ANZ RESEARCH

COMMODITY DAILY
April 18, 2012

Contacts: Mark Pervan Natalie Robertson

+613 9273 3716 | [email protected] +613 9273 3415 | [email protected]

MARKET HIGHLIGHTS
Oil prices up, Brent-WTI spread narrows to US$15/bbl Gold flat, despite strong gains in equities & oil prices Base metals rose on risk-on rally & coppers tight supply Coal slipped, activity quiet with many attending China CT

OVERNIGHT WRAP
Overnight Themes Risk appetite improved for commodities as a successful Spanish bill auction, IMF global growth forecast upgrades, and better than expected US housing data encouraged investors to brush away some of their recent demand concerns. In addition, the German ZEW for April printed better than expected and was the best reading since June 2010, while US Q1 corporate earnings reports appears to be favourable. Data wise, US house building permits rose to the highest level since September 2008, offsetting the lower-thanexpected housing starts print and mildly softer read for industrial production. European equities closed almost 3% higher and US bourses were up around 1.5%. The improvement in sentiment resulted in a broad sell-off in the USD, which was also positive for commodities. Crude benchmarks recovered, with US crude breaking out to a fresh nine-day high and outperforming Brent again. Brents premium to WTI has now narrowed back towards the US$15/bbl, continuing the recent unwinding of the Brent/WTI spread, as well as crack spreads. Market speculation that the US Seaway pipeline reversal will take place sooner than expected (in Mid-May, rather than June) appears to be buoying WTI relative to Brent. Meanwhile, the Iranian risk premium is continuing to recede from the price of Brent more quickly than WTI. The positive tone in wider markets was also supportive for crude oil, tracking the solid gains in equity markets. Although the mood could turn bearish if weekly US crude oil inventories show stockpile builds beyond the 1.8mbbls expected. Gold ended the session flat at US$1,650/oz, after a sharp ~$20 fall mid-way through the session in response to some of the discouraging US data reads. The strong gains in equities and bounce in crude oil prices didnt coincide with higher gold prices, perhaps because market participants remained concerned over China and Europe. Base metals closed mostly up, with bellwether copper supported by the risk-on rally in wider financial markets. Rio Tintos surprise drop in copper output also brought coppers tight supply situation back into focus. Rio Tintos mined copper output fell 13% to 119.5kt, against market expectations of around 140kt. Rio and Xstrata said copper output would improve in the second half of 2012, as seasonal bad weather and lower ore grades weighed on first quarter output. Newcastle coal front month futures slipped with activity quieter than usual, as most market participants attend Chinas CoalTrans (CT). In one presentation, BHP said Chinas coking coal demand is expected to remain resilient to 2025, supported by capital and infrastructure spending in its steel industry. Steel intensity is estimated to almost double to 700750kg/capita during the next decade, versus 445kg in 2010, with seaborne coking coal imports to rise accordingly. BHP also expects two-thirds of the global coking coal market to adopt spot and short-term contracts by the end of 2012.

OVERNIGHT RANKED PRICE MOVES (%)

1 .8 1 .5 1 .4 1 .4 1 .0 0.9 0.6 0.6 0.6 0.0 (0.1 ) (0.5) (0.8) (0.8) (2.0) (1 .5) (1 .0) (0.5) 0.0 0.5 1 .0 1 .5 2.0 2.5 Nickel S&P 500 B altic Freight Co pper WTI Oil Tin P latinum A luminium Silver USD (DXY) Go ld Lead Co al (NEWC) Zinc

WEEK-TO-DATE RANKED PRICE MOVES (%)

6.6 3.1 2.4 1 .8 1 .3 0.5 (0.3) (0.4) (0.6) (0.6) (0.8) (1 .9) (3.3) (5.1 ) (8.0) (6.0) (4.0) (2.0) 0.0 2.0 4.0 6.0 8.0 B altic Freight WTI Oil S&P 500 Lead Co pper A luminium Silver USD (DXY) Zinc Go ld P latinum Nickel Co al (NEWC) Tin

Note: Coal (NEWC) refers to front month futures Sources: Bloomberg, ANZ Commodity Strategy

COMMODITY DATA
Close 1 Day 1 Wk 1 Mth 3 Mth Close 1 Day 1 Wk 1 Mth 3 Mth

Commodities

% Change
2,037 8,164 17,751 1,981 2,058 21,522 0.6 1.4 1.8 (0.8) (0.5) 0.9 0.5 1.3 (1.9) (0.6) 1.8 (5.1) (7.6) (3.5) (6.4) (2.1) 3.2 (7.8) (7.6) (2.2) (13.7) (6.0) (7.5) (2.8)

