March 11, 2010

Top Stories: Commodities


Top Stories: Commodities
2010-03-11 08:38:30.921 GMT

     March 11 (Bloomberg) -- The following are the day's top stories on commodities:

Copper May Advance to Record on Chinese Demand, Sucden's Goldwyn Forecasts
     Copper may rise to a record this year, possibly surpassing  $9,000 a metric ton, driven by larger- than-expected imports by  China and a revival of demand in Europe and the U.S., according  to Sucden Financial Ltd. Chinese demand will be ``positive''
for the metal used in construction and the country may import  an average of 200,000 metric tons a month, said Jeremy Goldwyn,  who oversees business development in Asia for London-based  Sucden. The West may be a ``net positive'' for copper, Goldwyn  said in an interview. Copper peaked at $8,940 a ton in July  2008, two months before the collapse of Lehman Brothers  Holdings Inc. helped to push the global economy into recession.
Stimulus spending by China, the largest metal user, helped to  more than double prices last year and a further rally would  bolster producers' profits. ``Underneath any other factors,  China needs copper,'' Goldwyn said today from Shenzhen,  Guangdong. ``Any commodity that China is short of is a good  investment in the long term,'' said Goldwyn, who's worked in  the industry for 25 years and correctly forecast in 2007 that  the price would gain to a record.

El Nino May Cut Thai Rice Output, Boost Palm Oil Price as Drought Spreads
     Rice production in Thailand, the world's largest exporter,  may decline as drier-than-normal weather curbs yields, adding  to signs that an El Nino may be hurting farm output across the  region. ``Unmilled rice output in the next crop year may fall  below the average production level of 31 million tons if El  Nino puts off rainfall,'' Prasert Gosalvitra, head of the  nation's Rice Department, said today by phone from Bangkok.
Thailand accounts for about a third of the global trade in  rice. Lower production of rice from Thailand and palm oil from  Malaysia caused by the dry weather may drive commodity prices  higher, spurring food inflation. Asian agricultural companies  including Wilmar International Ltd. may benefit from the surge,  BNP Paribas SA told investors in a note today. ``We're worried  that delayed rainfall will probably hurt output,'' Apichart  Jongskul, secretary-general of Thailand's Office of  Agricultural Economics, said today by phone. ``The impact on  the next crop has yet to be evaluated,'' Apichart said.

Japan, Korea May Face Wheat Supply Disruptions From Closure of U.S. Rivers
     Japan, the biggest buyer of U.S. wheat, may stockpile the  grain or seek alternative supplies before the U.S. closes its  largest export gateway later this year for a three-month  revamp, potentially delaying shipments. Downstream lock gates  on the Columbia River and the Snake River in the U.S. Pacific  Northwest will be repaired from mid- December through  mid-March, closing the waterways to barge traffic, said Diana  Fredlund, a spokeswoman for the Army Corps of Engineers  Northwestern Division in Portland, Oregon. The work will affect  shipments of Western White wheat, said industry groups in Japan  and South Korea. The potential supply disruption from the  world's largest exporter may affect wheat prices, which have  fallen 11 percent this year partly because of rising global  inventories. The Columbia River is the biggest wheat and barley  export gateway in the U.S. and the third-largest grain gateway  in the world, according to the Web site of Pacific Northwest  Waterways Association. ``Buyers are concerned that supplies of  white wheat may be disrupted,'' said Park Jeong Seop, deputy  general manager at the Korea Flour Mills Industrial  Association. ``They are trying to work with suppliers and  related parties to find ways to minimize any possible  disruption.''

Cattle Speculators May Herd to Exit, Ending Rally in Prices: Chart of Day
     Cattle futures may fall 6.3 percent by June as the highest  prices in 16 months encourage speculators to exit positions,  said Jim Stellakis, an independent analyst and former  strategist at Touradji Capital Management. The CHART OF THE DAY  shows net-long positions by managers of hedge and index funds  were at the highest level ever in the week ended March 2,  totaling 86,320 contracts on the Chicago Mercantile Exchange.
New positions on higher prices are ``late to the party,'' after  cattle jumped 9.6 percent this year to 94.45 cents a pound on  March 8, Stellakis said. Cattle futures may peak this month at
96 cents a pound, before dropping as low as 88 cents during May  or June, based on seasonal chart patterns followed by some  traders, Stellakis said. Cattle futures for April delivery  closed yesterday at 93.875 cents. ``Anybody long the market  between now and 96 cents should be liquidating'' their  positions, Stellakis said by telephone from New York.
``Pullback toward the 89 level should be bought, if you're  looking to get into the market longer term.''

