Thursday 19 July 5:15 PM
Asia Metals-Australia churns metal as markets sink
au.dailynews.yahoo.com
By James Regan
SYDNEY, July 19 (Reuters) - World metals markets, whirling from declining industrial output and growing inventories, are unlikely to find supply side relief from Australian producers, commodities analysts and traders said on Thursday. "Most producers are running flat out, which is wearing on premiums, particularly in Asia," said a metals trader in Sydney.
Premiums -- prices paid above the average monthly London Metal Exchange price -- are determined by the ready availability of metals in given markets.
Commodities analysts at JB Were Ltd say the manufacturing sector in Asia has weakened dramatically this year, pointing to steeper declines in industrial production than previously believed. In Japan alone, it forecasts an across-the-board decline in base metals consumption this year.
"While our previous forecasts had anticipated an outright contraction in global manufacturing output through the June and September quarters, the actual outcomes will be worse than expected," JB Were said in a report.
Australian producers of copper, nickel, aluminium and other metals spent billions of dollars during the second half of the 1990s on building more efficient refineries, or modernising and expanding old ones, with an eye to running at full capacity.
MORE METAL TO COME
If anything, Australian producers are seen churning out more metal this year than ever before. This is thanks in part to a persistently weak Australian currency, which has hobbled along at or near record lows against the U.S. dollar for more than a year. Because metals trade in U.S. dollars, most producers are earning big margins on exports.
Remarks on Thursday (Asia time) by U.S. Federal Reserve chairman Alan Greenspan on the possible need for more rate cuts yanked the Australian dollar about a half cent higher to US$0.5130. But this is small beer, say analysts, for Australian firms who have factored in exchange rates of between 60 and 70 US cents.
"That move in the (Aussie) dollar won't make a lick of difference to the producers," said Commonwealth Bank of Australia commodities analyst David Thurtell. "They are getting such good returns on the Aussie, why wouldn't you crank it out. Five or six cents might make a difference, but not today's move," he added.
This year, Australia is expected to produce roughly 10 percent of the world's nickel and zinc, four percent of global copper, and eight percent of aluminium.
"The Aussie dollar is a real plus for the producers," said Keith Goode, an analyst for Bell Securities.
PLENTY OF COPPER COMING
Two of Australia's biggest copper producers, MIM Holdings Ltd MIM.AX and WMC Ltd (ASX: WMC), each will pump out some 200,000 tonnes of copper from newly refurbished smelters.
WMC also has approved A$100 million to lift output a further 35,000 tonnes and is commissioning additional nickel-making capacity at its refinery in Western Australia. When completed later this year, it will boost annual output there to 67,000 tonnes from 60,000 tonnes. "The idea is to get as much out of that refinery as we can, said WMC managing director Hugh Morgan.
It's not just the big metals houses that are ramping up output. The newly formed Miitel joint venture headed by Mincor Resources NL MCR.AX expects to produce 10,000 tonnes of nickel a year from previously mothballed nickel mines in Western Australia after buying a second mine on Thursday. "At a stroke we become a two mine company," said Mincor managing director David Moore.
Straits Resources Ltd SRL.AX lifted its production of copper cathode from its Nifty mine by 70 percent in the June quarter to 5,466 tonnes. It also has completed an upgrade that will take output to an annualised 25,000 tonnes from 10,000 tonnes.
Western Metals Ltd (ASX: WMT), which increased output by more than half to 11,455 tonnes in the March quarter, is expected to record further increases in the June quarter following an upgrading of its Mount Gordon mine in Queensland. Design work has been aimed at lifting yearly production to 55,000 tonnes from 14,000 tonnes in 1998. |