Inventories

% Change
5,080 261 99 912 371 13 0.7 (0.2) (0.5) 1.1 (0.1) 0.3 0.3 (2.7) (1.2) 1.4 (0.5) 1.8 (0.0) 0.1 1.9 3.9 0.4 9.8 1.5 (23.7) 6.4 7.6 7.4 37.1

LME BASE METALS (US$/t)

Aluminium Copper Nickel Zinc Lead Tin

LME BASE METALS (kt)

Aluminium Copper Nickel Zinc Lead Tin

PRECIOUS METALS (US$/oz)

Gold Gold (A$/oz) Silver Platinum Palladium 1,650 1,584 31.7 1,586 663 (0.1) (0.7) 0.6 0.6 1.3 (0.6) (2.0) (0.3) (0.8) 2.7 (0.1) 0.7 (1.4) (4.3) (4.4) (1.0) (0.3) (1.2) 2.2 (2.6)

Key Indices
S&P 500 VIX Volatility Index CRB Index LME Metals Index

Close
1,391 18 302 3,464

1 Day
1.5 (5.6) 0.4 0.8

1 Wk
2.4 (9.5) 0.5 0.1

1 Mth
(1.0) 18.5 (4.3) (5.0)

3 Mth
5.8 (2.4) (4.0) (5.5)

% Change

ENERGY (US$/bbl)
WTI Oil* Brent Oil* Sing Gasoil 0.5% Sing Fuel Oil 180cst (US$/t) 104 119 132 721 1.0 0.2 0.0 0.0 3.1 (0.9) (1.6) (2.3) (1.3) (4.3) (4.1) (4.3) 5.3 8.0 1.1 (1.0)

Freight
Baltic Freight Rate Baltic Capesize Baltic Panamax Baltic Handysize

Close
989 1,542 1,232 546

1 Day
1.4 (0.3) 3.6 0.6

1 Wk
6.6 0.7 18.5 1.1

1 Mth
11.9 8.9 22.7 4.6

3 Mth
22.6 2.0 30.2 20.3

% Change

OTHER (US$/t)
China HR Coil (RmB/t) Richards Bay Coal API4 Newcastle Coal*** Australia Coking Coal** Iron Ore Spot 4,390 101 103 211 149 (0.0) (0.8) (0.8) (0.1) (0.0) (1.9) (3.3) 1.4 0.8 1.0 (2.8) (3.8) 1.0 3.0 4.0 (5.3) (12.5) (5.8) 6.7

Currencies
DXY - USD Index AUD/USD - Aussie NZD/USD - Kiwi

Close
79.6 1.041 0.823

1 Day
0.0 0.6 0.4

1 Wk
(0.4) 1.4 1.1

1 Mth
(0.0) (0.7) 0.6

3 Mth
(0.4) (0.6) 1.5

% Change

US$ /t 2,900 2,700 2,500 2,300 2,1 00 1 ,900 A pr US$ /t 2,600 2,400 2,200 2,000 1 ,800 1 ,600 A pr US$ /bbl 1 20 10 1 1 00 90 80 70 A pr Jun Jun Jun

ALUMINIUM

US$ /t 1 0,000 9,500 9,000 8,500 8,000 7,500 7,000 6,500

COPPER

US$ /t 28,000 26,000 24,000 22,000 20,000 1 8,000 1 6,000

NICKEL

A ug

Oct

Dec

Feb

A pr US$ /o z 1 ,900 1 ,800 1 ,700 1 ,600 1 ,500 1 ,400

Jun

A ug

Oct

Dec

Feb

A pr US$ /o z 50.0 45.0 40.0 35.0 30.0 25.0

Jun

A ug

Oct

Dec

Feb

ZINC

GOLD

SILVER

A ug

Oct

Dec

Feb

A pr US$ /t 1 25 1 20 15 1 10 1 1 05

Jun

A ug

Oct

Dec

Feb A$ 12 .1 1 .09 1 .06 1 .03 1 .00 0.97 0.94

A pr

Jun

A ug

Oct

Dec

Feb

WTI OIL

NEWCASTLE COAL

AUD

A ug

Oct

Dec

Feb

A pr

A pr

Jun

A ug

Oct

Dec

Feb

A pr

Jun

A ug

Oct

Dec

Feb

Notes: * Front-month futures ** Weekly prices ***Newcastle ICE coal futures contract Sources: Bloomberg, McCloskey, ANZ Commodity Strategy

