Against the Grain

One of the dangerous side effects of the present economic environment is the increase in socio political unrest. This appears to be occurring across the globe with reports of labour disputes in China, rising piracy, increased troubles across Africa and Asia. While a lot of these issues have been ongoing reduced aid and development funds will exacerbate the problems. Cash can hide a multitude of sins and as we know African despots only fall when the State House pantry is empty.

Quiet Asian session saw prices arrive in London pretty much unchanged. Not even a Reuters report raising the spectre of the Chinese State Reserve Bureau (SRB) buying metal moved things although that threat always exists. In the past the actions of the SRB tend to be quiet secretive so we doubt they will telegraph buying till it is completed. The weekly Shanghai stocks declined cu by 1364 tonnes to 16,335; al 2198 tonnes to 199,958 and zn 1277 tonnes to 68,292 There was quite a lot of Oct Japanese data - unemployment was 3.6% (Spt 4%), household spending fell 3.8% (-2.3%), the CPI was 1.7% yoy (+2.1%), industrial production fell 3.1% and -7.1% yoy to a record low (+1.1% and +0.2% respectively) and retail trade  fell 0.6% yoy (-0.3%), construction orders jumped 47.2% yoy (+10.3%). Nov small business confidence was 35.1 (37.6). The Indian Jul / Spt quarter GDP rose 7.6% the lowest pace in 4 years (7.9%) with manufacturing growth at 5% from 9% a year earlier. The Malaysian Q3 GDP was 4.7% yoy (Q2 6.7%). The UK Nov GfK institute consumer confidence survey improved to -35 (Oct -36). For a second day in succession stocks rose in all the LME metals and more significantly for the first time in ages they all increased on a weekly basis; cu by 8.5 kt; al 78.5 kt; zn 5 kt; pb 150 tonnes; ni 1812 tonnes and sn 240 tonnes. The Euroland Oct jobless rate rose to 7.7% (Spt 7.5%) as the Nov flash yearly CPI declined to 2.1% (3.2%). This falling inflation data combined with weak economic data is raising expectations that the ECB will carry out a significant rate cut next week and helping the US$ recover.

Over the weekend OPEC meets in Cairo ahead of a formal meeting mid Dec it is possible a further production cuts could be announced. Chilean Oct cu output fell 7% to 450 kt in the year to Oct output is down 3.5% yoy at 4.435 million tonnes. This was reported as the country’s Oct industrial production fell 0.8% yoy (Spt +3.2% yoy).

Over the week prices still fragmenting cu rose 79, al rallied 15, zn up 25, pb fell 78, ni rose 200, sn increased 900, gold up US$ 18 / oz, oil rose US$ 2.7 / bbl, DJI jumped 1150 points and US 10 year bonds fell 0.26%.

Since Jul the markets have had a standard pattern to them the direction of metals being driven by the US$ and principally US equities or a combination of the two with some influence from oil. In the past week it is evident that this trend has been breaking down since its 11 year low on Nov 20 the S&P has rallied 18% the steepest four day rally since 1933. While the metals had a knee jerk rally Mon following the Citigroup bailout they have failed to synchronise with the equities despite a weaker US$. It is too early to call a definitive end to this trend, the answer seems to lie in the time perspective of each market. The equities are forward looking and this week has been dominated by the appointment of the Obama economic team which is building hope that after Jan things can only get better. While for the metals and other commodities data indicates the deterioration of the real economy is gathering pace. Going forward evidence of a pick up in activity should result in a solid move in commodities as industry looks to restock.

