jan
-14
Sep
-13
May-1
3
Jan
-13
Sep
-12
May-1
2
Jan
-12
Sep
-11
May-1
1
Jan
-11
Sep
-10
May-1
0
Jan
-10
Sep
-09
May-0
9
Jan
-09
Sep
-08
May-0
8
Global Refined Lead Production (mt) R1
Global Refined Lead Surplus/Deficit (mt) R2
Global growth in refined lead
production could remain subdued in
2016 due to aging mines and capacity
closings amid low prices.
Weakening lead demand in China led
to a 4.9% price decline in 1Q after a
3.5% loss in 2015. Chinese lead
refiners responded by slashing
production.
China, the world's largest lead miner,
also produced 18% less from mines in
2015 than a year earlier, causing global
refined lead output to contract 8.3% to
10 million metric tons.
LEAD- BALANCE SHEET
Global lead production in 2015 slumped more than 8%
on yearly basis.
Overall production worldwide in 2016 is estimated to
jump by around 3%.
Worldwide consumption in 2015 dropped by more than
10% on yearly basis.
Drop in Chinese consumption was more than 25% Y/Y
in 2015.
In 2016 global consumption is estimated to grow more
than 3%.
Chinese lead consumption is forecast to show an
annual growth of more than 6.50%.
Production (MTs)
Region 2014 2015 2016
World Total 930851 849312 875512
Asia Total 586639 474506 508302
China 423396 313848 334774
Europe Total 154969 162352 162878
NAFTA Total 135363 148170 140981
Consumption (MTs)
World Total 933821 832802 860054
Asia Total 611360 496466 527730
China 420279 309865 330342
Europe Total 134893 139528 134913
NAFTA Total 147583 156687 159116
LEAD – LME WAREHOUSE STOCKS
Lead LME warehouse stocks in 2015 slumped
more than 10% on yearly basis.
In 2016, YTD slump in total warehouse stocks
is around 2% as per the latest data available.
Cancelled warrants in 2015 stood almost
double compared to 2014 average levels.
On monthly basis, Jan’16 witnessed a jump of
more than 80% in cancelled warrants.
Percentage of cancelled warrants to total
warehouse stocks this year is averaging more
than 40%, which last year was around 25%. 0
20000
40000
60000
80000
100000
120000
0
50000
100000
150000
200000
250000
LME Cancelled warrant Lead Total LME warehouse stocks lead
LEAD: FUNDAMENTAL OUTLOOK
Global mined lead production started 2016 with a 5.9% decline in January, following a 20% contraction in 2015,
according to ILZSG. Output fell in Australia and China, which account for 60% of global supply.
Global refined lead demand declined 8.3% in 2015, with slumps of 17.9% in China and 5.1% in the U.S. That left
the surplus at a three-year high of 63,000 metric tons. The trend is expected to reverse in 2016, with demand
increasing 2.6% to 11.1 million tons, according to the International Lead and Zinc Study Group.
China, which accounted for 38.6% of the world's refined lead consumption in 2015, may propel the recovery
with its use of lead in industrial batteries and automobiles
LEAD: TECHNICAL OUTLOOK
Weekly MLDc1 10/4/2014 - 6/25/2016 (BOM)
Price
INR
Kg
95
100
105
110
115
120
125
130
Value
INR
KgN D J F M A M J J A S O N D J F M A M JQ4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Expected Trend: Bullish
Trend determining technical factors:
1. Prices are moving in a Bullish trend
channel, which is bullish in nature.
2. Channel trend support at Rs. 114.20
and resistance at Rs.132.70.
3. Short term exponential moving
averages 8, 13 and 21 periods are
supporting for bullish trend.
4. RSI-14 is in neutral zone reading at
53.32, turning positive from a low of
41.55
Exchange Action Entry Target Stop Loss
LME Buy 1700-1710 &
1640-1650 1950 1520
MCX Buy 114.00-114.50 &
110.00-110.50 132 100
43
Reach us at [email protected] Disclaimer The report contains the opinions of the author, which are not to be construed as investment advices. The author, directors and other employees of Karvy and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above mentioned opinions are based on the information which is believed to be accurate and no assurance can be given for the accuracy of this information. There is risk of loss in derivatives. The author, directors and other employees of Karvy and its affiliates cannot be held responsible for any losses in trading. Commodity derivatives involve substantial risk. The valuation of underlying assets may fluctuate, and as a result, clients may lose entire value of their original investment. In no event should the content of this research report be construed as an express or an implied promise, guarantee or implication by or from Karvy Comtrade that the reader/client will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided in this report is intended solely for informative purposes and is obtained from sources believed to be reliable. The Information contained in this report is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management or investment advisory services. The reports are only for information purpose and not to be construed as investment advices. Disclaimer http://www.karvycomtrade.com/v3/Disclaimer.aspx http://www.karvycomtrade.com/v3/RiskDisclaimer.aspx
Prepared by:-
Function Analyst
Head of Research-Commodity Veeresh Hiremath
Senior Market Strategist Himanshu Gupta
Fundamental Analyst Ritu Raj Jha
Technical Analyst Prabhakar Reddy