ANZ FORECASTS
ANZ Forecast Table1
COMMODITY
BASE METALS Aluminium Copper Nickel Zinc Lead Tin PRECIOUS METALS Gold Platinum Palladium Silver ENERGY WTI NYMEX Dated Brent Uranium BULKS Thermal coal2 Premium hard coking Hard coking Semi-soft coking coal Iron ore lump Iron ore fines OTHER METALS Alumina Molybdenum Cobalt EXCHANGE RATES AUD/USD NZD/USD EUR/USD USD/JPY USD/CAD USD/CNY US$ US$ US$ C$ Yuan 1.08 0.82 1.46 81.03 0.96 6.46 1.05 0.83 1.41 76.78 0.99 6.38 1.04 0.79 1.35 77.48 1.01 6.36 1.06 0.83 1.33 80.06 1.00 6.29 1.05 0.84 1.35 78.96 0.99 6.27 1.09 0.86 1.36 75.67 1.00 6.23 1.10 0.88 1.37 73.00 1.02 6.14 1.10 0.90 1.37 70.67 1.04 6.10 1.10 0.90 1.37 70.00 1.06 6.08 1.10 0.90 1.36 70.00 1.08 #/NA 1.10 0.90 1.34 70.00 1.10 #/NA US$/t US$/lb US$/lb 326 16.7 18.3 300 14.6 17.1 262 13.4 15.1 265 13.8 14.8 278 14.8 15.3 280 15.8 16.2 288 16.3 16.8 291 16.5 17.0 288 16.8 17.5 288 16.9 18.0 291 16.7 18.0 US$/t US$/t US$/t US$/t US$/t US$/t 130.0 330.0 300.0 275.0 206.1 171.8 130.0 315.0 290.0 230.0 202.0 168.3 130.0 285.0 265.0 208.0 177.6 148.0 130.0 235.0 225.0 171.0 168.0 140.0 115.0 206.0 196.0 151.0 175.2 146.0 115.0 215.0 195.0 170.0 180.0 150.0 115.0 220.0 200.0 175.0 183.9 152.0 115.0 220.0 200.0 175.0 183.9 152.0 125.0 225.0 200.0 175.0 181.5 150.0 125.0 225.0 200.0 175.0 176.7 146.0 125.0 220.0 195.0 170.0 173.2 142.0 US$/bbl US$/bbl US$/lb 102.5 117.0 56.4 89.5 112.9 51.8 94.1 109.3 52.6 102.4 115.8 53.1 107.0 123.5 56.0 108.5 122.5 60.5 111.0 123.0 65.0 114.5 124.5 68.5 116.5 125.0 71.5 116.0 123.5 74.0 114.5 121.0 76.0 US$/oz US$/oz US$/oz US$/oz 1,508 1,785 760 38.5 1,706 1,771 752 38.9 1,683 1,531 630 31.8 1,632 1,526 673 31.2 1,740 1,685 700 34.8 1,790 1,700 730 35.3 1,815 1,700 775 36.2 1,855 1,765 820 37.4 1,870 1,795 850 37.5 1,830 1,765 850 36.9 1,770 1,725 838 36.3 US$/lb US$/lb US$/lb US$/lb US$/lb US$/lb 1.18 4.16 11.05 1.02 1.16 13.08 1.09 4.07 9.98 1.01 1.11 11.16 0.95 3.41 8.34 0.86 0.90 9.45 0.96 3.62 8.70 0.87 0.94 9.09 1.01 3.85 9.15 0.90 0.96 9.45 1.02 3.98 9.70 0.91 0.96 9.75 1.05 4.08 10.15 0.95 0.99 10.30 1.06 4.08 10.25 0.98 1.02 10.55 1.05 4.13 10.40 1.01 1.05 10.80 1.05 4.15 10.45 1.03 1.06 10.95 1.06 3.95 10.15 1.04 1.07 10.80 Unit Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13

Note 1: Average prices Note 2: Thermal coal prices are for JPY year starting April 1 Note 3: Historical data are actuals Sources: Bloomberg, ANZ Commodity Strategy, ANZ FX Strategy

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