Following the terrorist attacks in Mumbai Indian markets were closed. The Philippines reported Q3 GDP rose 4.6% (Q2 4.4%). There is a report on Reuters that China is considering the reintroduction of toll smelting for re export in cu, al and pb. It is cold comfort to know that metals are not the only good suffering from the customers reneging on cargos in these volatile times it is reported on Bloomberg that Chinese textile producers and cotton traders have not concluded on 20 kt of cotton after the price has fallen 33% since Aug. LME stocks rose across the board dominated by al where the emphasis turned to Europe and Asia (Sing 18 kt; Rott 14 kt; Antwerp 5 kt and Hamburg 4 kt); cu (Rott 2 kt); ni (Rott 336 tonnes). The metals volumes were very low as prices pulled back after the stocks ignoring a weaker5 US$, stronger equities and higher gold. With the US markets closed it remains to be seen whether we get a usual nudge in London time. In Europe the Nov EU index of executive and consumer sentiment declined to 74.9 (Oct 80.0). Some good news German Nov unemployment fell by 10 k (Oct -26k) as the unemployment rate remained unchanged at 7.5% a 16 year low.

The FTSE rose 73 points on the day and y/day US 10 year bonds closed at a record low yield below 3%!

The PBoC carried out some aggressive monetary action around 09:00 London time as they cut lending rates by 108 basis points to 5.58% and deposit rates by a similar amount to 2.52%. This was accompanied by a reduction in reserve requirements by 1% for large banks to 16% and 2% for smaller banks to 14%. This followed a report on Reuters that China will resume a duty free policy from Dec1 on some semi finished base metal products that it cancelled mid ’07 (specifically bar, rods, profiles and foil of cu, ni, pb, zn and sn as well as plates, sheets and strips in al, ni, zn, pb and sn). We were just pointing out that the base metals had not rallied recently as the US$ weakened and equities firmed and drifted lower in early London before scooting higher on the rate cut news. The US$ 800 billion stimulus action taken by the US Fed and Treasury y/day after the poor Q3 GDP data left the markets in an uncertain state was it a very supportive move or panic action as the gloomy outlook intensified. The EU which has little power to implement any monetary or fiscal action called for a concerted effort by its member states to support a combination of tax cuts and targeted investment. There you go from the sublime to the ridiculous of government action.

The weekly US ABC / Washington Post consumer sentiment index was -52 unchanged at a record low. In Asia the Dec South Korean manufacturing confidence index fell to 52 the lowest in 10 years (Nov 65) while Oct Singapore industrial production fell 12.6% (Spt +3.1%) pharmaceuticals dropped 31.2% and electronics off 14%. In Europe Nov French consumer confidence improved to -43 on lower energy prices (Oct -46) as Italian business confidence declined to 72.2 (76.9).

On the metals front, the LME stocks dominated by more al in (US 5625 and Asia 3575); cu (Korea moved out 1100 and cancelled warrants there rose as we hear buying from China has ticked up) and ni (Rott landed 570 tonnes). Production cuts are now coming thick and fast, PT Inco is reported considering a 20% cu in ’09 output capacity of 77 ktpa while Bindura Nickel Corp in Zimbabwe is placing its mines and smelter operations on care and maintenance. In Chile the government announced plans to set up a fund to help small cu miners (output less than 5 ktpa), Enami smelter will lend miners 20 c/lb while the price is below US$ 1.99 c/lb (4387 / tonne) and when the price moves back over US$ 2.00 c/lb they will recoup the loan set at commercial rates. This comes against a background of closing mines in the Antofagasta region over 120 small mines are expected to shutter. Nyrstar is suspending operations at their Belgian Balen plant till mid ’09 (25 kt remainder of ’08 and 130 kt in ’09). In Australia Straits Resources is scaling back ’09 cu output at their Tritton mine by holding back expansion plans and leaving it at 25 ktpa. On the plus side Pan Pacific Corp will continue a feasibility study on a 150 ktpa cu mine in Chile and China’s Bosai Minerals is looking at a study to build a 1million tonne alumina plant in Guyana were eventually the country could earn an 11% stake.

