Inventory cost of imported raw materials like nickel, scrap and molybdenum weighs heavily on producers.

The demand for stainless steel has got much to do with the state of development of an economy and also how much emphasis it gives to infrastructure creation. It then says much of the scene here that India was ranked the world’s fourth-largest producer of this metal behind China, EU and Japan and its third-largest user after China and EU in 2010. Recording a growth of 12 per cent in crude stainless steel production to 2.9 million tonnes (mt), which at finished product point became 2.6 mt, the Indian demand at 2.4 mt, too, registered double digit rise. (more…)

Weak outlook of Euro zone due to ongoing tensions of Greece bailout, demand declines in China took Indian metals markets on a ride.

Most of the base metals went for a toss since the opening quotes even after closure of London Metal Exchange (LME). Technical selling persisted in the metals after a sober run last week.

Indian Copper futures witnessed shorting that took prices towards Rs 413.5 per kg, the prices are now at Rs 414.8 per kg. Nickel was down by 1.2% to trade at Rs 1040 per kg. Meanwhile, Lead slumped to Rs 114 per kg, down 0.7%.

Elsewhere, China lead battery plants in Zhejiang, Guangdong, Fujian, Henan and Sichuan had been closed down following a central government order to root out heavy metal pollution problems in the sector. Lead is extensively used in mobile phones and e bikes in China.

Both of which compounded account for more than 70% of the lead demand. With closure of the battery-manufacturing units the demand is expected to slow down.

In Europe, Greece has already failed to gain a vote for austerity measures and was on a verge of bankruptcy eagerly awaiting IMF and Euro zone relief measures.

Jobs data remained quite dismal in US. For the week ending May 21, an increase of 10000 was registered from the previous week’s revised figure of 414000. Overall the situation for world economics has plenty of if’s and but’s to answer.

Dollar gained against the EURO on Monday with pair exchanging hands at 1.4285 against 1.4321 last week.

The Sudbury Star reported that nickel prices may be moving down world markets, but they will stay high enough for Vale and Xstrata to keep producing in Sudbury.

Mr Kerry Smith analyst at Haywood Securities said that “I’m thinking US USD 9 to USD 11 a pound for the medium term or the next one to three years. Right now, it’s between USD 10.50 and USD 10.60 a pound. I’m thinking it’s going to be in this range. In the next few months, I think it’s going to be USD 10 to USD 11. I can’t see it going higher or lower. I think Vale and Xstrata Nickel can make decent money at these prices.”

Mr Smith said while a lot of new nickel production is coming on stream involving laterite nickel ores to be processed with new acid leaching technology, it won’t all be coming into play at once. He doesn’t see the laterite nickel ores (meaning ore located close to the surface) having much impact on world nickel supply and demand.

He said that “I don’t know if they will work as good as expected. There’s a lot of new production coming into the market from Vale and Xstrata. They have big balance sheets. They can get their projects to work. I think nickel is going to do well, but I don’t think we’re going to get back to the price we had in 2003: USD 25 a pound.”

One aspect of the world nickel market, China’s expansion and refinement using nickel pig iron for internal consumption has Mr Smith concerned about what could happen to the world nickel market as a whole.

While Chinese producers of nickel pig iron, a nickel substitute, had a production cost of about $15 a pound when they started several years ago, efficiencies introduced since then may have cut costs by about half.

Dr Jean Charles Cachon, a commerce and administration professor at Laurentian University agreed that world nickel prices won’t move much in the year ahead.

He said that after nickel hit USD 25 a pound in July 2007, one of the world’s big nickel consumers China took such measures as stockpiling nickel and getting into nickel pig iron to ensure its growing economy would never get burned again by rampant speculation.

Mr Cachon said look for a nickel price in the USD 9 to USD 11 range for some time.

In Greater Sudbury, Vale’s No 2 flash furnace at its Copper Cliff Smelter is down due to a 16 week rebuild that is now underway. The expected loss of nickel production will be about 5% of Vale’s 2011 nickel output or about 15,000 tonnes.

Ms Angie Robson, a spokeswoman with Vale in Greater Sudbury, said that Vale doesn’t talk about nickel prices and where they are heading. She added that “We are making tremendous investments over the next few years to make our operations more efficient. We will be spending USD 3.4 billion between now and 2014.”

China’s Ministry of Environmental Protection has ordered East Hope Group’s alumina refinery in Henan province to shut down production facilities that had not been approved.

The ministry said East Hope (Sanmenxia) Aluminium, the alumina arm of the large aluminium and agricultural products group in China, had been given approval to build annual capacity of 700,000 tonnes in two phases in Sanmenxia city in the central province. But the refinery had built extra 400,000 tonnes of capacity without an additional approval, according to a statement posted on the ministry website on Thursday.