Copper Drops in Shanghai, London on Concern China May Raise Interest Rates
     Copper declined as inflation in China gained at the fastest  pace in 16 months, fueling concern that the government and  central bank may take further steps to cool the economy,  potentially curbing demand for the metal. The June-delivery  contract on the Shanghai Futures Exchange fell 2.2 percent to  close at 59,310 yuan ($8,689) a metric ton. Copper for  three-month delivery on the London Metal Exchange dropped 1  percent to $7,363 at 3:59 p.m. Shanghai time. China's consumer  prices rose 2.7 percent from a year earlier and new loans  exceeded forecasts, figures today showed, adding to the case  for the government to cut stimulus measures. The People's Bank  of China hasn't raised benchmark interest rates since December  2007, before the financial crisis deepened. ``The CPI number  fueled speculation for interest rate hikes, possibly in the  second quarter,'' Yang Su, an analyst at Jiangsu Suwu Futures  Co., said from Nanjing today. ``That's going to damp metals  demand, especially from speculators.''

China Inflation, Production Accelerate, Adding Pressure for Stimulus Exit
     China's inflation reached a 16- month high, industrial  output climbed and new loans exceeded forecasts, adding to the  case for the government to pare back stimulus measures.
Consumer prices rose 2.7 percent in February from a year  earlier, the National Bureau of Statistics said in Beijing  today, compared with the 2.5 percent median estimate of 29  economists surveyed by Bloomberg News. Seasonal factors  stemming from a weeklong holiday may have boosted prices.
Production rose 20.7 percent in the first two months of 2010,  the most in more than five years. Premier Wen Jiabao aims to  hold full-year inflation around 3 percent after banks flooded  the financial system with money to drive a rebound from the  global recession. Gross domestic product grew 10.7 percent last  quarter and central bank Governor Zhou Xiaochuan said March 6  that anti-crisis policies, including the yuan's peg to the  dollar, must end ``sooner or later.'' ``Inflation may top the 3  percent policy target by April, which is bound to trigger  further monetary tightening,'' said Dariusz Kowalczyk, chief  investment strategist at SJS Markets Ltd. in Hong Kong. He sees  benchmark interest rates increasing as early as this month.

Corn Rises for First Time in Six Days as Cold Weather Delays U.S. Planting
     Corn rose for the first time in six sessions on concern  that cold, wet weather last month may hamper planting work in  the U.S., the world's largest exporter. Corn for May delivery  rose as much as 2.5 cents, or 0.7 percent, to $3.68 a bushel on  the Chicago Board of Trade and traded at $3.67 at 11 a.m. Seoul  time. The price fell to a one- month low yesterday after the  U.S. government said inventories before this year's harvest  will be bigger than forecast. ``Corn may not fall any further  as investors may start buying on concern over delayed  planting,'' said Han Sung Min, a broker at Korea Exchange Bank  Futures Co. in Seoul. ``The focus of the market is now moving  on to planting and new crop.'' Average temperatures last month  were 8 degrees Fahrenheit lower than normal and rainfall in  Texas was more than double the normal average, Texas AgriLife  said March 9 in a report.

Silver, Platinum Drop From Seven-Week Highs; Gold Little Changed in Asia
     Silver and platinum dropped from seven-week highs after  China's inflation and industrial output accelerated, adding  pressure on the government to pare stimulus measures. Gold was  little changed. Silver for immediate delivery lost as much as
1.2 percent to $16.8150 an ounce and was at $16.9350 at 3:02  p.m. Singapore time, while platinum dropped as much as 0.8  percent. Consumer prices in China rose 2.7 percent in February  from a year ago, the National Bureau of Statistics said today,  compared with the 2.5 percent median estimate of 29 economists  surveyed by Bloomberg News. Silver prices reached $17.6525 an  ounce, while platinum gained to $1,610.75 an ounce yesterday,  the highest levels for both metals since Jan. 21, on optimism  industrial demand will increase as the global economic recovery  gains momentum. ``Unlike gold, silver, platinum and palladium  have industrial uses so they are affected by economic growth,''
said Zhu Lv, research manager at Shanghai Tonglian Futures Co.
``Any signs of a possible slowdown in China will have an effect  on prices of these metals.''

Crude Oil Falls on Concern China May End Stimulus Spending, Slow Demand
     Crude oil fell on speculation Chinese demand will slow as  the government may end stimulus programs amid an increase in  inflation and concern that recent price gains outpaced demand  growth in the U.S. Chinese consumer prices surged 2.7 percent  in February, a 16-month high, increasing expectations the  government may end policies to fight the global recession,  which may slow economic growth. U.S. refinery utilization fell  last week for the first time in five weeks to 80.7 percent of  capacity, an Energy Department report said yesterday. ``This  should be bearish because the Chinese government might tighten  their monetary policy earlier than expected,'' said Clarence  Chu, a trader with options dealers Hudson Capital Energy in  Singapore. ``Speculators in China will cut down on their  positions.'' Crude oil for April delivery dropped as much as 59  cents, or 0.7 percent, to $81.50 a barrel, in electronic  trading on the New York Mercantile Exchange. It was at $81.59  at 3:58 p.m. Singapore time. Yesterday, the contract rose 60  cents, or 0.7 percent, to $82.09, the highest settlement since  Jan. 11.