With Thanksgiving holiday tomorrow we have another heavy day of US data; weekly jobless claims fell 14 k to 529 k; Oct durable goods fell 6.2% (Spt revised to -0.2% from +0.9%) ex transport was down 4.4% (-2.3%) and personal income rose 0.3% (+0.1%) and spending fell 1.0% (-0.3%). Later the Nov Chicago PMI 33.8 as the industrial economy was quoted as being in a dreadful state (Oct 37.8). Oct new home sales fell 5.3% to 433 k units (Spt revised to 457 k units from 464 k).The final Nov Uni of Michigan consumer sentiment index was 55.3 (Oct 57.6), current 57.5 (58.4) and expectations 53.9 (57.0). US oil stocks rose again as the economy slows. Nov Kansas City Fed manufacturing index -31 a record low (-23) and Oct Chicago Fed Midwest manufacturing index 98.6 the lowest level in 11 years dragged down by steel, autos and machinery output (99.5). This afternoon’s data adds to the gathering evidence of a deep recession. Towards the session end the US$ was strengthening, gold was steady, oil moved higher, equities struggled up and metals followed the later two, for the third session this week well established old patterns seem to be breaking down. It seems equities rallied on the announcement that Obama had chosen Paul Volker to head the Economic Recovery Advisory Board. An awful lot of economic reputations are being put on the line.

The full effect of the economic slowdown on the commodities sector was put in sharp relief overnight as BHP Billiton walked away from its bid for rival Rio Tinto, saying “We have said that we would only seek to complete the transaction if it was in the best interests of BHP Billiton shareholders. While we have not changed our view of the basic industrial logic of the combination, or of the longer term prospects for natural resource demand growth driven by emerging economies, we have concerns about the continued deterioration of near term global economic conditions, the lack of any certainty as to the time it will take for conditions to improve and the risks that these issues imply for shareholder value”.

The metals again failed to react to strong world equity markets overnight themselves boosted by the Citigroup rescue and comments on the US economy by Bush and Obama. In Europe the Dec German GfK institute consumer climate survey improved to +2.2 reaction to wage agreements and lower commodity prices (Nov +1.9). In France the Nov business sentiment survey declined to 80 (Oct 87.0) as Italian consumer confidence index fell to 100.4 (102.2). The LME stock inflow dominated by al (Rott 9650 and US 5800 delivered in), cu (US 1875) and ni (Rott 288 tonnes). Despite a recovering in equities after a weak start the metals remained under a cloud with cu registering the biggest falls to 3560. In the emerging markets Chilean Q3 GDP rose 4.8% (Q2 +4.5%) while the World Bank down graded Chinese ’09 growth to7.5% (previous quarterly report estimate 9.2%). The Q3 South African economic growth slowed to 0.2% annualised (Q2 +5.1%). The OZ Minerals output cuts were not as dramatic as anticipated in ’09 they will reduce production at their Century zn mine in Queensland by 4% to 495 kt (previous ’09 target 515 kt) and delay a 20 ktpa expansion at their Sepon cu mine (60 ktp) in Laos. In the stainless steel sector ThyssenKrupp has extended a Christmas shutdown at its German Nirosta stainless coil rolled plant; Norilsk has put their Waterloo and Silver Swan ni mines in Western Australia on care and maintenance (’08 the combined units produced 10 kt of contained ni) and finally BHP Billiton will incur a US$ 1.5 billion writedown on their Ravensthorpe and Yabulu ni operations in Australia.

A heavy afternoon of diverse US data first up preliminary Q3 GDP fell 0.5% (advanced Q3 -0.3% and final Q2 +2.8%), real final sales fell 1.5% (advanced -1.3% and Q2 final +4.4%). The Spt Case Shiller home price 20 city index fell 17.6% yoy (Aug -16.6%). The Nov Richmond Fed manufacturing index -38 (Oct -26), retail revenue index -35 (-18), service revenue index -22 (-10) and shipments index -31 (-24). The Nov Conference Board consumer confidence index 44.9 similar to the experience of other countries following popular election wins in this case the expectations showed the biggest gain as they wait for the new incumbent (38.0), current situation 42.2 (43.5) and expectations 46.7 (35.5). The Nov Dallas Fed manufacturing outlook survey -61.0 with the slump really gathering pace from Spt (-59.4). This cross section of data reinforces the steepness of the financial sector induced slowdown. No surprise that the Fed took news action to loosen US credit by adding US$ 800 million to help home buyers, consumers and business. After all this markets seemed to moving in odd directions, oil down, US$ weaker, gold, metals and US equities pretty steady.

