Global Markets Research

Daily Alert

10 February 2015

Vivek Dhar Mining & Energy Commodities T. +613 9675 6183 E. vivek.dhar@cba.com.au

Important Disclosures and analyst certifications regarding subject companies are in the Disclosure and Disclaimer Appendix of this document and at www.research.commbank.com.au. This report is published, approved and distributed by Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.

OPEC cuts non-OPEC oil supply forecasts OPEC estimates that non-OPEC supply will increase 850kb/d to

57.09mb/d in 2015, down 420kb/d from its previous forecast and led by a reduction of 130kb/d in the US. The group also forecasts that demand for OPECs crude oil will be 29.2mb/d in 2015, up 430kb/d from last months estimate. OPEC estimates that demand for its crude oil will increase as the year progresses, moving from 27.93mb/d in 1Q15 to 29.21mb/d in 4Q15.

Base metals finished mostly lower on demand concerns after Chinas value of imports fell more than expected in January, reflecting weaker commodity prices and volumes. The fall in Chinas imports in January can also be attributed to reduced activity ahead of the Chinese Lunar New Year holiday period. US WTI crude oil advanced on views that crude oil markets will balance sooner than markets expect after OPEC said non-OPEC supply will lift less than it previously expected. Iron ore fell by 2.1% to USD61.20/t (CFR China).

Novelis believes that at current aluminium prices there will be a relative resistance to a reduction in any of the [aluminium] premiums, largely because of how financial transactions are set up with the warehouses. The LME changed its warehouse rules from 1 February to limit waiting times for the delivery of metals to at most 50 days.

Under a new calculation methodology, Indias economy grew 7.5% y/y in the December quarter, down from the 8.2% y/y expansion in the September quarter. The revised data indicates that Indias economy has built momentum in the last three years, which runs counter to a number of other indicators. The new GDP data shows strong performances in Indias manufacturing, finance and services sectors.

Sumitomo Metal Mining has reported that its nickel production (pure Ni equivalent) lifted 15.9% y/y to 78.8kt in CY14. The companys ferronickel output increased 4.0% y/y to 22.7kt last year.

Chart of the Day: Chinas net steel product exports hit a record high in January

Chinas net steel product exports rose by 69% y/y to a record-high 9.14Mt in January, reflecting the competitiveness of Chinas steel products in export sectors as an oversupply of steel on the domestic front has pushed domestic steel prices down.

The lift in Chinas steel product exports comes despite the removal of an export rebate on boron-added steel from 1 January. Boron-added steel accounted for ~30% of Chinas total steel exports. There are reports suggesting some of Chinas steel mills may have circumvented the law by producing chromium-based steel products but we await trade data in coming months to confirm.

Other trade data showed that Chinas commodity imports slowed in January, likely reflecting reduced activity ahead of Chinas Lunar New Year holiday period that begins on 18 February this year. We continue to see a challenged outlook for commodity demand into 2015 as Chinas commodity-intensive construction activity looks to keep slowing consistent with slowing fixed asset investment, industrial production and manufacturing.

Chart of the Day: Chinas net steel exports - monthly

Source: China Customs, Bloomberg, CBA estimates

New York (Dow Jones IA) 17,696 -0.7%London (FTSE 100, 09-Feb) 6,837 -0.2%AUD/USD (as at 10-Feb-15) 0.7811 0.2%

LME spot (09-Feb) USD/t USc/lb % chgAluminium $1,859 84 0.1%Copper $5,688 258 0.3%Lead $1,838 83 -0.1%Nickel $15,099 685 -0.5%Tin $18,222 827 -1.3%Zinc $2,150 97 -0.1%

Iron ore & Steel USD/t % chg$61.20 -2.1%

$402.25 0.0%

Precious MetalsGold

Spot (USD/oz) $1,242.09 0.7%Comex (USD/oz) * $1,240.80 0.6%AUD spot (AUD/oz) $1,589.98 0.5%

Silver (USD/oz) $17.07 2.1%Platinum (USD/oz) $1,218.20 -0.5%Palladium (USD/oz) $779.40 -0.6%

Oil

$52.87 2.3%Brent (USD/bbl) $57.42 -0.2%Singapore TAPIS (USD/bbl) $59.75 -0.4%

NYMEX light sweet crude (USD/bbl) *

Overnight Price Moves (full table over) - 09-Feb-15

Source: Bloomberg, globalCOAL, CBA estimates. Prices are indicative and subject to change. Oz refers to troy ounce. * Near month.