The refinery also had added another two phases in the construction of alumina capacity and four power generators that all had not been approved by the ministry, the statement said.

The ministry ruled that East Hope (Sanmenxia) had to shut down units with 400,000 tonnes capacity and the added two phases of alumina production capacity. The refinery was also fined 100,000 yuan, said the statement dated May 23.

The statement did not disclose the total capacity involved and the timeframe of closure.

East Hope Group’s metal arm operates the alumina refinery in Henan and an aluminium smelter in Inner Mongolia in the north.

The group’s website does not provide capacity of the alumina and aluminium plants.

Industry sources estimate East Hope’s alumina refinery has more than 2 million tonnes of annual capacity and the aluminium smelter has about 1 million tonnes.

China, the world’s top consumer of alumina used to produce primary aluminium, has more than 41 million tonnes per year of alumina capacity.

Zhongjin Gold’s controlling shareholder plans to pay 2.34 billion yuan on a two-year project to expand production scale in Shandong province, reports Xinmin Evening News, citing a company filing.

The project is expected to produce 1,235 kilograms of gold each year, generating 294 million yuan in revenues.

The global copper-mining industry needs to expand to new regions if producers are to bring supply back into line with unprecedented demand, according to a mining- studies group in Chile, the world’s largest producer.

So far, the industry’s reaction to record prices has been slow because of declining ore grades, the need for deeper mines and higher costs, Juan Carlos Guajardo, executive director of the Center for Copper & Mining Studies, said yesterday.

The global copper market faces a 377,000 metric ton deficit this year, according to the International Copper Study Group, as demand, led by China and other emerging markets, outpaces supply. Copper futures in London surged to an all-time high in February.

“Since mining is a long-term industry, more time is needed to reach a new equilibrium in the copper market,” said Guajardo, speaking at a Shanghai Futures Exchange conference. By 2015, a further 2.1 million tons of capacity is needed, he said.

Copper for delivery in three months on the London Metal Exchange climbed to a record of $10,190 a ton on Feb. 15 after gaining 30 percent last year and more than doubling in 2009. The contract for three-month delivery closed at $9,199 a ton on May 27, rallying 2 percent after Chinese stockpiles dropped.

Guajardo’s assessment is similar to the outlook from Rio Tinto Group, the third-largest mining company. New supply is particularly dependent on opening up so-called greenfield projects and is moving to higher-risk regions, Matthew Holcz, general manager of business development at the London-based company’s copper unit, said in an October 2010 presentation.

China’s Growth

Copper is used in pipes and wires. Demand has jumped as China builds more infrastructure and emerging-market consumers buy more appliances. Demand from China’s power industry may expand 5 percent this year, while transport-industry use may grow as much as 10 percent, Mark Loveitt, secretary-general of the International Wrought Copper Council, said at the conference.

There have been “significant production disappointments” in the global copper industry over the past five years driven by falling ore grades, power and water shortages, strikes and extreme weather events, UBS AG said in a report on May 18. As a result, mining companies are targeting mergers and acquisitions rather than developing new sites, the report said.

“Exploration is the most relevant way, but it takes time, while the maximization of current capacity is limited,” said the Center for Copper’s Guajardo.

Chile’s Outlook

Copper prices are expected to remain high even if China’s economy slows, Chile’s President Sebastian Pinera said in an interview with Bloomberg Television on May 25. While economic growth in China may slow to 7 percent to 9 percent, that would still be enough to keep commodity prices high for “a very long period of time,” Pinera said.

“China’s emergence as a major consumer of copper, most of which is imported, is now the major swing factor in the copper market, as is the issue of how fast supply additions can come into the market,” the UBS report said.

Kazakhmys Plc (KAZ), the biggest Kazakh copper company, said May 4 that its first-quarter production of finished copper fell from a year earlier on lower ore grades. A day earlier, Boliden AB (BOL) reported lower copper output. Codelco, the world’s biggest producer, said May 3 output at its largest mine will drop “strongly” during conversion into a subsurface operation.

“The market has been reminded about how tight the supply side looks for copper,” said Gayle Berry, an analyst at Barclays Capital in London. “The Q1 production results for a number of copper miners underperformed people’s bleak expectations. It does further illustrate how tight the raw materials market is for copper.”

Copper in London may rise this week after the mining companies’ comments on production, according to a Bloomberg survey. Seven of 13 analysts, investors and traders questioned by Bloomberg, or 54 percent, said prices will gain this week, while three predicted a drop and three forecast little change.

SHANGHAI – Chinese demand for gold bars and coins as private investments could push bullion imports above 400 tons in 2011, the leading global consultancy GFMS said on Friday.

Increased appetite for silver investment products too, combined with a forecast 16 percent annual growth in industrial demand, means China’s total silver consumption could outstrip domestic supply this year, said Philip Kalpwijk, executive chairman of GFMS.