Business has suffered months of trauma as sector after sector has succumbed to the relentless squeeze of liquidity rather like an engine with sand in the working parts. The white knights riding to the rescue are the public sector (monetary and fiscal policy) and emerging market sovereign wealth funds (SWF). In the past 20 years we have seen government and SWF grow bigger supported by layers of management. At the same time business especially the financial and resource extraction industries have seen immense consolidation (economies of scale) and a push to downsize management structures – small head offices and stream management. Yet in hindsight one is left wondering how an institution the size of Citicorp (bailed out by the US government this weekend after SWF bailouts failed) could have been run by one person on a shoe string management. The real losers we suggest are the SWF who are being pressured into throwing good money after bad in the financial sector.

US equities rallied late Fri as news broke that the NY Fed Governor Giethner would be named Obama’s Treasury Sec, as the new administration packs itself with Clinton protégés. Asia was quiet on the back Japanese holiday and despite higher equities and a weaker US$ cu lost ground. In China preliminary Oct trade data showed imports of refined pb and zn 19% & 66% respectively from Spt to 5,090 tonnes, 11,407 tonnes as pb and an ores declined 7.2%, 7.8% to 142 kt and, 269 kt. In India Verdanta’s subsidiary Sterlite said a breakdown at its Tuti smelter (400 ktpa) will see it shut for a month. We hear other breakdowns in Indian metal plants are likely to follow as industry is squeezed. The Nov German Ifo institute business climate index was 85.8 the lowest level since ’93 (Oct 90.2). The metals quickly got out of the Asia lethargy and move briskly higher as European equities reacted to the US move, the US$ weakened and oil strengthened. The LME stocks continued the general rise led by zn (Sing landed 3 kt); cu (Rott 1750); al (US 3225) and ni (Rott 354 tonnes delivered).

The Chilean state cu commission, Cochilco has revised their ’09 average cu price to US$ 1.60 c/lb (US$ 3527 / tonne) from previous US$ 3.40 c/lb (7495). The ‘08 rate was revised to US$ 3.20 c/lb (US$ 7054) from US$ 3.70 c/lb. The Oct Chicago Fed National Activity Index improved to -1.06 (Spt -3.11). The US markets are keying off the Citigroup bail out and the announcement of the Obama Treasury team. The metals are tracking US equities almost point for US$. At 15:00 Oct existing home sales were reported falling 3.1% to 4.98 million units (Spt +5.5% at 5.18 million units) as the median house prices fell 11.3% the largest year on year decline since records began in ’68.

The lack of political leadership in the US is helping to fan the uncertainty we doubt there could have been a worse time for the world’s economic locomotive driver to make a shift change. We would not be surprised to hear calls for the inauguration to be brought forward. For the second session in succession US equities gave up substantial ground in the last hour as investors worried about the banks and legislators rejected pleas from the US motor industry for financial assistance (the DJI fell 5%). Bloomberg reports the Obama transition team is exploring pre packaged bankruptcy for automakers as a possible solution to the industry’s problems and a means of avoiding government cash. This is an idea put forward by a Republican senator and rejected by Democrats in Congress.