Iron ore (62%Fe, cfr China, 09-Feb)China domestic rebar (09-Feb)

-20 Mtpa

0 Mtpa

20 Mtpa

40 Mtpa

60 Mtpa

80 Mtpa

100 Mtpa

120 Mtpa

-2 Mt

0 Mt

2 Mt

4 Mt

6 Mt

8 Mt

10 Mt

Jan-09 Jan-11 Jan-13 Jan-15

Net exports (original)

Annualised, 3mma (orig)

Global Markets Research | Commodities: Daily Alert

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Figure 1: NYMEX light sweet crude (US/bbl) first month intraday price

Source: Bloomberg, CBA. 5 min intervals

Figure 2: Gold (spot, US/oz) intraday price

Source: Bloomberg, CBA. 5 min intervals

Figure 3: Australian dollar (USD/AUD) intraday price

Source: Bloomberg, CBA. 5 min intervals

50.50

51.00

51.50

52.00

52.50

53.00

53.50

54.00

8:00 AM 7:00 PM 6:00 AM1,228

1,230

1,232

1,234

1,236

1,238

1,240

1,242

1,244

1,246

8:00 AM 7:00 PM 6:00 AM0.770

0.772

0.774

0.776

0.778

0.780

0.782

0.784

8:00 AM 7:00 PM 6:00 AM

Cash USD/t USc/lb day week month Oil USD/bl day week month

Aluminium $1,859 84 0.1% 0.2% 3.8% WTI (NYMEX) crude (09-Feb) * $52.87 2.3% 6.7% 14.8%

Copper $5,688 258 0.3% 2.9% -6.8% Brent (09-Feb) $57.42 -0.2% 6.9% 23.5%

Lead $1,838 83 -0.1% 0.2% -0.7% Singapore TAPIS (09-Feb) $59.75 -0.4% 12.2% 18.7%

Nickel $15,099 685 -0.5% -1.1% 0.5% Dubai (09-Feb) $55.41 -0.6% 11.2% 20.3%

Tin $18,222 827 -1.3% -3.2% -8.4%

Zinc $2,150 97 -0.1% 1.2% 1.0% Refined products, Singapore

Steel Billet $485 na 0.0% -1.0% -0.8% Gas Oil (USD/bbl, 06-Feb) *** $70 0.0% 7.1% 12.0%

Jet Fuel (USD/bbl, 06-Feb) **** $73 0.0% 6.4% 15.5%

Fuel Oil (USD/t, 06-Feb) ***** $328 0.0% 9.9% 24.3%

Aluminium $1,876 85 0.3% 0.2% 3.6%

Copper $5,673 257 0.4% 3.1% -5.7% Currencies (10-Feb)

Lead $1,851 84 -0.1% 0.1% -0.9% AUD/USD (London close) 0.7811 0.2% -0.1% -4.2%

Nickel $15,155 687 -0.5% -1.1% 0.4% AUD/EUR 0.6896 0.1% 0.0% 0.0%

Tin $18,250 828 -1.4% -3.2% -8.3% AUD/JPY 92.718 -0.2% 1.1% -3.9%

Zinc $2,160 98 -0.1% 1.5% 1.0% AUD/CNY 4.881 0.2% -0.3% -3.5%

Steel Billet $485 na 0.0% -1.0% -1.0% AUD/KOR 857 0.1% -0.3% -3.0%

EUR/USD 1.133 0.1% 0.0% -4.2%

tonnes

Aluminium 4,007,175 -5,325 -33,900 -149,875

Copper 286,475 2,025 36,450 99,075 Newcastle * $66.70 2.7% 7.6% 17.5%

Lead 213,600 -650 -1,250 -6,550 Richards Bay * $63.85 3.9% 4.9% 11.9%

Nickel 426,324 2,118 1,350 11,592 DES ARA * $62.90 1.5% 8.1% 11.9%

Tin 11,850 0 10 -260

Zinc 612,150 -3,925 -15,925 -58,725 Iron ore & Steel USD/t

Steel Billet 585 0 0 0 Iron ore (62%Fe, cfr China, 09-Feb) $61.20 -2.1% -2.0% -12.9%

China domestic rebar (09-Feb) $402.25 0.0% -0.3% -7.6%

Precious Metals

Gold USD/oz (unless stated otherwise)

Spot $1,242.09 0.7% -2.5% 0.7%

Comex * $1,240.80 0.6% -2.8% 0.6% Equity & Debt Capital Markets

$1,589.98 0.5% -2.5% 5.1% New York (Dow Jones IA) 17,696 -0.7% 1.9% 0.3%

Silver $17.07 2.1% -0.8% 2.9% London (FTSE 100, 09-Feb) 6,837 -0.2% 0.8% 5.2%

Platinum $1,218.20 -0.5% -0.7% -1.9% Europe (EuroStoxx50) 3,348 -1.5% -0.7% 8.5%

Palladium $779.40 -0.6% -0.9% -3.9% Toronto (Metals & Mining) 2,011 1.0% -2.7% 2.4%

Philadelphia Gold & Silver Index 78.3 1.8% -2.6% -0.9%

Natural Gas

$2.609 1.2% -2.6% -6.7% US 2 year bond yield 0.636% -1.5% 38.0% 16.3%

47.39 0.5% 2.8% 1.1% US 10 year bond yield 1.943% -0.8% 16.7% 1.8%

Overnight Market Price Snapshot

change over change overLME spot (09-Feb)

Source: Bloomberg, ICE, CBA estimates. Data is indicative and prices subject to change. * Near month (not adjusted for contract changes). ** Weekly, *** Gas Oil is 0.05% sulphur. Active contract. **** Active contract. ***** Fuel Oil is 380 centistoke. Active contract.

AUD spot (AUD/oz)

Henry Hub (USD/MMBtu) **

British NBP (GBp/therm) **

Coal - Thermal (09-Feb)

LME futures, 3 mth (09-Feb)

LME inventories (09-Feb)

Global Markets Research | Commodities: Daily Alert

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