MCX COMMODITY MARKET SPECIAL REPORT - 25 AUG 2016

GOLD:

Low volume and general nervousness about the direction of U.S. interest rates kept gold prices in check on Wednesday. Many major investors were on the sidelines, choosing to wait until they get a little clarity from a speech by Federal Reserve Chair Janet Yellen on Friday which will be closely watched for clues as to the timing of the next Fed rate hike.

Yellen will deliver a speech before a group of central bankers at a conference held at Jackson Hole, Wyoming. Based on the price action in the gold market this week, it looks as if investors are already anticipating hawkish commentary from Yellen. This would put her in line with a few Fed members who recently issued hawkish comments about the strength of the economy and the timing of the next rate hike.

Going into the meeting, it looks as if investors are pricing in a 21 percent chance of a rate increase in September, a 50 percent chance of at least one hike by the end of the year, and a 100 percent chance of a 25-basis point hike in September 2017.

CRUDE OIL:

The current volatility is being driven by speculation over whether Saudi Arabia and Russia can convince other OPEC and non-OPEC countries to come to an agreement over reducing or perhaps freezing current production levels. Analysts and traders are casting doubts, however, that such an agreement can be pulled off at a meeting in Algeria scheduled for September 26-28 as various OPEC members have their own agendas.

COPPER:

LME copper registered a 3.8% drop during August 22-24 as LME copper inventories grew 44,075 tonnes.

The catalysts behind the selling pressure were a jump in copper stocks, increased mine supply and a stronger U.S. Dollar.

Supply was a big concern on Wednesday as inventories rose in Asian warehouses, fueling fears about weaker demand ahead in top consumer China. The huge inventory rise in Asian warehouses suggests China is exporting its surplus. In Asia, it was reported that stocks of copper in LME-approved warehouses rose by a quarter, or more than 50,000 tones.

ALUMINIUM:

Alumina prices in China, which had been mired in downward track over the past few months, will not turn any worse in the second half of the year, SMM expects.

China Aluminum International Trading Co. (Chalco Trading) cut aluminum prices it offered in major markets today after hike in previous day, it said on its WeChat.   

Indian Aluminium producers are seeking for further increases in import duties and other  measures, said Nalco and Vedanta officials. The further duty increases appeal by  producers is to control cheap imports from China and other countries.

An  increase in import duty by another 2.5% is being appealed in primary Auminium by  the producers which will bring the import duty to 10%. They are also seeking for  implementing a higher tax for Aluminium scrap which is now at 2.5%.

Market expects US Fed Chairwoman to give hawkish speech during Friday’s conference, which will favor the US dollar.

LEAD:

The ILZSG preliminary data indicates that global refined lead market was in surplus of 37,000 tonnes during the first half of 2016. The total reported lead inventories increased by 37,000 tonnes during the same period.

The lead mine production reported decline in countries such as Australia, India, China and the United States. The overall global lead mine production dropped by nearly 6.8% during Jan-June ’16 when compared with the corresponding six-month period in 2015. 

The world lead mine output during the six-month period this year totaled 2.218 million tonnes as against 2.381 million tonnes during the same period in 2015.

The refined lead metal production during the initial six-month period of 2016 totaled 5.161 million tonnes, marginally lower by 2.44% when compared with the 5.290 million tonnes output during corresponding six-month period in 2015.

The global demand for refined lead metal witnessed marginal dip of 3.4% to 5.124 million tonnes during January to June this year.

ZINC:

The zinc mine output declined considerably in major producing countries including Australia, India, Ireland and Peru. Overall, the zinc mine output declined by 6.7% during the initial six-month period in 2016 when compared with the corresponding period last year.

The refined zinc metal production during the six-month period totaled 6.648 million tonnes, 4.21% lower when compared with the 6.940 million tonnes output during corresponding six-month period in 2015. The refined zinc metal production surged higher in the Republic of Korea. On the other hand, production recorded decline in major producing countries including Argentina, Australia, Thailand and the United States.

The global demand for refined zinc metal has increased marginally by 0.6% to 6.786 million tonnes during January to June this year, as compared with 6.746 million tonnes during the same period last year.

 CAPITALSTARS