The falls in the US were absorbed by Asia, the US$ was steady, oil weakened and metals followed. The ICSG released their Aug world cu supply / demand balance indicating a 125 kt surplus however in this fast moving environment the data is history. The weekly Shanghai stocks saw cu fall 3797 tonnes to 17,699; al rose 3411 tonnes at 202,156 and zn down 2428 tonnes at 69,569. In Europe there was a poor set of Nov flash PMI data, French manufacturing PMI was 37.9 (Oct 40.6) and service 46.6 (47.5); Germany manufacturing 36.7 (42.9) and service 46.2 (48.3) and Euroland manufacturing 36.2 (41.1), service 43.3 (45.8) and composite 39.7 (43.6). The LME stocks saw metal into all the metals except small declines in pb and sn. On the week cu rose 9 kt; al leapt 123 kt; zn up 4 kt; pb fell 3 kt; ni increased 2046 tonnes and sn saw 900 tonnes in. Just after LME stocks the US$ weakened sending the metals higher as it became the lightening rod, there is a news report in Asia that the US has approached Saudi Arabia, UAE, Qatar and Kuwait for US$ 300 billion in financial aid to help in its efforts to stabilise the economy. Support for the metals also came from a recovery in the mining shares over the past two day with investors said to be viewing the sector as undervalued.

The excitement in the first pb ring saw tom / next boom out to 300 back later adjusted by the LME to level. Ahead of the US opening the metals jumped ship tying themselves to the US equities as opening calls looked for an early jump in the DJI and associates. With no data it will become a case of following the leader with some end of week short covering. The winner of the day is gold trading at 795 as investors revert to the oldest store of wealth in troubled times at the same time the US$ surged through € 1.250 and economists talk of US rates going to 0%. The markets are acting like a tipping tank of water one moment buyers are swarming then the next sellers hit back. While gold has moved higher all day oil has fallen away. Late in the day Rio Tinto said it had cut al output at its UK Lynemouth smelter (180 ktpa) by a third over the winter.

A week when things scattered in every direction, metals all down cu 279, al 75, zn 20, pb 167, ni 1100, sn 2400, gold up US$ 46 / oz, oil fell US$ 8 / bbl, DJI down 912 points, US 10 year bonds fell 0.49% just above its record low y/day and US$ strengthened with the yen.

Deflation is the new nemesis on the block and this was elevated by the big drop in US CPI and a further Fed downgrade of US economic growth going forward (’08 growth was downgraded to 0% - 0.3% from Jne 1% - 1.6% and ’09 -0.2% - 1.1% from 2.0% - 2.8%). The US equities reacted to this with a large fall in the last hour of trading sending the DJI off 5%and below 5000 points for the first time since ’03. The sell off carried on in Asia as the Nikkei lost nearly 7%, Hang Sang 6% and ASX 4%.

The metals were marked lower but certainly not with the same intensity as equities as the US$ was steady. The Taiwanese Q3 GDP contracted -1% (Q2 +4.5%). In Asia the ’09 Codelco cu premium for China was announced at US$ 75 / tonne cif (’08 US$ 115 / tonne cif). That adds to Japan US$ 65 from 102, South Korea US$ 64 from 99 and Taiwan US$ 70 / tonne cif from US$ 102. Bloomberg reported Chinese pb smelters are idling plant as demand falls with battery makers facing pressure from high priced stocks. While Xinling Refining Co has cut 60% of its 100 kt smelting capacity, battery producer Yuasa in China has halved output. The LME stocks reflected the economic mood as apart from pb the material pours in to the obvious places, cu and al global, ni Rott, zn Asia, sn Sing while pb out of various US and European locations. The talk in zn is the fate of the OZ Minerals flagship Century mine (500 ktpa) in Queensland with analysts predicting present prices will see the mine reduce output anywhere from 20% to total closure. One of the things that is complicating attempts to estimate the cut off level of cash cost for mines and smelters is the rapid fall in input prices. For instance JP Morgan sees in the al industry lower inputs and higher US$ lowering the industry average cost of production by as much as 20% to around US$ 1600 / tonne. The Oct German PPI was unmoved (Spt +0.3%) as yoy fell to 7.8% (8.3%). The Oct UK retail sales fell 0.1% much less than expected (Spt -0.5%) while yoy was up 1.9% (+1.8%). The IAI reported Oct daily average primary al output at 70.7 kt (Spt 70.3 kt and Oct ’07 68.9 kt).