Vale Tells China of Plan to Drop Annual Iron Ore Pricing, Says
     Vale SA, the largest iron ore producer, told Chinese  steelmakers it plans to drop a 40-year tradition of setting  annual prices in favor of shorter contracts, according to Hu  Kai, an analyst at research company The Rio de  Janeiro-based company sent a note to major Chinese steelmakers,  who haven't decided what their responses will be, Hu said from  Shanghai, citing mills he didn't name. Vale will stand to win  higher sales through regular pricing after spot market rates  soared to more than double last year's contract agreement. Iron  ore producers in Australia, the biggest exporter, will make $20  billion more a year by selling products at cash levels rather  than on annual contracts, Goldman Sachs JBWere Pty said March  1. Vale is seeking to raise contract iron-ore prices by more  than 90 percent for the second quarter of 2010 in negotiations  with Japanese steelmakers, Nikkei English News reported,  without saying where it obtained the information.

Rubber Drops as China Inflation Reaches 16-Month High, Stoking Rate Fears
     Rubber declined for a third day after data showed China's  inflation climbed to a 16-month high, raising concern that the  nation may raise interest rates to cool the economy, curbing  demand for the commodity used in tires. Rubber for August  delivery on the Tokyo Commodity Exchange fell as much as 0.9  percent, reversing an earlier 1 percent gain, and settled 0.3  percent lower at 291 yen a kilogram ($3,217 a metric ton).
China's consumer prices rose 2.7 percent in February from a  year ago, the National Bureau of Statistics said in Beijing  today, compared with the 2.5 percent median estimate of 29  economists surveyed by Bloomberg. The nation's output grew 20.7  percent in the first two months of the year, adding to the case  for the government to pare back stimulus measures. ``Concern  about monetary tightening in China is the largest drag on the  price of rubber,'' said Hisaaki Tasaka, an analyst at ACE Koeki  Co., a commodity broker in Tokyo. China has the world's largest  car market and is the biggest user of rubber.

Copper Prices May Extend Advance as Stockpiles Peak: Chart of the Day
     Copper, which has more than doubled in the past year, may  extend its rally and trade close to a record in 2011 as  production fails to meet soaring Chinese demand, sending  stockpiles tumbling. The CHART OF THE DAY shows copper prices  have soared even as inventories of the metal rose to the  highest since 2004. Prices typically move in an inverse  relationship to stockpiles, which can indicate the level of  demand. Paul Cliff, a metals and mining analyst at Nomura  Holdings Inc. in London, says the correlation will resume, with  stockpiles shrinking as demand in China, the largest  copper-using nation, keeps growing. ``A supply shortage will  push prices up as inventories fall sharply through 2010 and  2011,'' Cliff said. ``We're bullish short, medium and long  term.'' Nomura predicts the copper price will average $8,818 a  metric ton in 2011 as stockpiles drop to equal 37 days of  global consumption. Stocks slid to the equivalent of 39 days in  2006, when the price jumped 44 percent. The bank's price  forecast is the highest of 15 analyst estimates compiled by  Bloomberg. Demand will exceed output by 470,000 tons in 2010  and 950,000 tons in 2011, Nomura estimates.

Hebei Steel Is Planning More Acquisitions; Says Iron Ore Talks Continue
     Hebei Iron & Steel Group, China's biggest steelmaker, is  planning more mergers and acquisitions in China and abroad as  part of a government drive to improve the country's mills. ``We  want to make further progress on mergers and acquisitions,''
Chairman Wang Yifang said at a press conference in Beijing  today, without identifying targets. The state-owned company is  in talks to buy Shijiazhuang Iron & Steel Co., Wang said March  7. The Chinese government wants to accelerate consolidation in  the steel industry to tackle overcapacity and curb pollution as  output soared to a record last year. The overcapacity is  depressing prices and hurting profitability, the China Iron &  Steel Association said. ``In Hebei, two-thirds of the  production comes from privately owned mills,'' Wang said. ``In  times of favorable market conditions, they are unwilling to be  merged.'' Hebei Steel is in contact with producers outside of  its province for possible deals, he said.

     For the complete stories summarized here, and for more of the day's top news, see TOP .

-0- Mar/11/2010  8:38 GMT

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