“There is a widening demand for silver as an investment in China because of its lower entry point. It is also being increasingly recognized as an physical investment asset, which will support demand,” Kalpwijk told a conference in Shanghai.

The Chinese government does not publish official statistics on gold imports but the World Gold Council said the country produced 340 tons in 2010.

Last year, total consumption was about 700 tons, leaving a gap of around 300 tons made up either by imports or sales of existing stocks.

The surge in imports, which jumped fivefold last year, has turned China, already the largest bullion miner, into a major overseas buyer. GFMS forecasts imply that imports will continue to grow at a robust pace despite high gold prices.

The explosive demand has been stoked by concerns about inflation and poor returns in the stocks and property sectors. It also been aided by Beijing’s encouragement of retail consumption, such as expanding the number of banks allowed to import bullion.

GFMS said China’s investment demand for gold could hit 300 tons this year, up from 200 tons in 2009. Investment demand for silver stood at around 260 million tons in 2010, the group said.

China National Gold Group Corp predicted that China’s bullion output could reach 400 tons by 2014, a gain of nearly 19 percent from 2010. Consumption was set to grow by nearly a quarter to 700 tons, implying a supply shortfall of about 300 tons in three years.
Demand from China, along with inflation concerns amid a weak dollar, has pushed gold prices to a series of record highs.

Bullion struck a record above $1,575 in early May. Silver touched a record at $49.51 in late April before falling sharply on a broad sell-off in commodities and after exchange operators in Shanghai and New York raised the amount of money required to trade.

Gold’s decade-long price rally could take the metal above $1,600 an ounce by the end of the year, GFMS said.

The investment frenzy in China has also led to booming trading volumes in the spot and forward markets on the Shanghai Gold Exchange (SGE), said the exchange’s president Wang Zhe.

Total gold traded on the exchange rose 28.5 percent from a year ago to 6,051.5 tons in 2010, while the total turnover jumped 57 percent. The trading volume for silver was 73,615 tons in 2010, a meteoric 353 percent rise from a year ago, Wang told a conference on Thursday.

The SGE, China’s only specialized precious metals exchange, started a trial of over-the-counter trading in April and is studying ways of establishing a platform to provide open gold lease rates in China.

China National Gold Group’s President Sun Zhaoxue said Beijing’s move to consolidate the gold-mining sector, improve technology and encourage exploration at depths exceeding 1,000 metres would combine to boost underground reserves and output.

China’s gold output in the first three months of 2011 totaled 73.4 tons, up 4.6 pct from the same period in 2010, the Ministry of Industry and Information Technology said.

Chinese gold demand could rise over 22 percent in the next three years and sharply outpace domestic production, the head of the country’s largest state-owned gold miner China National Gold Group said on Thursday, signalling room for a strong ramp up in imports.

Gold production should reach 400 tonnes by 2014, a gain of nearly 19 percent from 2010, but consumption is set to grow by nearly a quarter to 700 tonnes, Sun Zhaoxue, president of the group, told reporters at the sidelines of a conference in Shanghai.

“I’m very optimistic about the future of China’s gold market,” Sun said.

China produced 340 tonnes of gold in 2010 and investors locally bought 571.5 tonnes, according to official data, for a gap of 231.5 tonnes made up by either imports or sales of existing stocks.

The proportion of imports is not available because China doesn’t regularly publish gold-trade figures and rarely comments on its reserves.

China has seen a spike in demand for gold and silver since late last year as investors looked to precious metals over stocks, property and savings.

India remains the world’s largest gold buyer, but China is closing in and from a low base with room to grow quickly as income rise, Sun said, noting gold buying per capita stood at just 4 grams, much lower than other industrialised nations.

In April, Shanghai Gold Exchange, China’s only specialty precious metals exchange, started a trial for over-the-counter trading, providing an easier tool for institutional clients to trade large quantities of gold.

Sun said Beijing’s move to consolidate the gold mining sector, improve technology and encourage exploration at depths exceeding 1,000 metres would combine to boost the country’s underground reserves and output over the coming years.

China’s gold output in the first three months of 2011 totalled 73.4 tonnes, up 4.6 pct from the same months of 2010, the Ministry of Industry and Information Technology said.

Gold’s decade-long price rally could take the metal above $1,600 an ounce by year-end, metals consultancy GFMS said in a widely anticipated industry report as investors’ appetite for gold sharpens further.

Separately, Sun said the group was still considering whether to inject its copper assets into its Shanghai-listed China Zhongjin Gold.

“Some don’t support the idea of an injection. We are the fifth-largest copper producer in China and they think it may be better to spin off our copper assets,” Sun said, adding the firm was also in talks with regulators on the subject.