The US weekly jobless claims rose 27 k to 542 k against an expected decline. With weaker equities in Asia and Europe the market is expecting the worst when the US begins. As we noted y/day there was a notable collective “throwing in of the towel” by markets mid pm London time. At 15:00 the Nov Philadelphia Fed manufacturing index slipped to -39.3 from -37.5 with the fall cushioned by a significant fall in prices received and less inventories. The Oct Conference Board leading economic indicators fell 0.8% to 99.6 (Spt +0.1%), the coincident index up 0.2% at 105.6 and lagging index increased 0.1% to 113.5. Markets ebbed and flowed with the DJI, notable exceptions zn (traders caught short), gold (safe haven buying) and US 10 year treasuries (flight to quality).

First it was the financial sector looking to socialise their losses now it looks as though everyone is joining in, with reports the car industry in the US, UK and China are in various stages of requests as trade deteriorates. The Nov US NAHB housing market index was 9 the lowest since the series was created in ’85 (Oct 14) and the accompanying statement called for “Congress and Administration need to focus on stabilising housing”.

The markets continued to consolidate overnight further racketing down volatility though many will think we are in some eye of the multiple storms. The US weekly ABC / Washington Post consumer sentiment index was -52 touching the record low after -50 last week. The al (US 60,800 tonnes, Korea 7975, Johore 7075 and Trieste 3375) continues to cascade into LME warehouse dominating the now familiar pattern to the data. This is how things have changed since late Aug when al was trading 2776 and stocks stood at 1,168,125 tonnes and cu was trading 7665 with stocks at 178,180 tonnes since then al has fallen 32% in price and stocks risen 45% while the cu price is off 51% and stocks up 57% - we guess back then a lot of people knew the al was around while cu they thought it was all being used in a booming emerging market. The past few days have seen a number of public sector strikes in Chile as unions push for wage increases. Another small cu miner has curtailed operations Weatherly International will close mines in Namibia although its custom smelter (34kt) produces blister from imported concentrates (Bulgaria and Peru).

The Oct US CPI dropped 1% the largest fall since records began in 1947 as energy prices slumped 8.6% (Spt 0%) and core inflation fell 0.1% (+0.1%). The worries the NAHB signalled above where highlighted by Oct data, housing starts fell 4.5% to 791 k units annually the lowest level since ’59 (Spt -6.3% at 817 k units) and building permits dropped 12% to 708 k units per annum (-6.1% at 805 k units). This data saw us back into a US$ play, as it weakened gold, oil and metals rose the US$ and equities reversed as did everything else. Every so often the market is hit by a wave of growth worries and that occurred late today sending the DJI off 200 points, the S&P to a 5 year low; 10 year US bond yields 30 basis points in yield. Why this afternoon the catalyst seemed to be another rise in US oil stocks.

We believed three key factors will signal the recovery of the world economy; to what extent the financial woes debilitate the broader economy; the impact of government and central bank fiscal and monetary policy actions and lower “food / fuel” inflation. On the first the slowdown has hits with sharp focus on rising unemployment, falling retail sales and declining output sending many countries into official recession. Going forward it is what happens after this initial shock that is important. The public sector response has been aggressive and broad in nature with time needed to judge its impact. The convention is that official rate cuts take upwards of nine months to have their full impact while fiscal stimuli are often big in headline and less impressive on examination. What is indisputable is that inflation is set to fall rapidly easing cost push pressures.

It seems all markets are now correlated to moves in the US currency and its equities and until we get a better idea of what the new US administration’s policies are this state of limbo looks set to continue – the world’s locomotive driver is having a tea break and those onboard must wait. The DJI gave up its impressive Thurs 6% gain in two sessions and its quite eerie how other things mirrored the moves. China added cu tube to goods eligible for an export VAT rebate from Dec 1. The LME metal stocks have established an on going pattern with inflows of al (Sing 3275, Antwerp 2175 and US 1800); cu (Livorno 2500) and ni Rott 228) dominating; pb saw cancelled European going to the Far East (Livorno 1350). No surprise Oct UK inflation data reflected the significant fall in “food and fuel”, CPI fell 0.2% (Spt +0.5%) yoy 4.5% (5.2%) and RPI -0.3% (+0.6%) and yoy 4.2% (5%). On the metal front the world’s largest zn producer and custom smelter operator Nyrstar said it was cutting output from its Belgian and Dutch smelters by 28% not sure what that is on overall production which in the 9 months to Spt this year was up 2% at 800 kt.

US Oct PPI tumbled 2.8% dominated by a 12.8% fall in energy (Spt -0.4%) and core PPI rose 0.4% (+0.4%). A reminder of ever present risk, someone pointed out to us that the Saudi VLCC pirated y/day was 480 miles off the Somali coast carried 2 million barrels of oil (25% of Saudi daily output) valued at US$ 100 million in a vessel weighting over 300 kt. It caused little reaction in the oil market. The audacity of the action stunned the US naval commander in the area. One has to hope the pirates do not cause an environmental threat. Makes the 33 T-72 tanks seized in Spt look a small bag, not sure what has happened to them? In early US trading equities went bid on better results, the US$ weakened and oil up resulting in metals off their lows. In Oct China overtook Japan as the largest holder of US Treasury government debt at US$ 585 trillion against US$ 573 trillion respectively. In the afternoon the metals tracked the path of US equities.

The G20 meeting was perhaps a better lesson in how we have downgraded history rather than anything else. As political PR experts tried to sell it as a new Bretton Woods it was in reality an exercise in grandstanding. The result being a vague statement that individual countries would see what each could do to boost their economies and meet again in Apr. Then the new administration in the US would have its feet under the desk. No surprise the markets took the whole thing in its stride.

Metals lost ground in Asia as they followed the US$. Meanwhile the bad news keeps coming with Japanese Q3 GDP declining -0.1% taking that country into recession for the first time since ‘01 and showing a yoy fall of 0.4%. The Spt tertiary industry index was -0.6% (Aug -1.4%). The Q3 Indonesian GDP was 6.1% with exports of palm oil and rubber slowing. (Q2 6.4%) Oct Chinese preliminary cu concentrate imports were 41 kt this was down 11% on Spt, in the ytd imports are up 15.4% at 4.33 million tonnes. China has signalled that as part of a wide ranging export tariff and tax review announced last week it will lower or scrap export taxes next month on some al and steel to try to bolster slowing economic growth. The tariff on al alloy rods and bars with a circumference of less than 210 mm will be reduced to 5% from 15% on Dec. 1. The country will also restore tax rebates on some copper and other industrial metal exports by early next year, the China Nonferrous Metals Industry Association said. The newswire Xinhua reported China State Grid Corp. plans to invest yuan1.16 trillion ($170 billion) in the next two years to expand its power grid, this is up from an original plan of yuan 550 billion, though it added that the plan was yet to be approved by the State Council. The LME stock report shows metal continuing to flow in dominated by al (US 5575, Sing 2625, Busan 1k); cu (Livorno 1550, Rott 925) and ni (Rott 294 and Helsingborg 120). Metals prices eased towards the pre market closed as traders worried that changes in the Chinese export regime could see metals flowing out of the Middle Kingdom.

The US$ began to strengthen and this put further pressure on the metals. The Nov US NY Fed Empire State manufacturing survey was -25.43, another statistic hitting a record low (Oct -24.6). This was followed up at 14:15 by Oct industrial production rose 1.3% the data distorted by strikes and hurricanes (Spt revised to-3.7% from-2.8%) and capacity utilisation 76.4% (revised to75.5% from 76.4%). The ILZSG reported a 112 kt surplus in zn in the year to Spt as production rose 7.1% to 8.825 million tonnes and consumption was up 6.3% at 8.713 million tonnes. For the same period the ILZSG saw pb at a 35 kt surplus with year to date production up 7.3% at 6.462 million tonnes and consumption rising 5.8% to 6.427 million tonnes. In both metals China dominates the supply / demand picture.