1. Base Metals
One Year Forecast
November 2009
Date of release: 6th November 2009
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2. Table of Contents
Introduction I1-I3
Economic Indicators E1-E2
Aluminium A1-A7
Copper C1-C8
Lead L1-L7
Nickel & Cobalt N1-N10
Tin T1-T7
Zinc Z1-Z8
Disclaimer
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3. Introduction - November 2009
Introduction
● Boosted by ongoing interest by investors, ● Chinese lead production figures in September
base metals prices were resilient throughout were higher than expected, despite concerns
October, and currently stand somewhat up on related to the poisoning incidents.
the level the started that month on.
● Nickel prices have come off their recent highs
● GFMS’ Base Metals Index averaged 262.8 in of close to $20,000/tonne. Developments in
October, up 3% on September and 31% year- the key stainless market where base prices
on-year. In early November, our index, at 268, are under pressure suggest weak demand for
is more than 90% higher than its February low. nickel in the short term.
● Aluminium production in China reached an all- ● The much discussed dominant position of tin
time high in September and production outside has reportedly declined from holding 90% of
the country was also up slightly. Demand all warrants to between 50-80%. Coupled with
remains muted outside China. ongoing fundamental weakness, this saw tin
prices retrace somewhat in October.
● Copper reached a cycle-peak above $6,600/
tonne in late October, underpinned by concerns ● Declining LME stocks as well as a suspension
over supply tightness. An ongoing, and of a concentrator at the Century mine
protracted, strike at BHP Billiton’s Spence mine boosted zinc prices, resulting in the metal
has provided key support to prices. outperforming the other base metals.
Base Metals Supply-Demand Overview
(000 tonnes) 2003 2004 2005 2006 2007 2008 2009
Aluminium
Consumption 27,887 30,285 32,040 34,366 37,953 38,120 35,138
Production 28,001 29,922 32,017 33,969 38,056 39,479 36,828
Metal balance 113 -363 -24 -397 104 1,360 1,690
LME Cash ($/tonne) 1,432 1,717 1,898 2,567 2,645 2,571 1,605
Copper
Consumption 15718 16838 16689 17045 18175 18007 18023
Production 15275 15928 16573 17295 17952 18272 18268
Metal balance -442 -910 -116 250 -223 264 245
LME Cash ($/tonne) 1,780 2,868 3,864 6,731 7,126 6,952 5,100
Lead
Consumption 6,823 7,295 7,783 8,062 8,181 8,665 8,852
Production 6,762 6,980 7,626 7,922 8,114 8,671 8,943
Metal balance -61 -315 -157 -140 -67 6 91
LME Cash ($/tonne) 516 888 976 1,288 2,600 2,085 1,710
Nickel
Consumption 1,248 1,251 1,296 1,366 1,353 1,294 1,232
Production 1,207 1,251 1,288 1,341 1,398 1,364 1,264
Metal balance -41 0 -8 -25 45 70 31
LME Cash ($/tonne) 9,640 13,850 14,733 24,287 37,181 21,029 14,800
Tin
Consumption 302 334 345 363 356 337 320
Production 276 343 350 351 349 333 343
Metal balance -26 9 4 -12 -7 -4 24
LME Cash ($/tonne) 4,896 8,513 7,370 8,763 14,580 18,499 13,475
Zinc
Consumption 9,851 10,646 10,612 10,972 11,276 11,483 11,108
Production 9,873 10,395 10,220 10,643 11,359 11,665 11,300
Metal balance 22 -251 -392 -329 83 182 192
LME Cash ($/tonne) 1,432 1,717 1,898 2,567 2,645 2,571 1,605
Source: GFMS, WBMS, LME
Independent - Informed - International I1

4. Introduction - November 2009
Prices continue to defy fundamentals Base Metals & Other Commodity Prices
In the aftermath of the recent LME week, field research
has further confirmed GFMS’ view that the recovery of 200
base metal prices has yet to be matched by a material GFMS Base Metals Index
Index, 2nd January 2009 = 100
improvement in the underlying fundamentals. Although
Dow Jones UBS Index
orders have undoubtedly come off the lows seen earlier in 150
the year, a real recovery has yet to emerge and consumption
remains far below normal levels in most regions. The long
awaited restocking phase in the semis sector has not began. GSCI
100
Coupled with production increases being seen for some of
the metals, this suggests no real tightness of material has
materialised to-date or is expected in the very near-term.
50
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09
Despite this fact, most base metals prices in early November Source: GFMS
are up on their one month prior levels and anything between
50% and 135% up on their lows earlier in the year. The
GFMS Base Metals Index, which is constructed using equal Fundamentals reflected in relative performance
weights on the six main LME metals, in early November Despite the aforementioned general mismatch of price
stands at 269, up 5% on the 1st October level and 93% performance and supply-demand conditions, the individual
compared to this year’s trough. Our index averaged 263 in metals’ fundamentals continued to affect the relative
October, 3% up on September and 31% up year-on-year. performance of the six main LME metals. For instance, the
exceptional performance of zinc from 1st October concurred
Investors remain positive towards the sector with a net decline in LME inventories, supply disruptions
The lack of a real improvement in the market’s fundamentals at the Century mine and came against the backdrop of a
has continued to be compensated by investor interest market expected to swing to deficit in the last quarter. In
in commodities, particularly those related to industrial contrast, aluminium and tin’s relative weakness reflected the
production, where much of the current and projected high inventories that weigh on both metals’ prices as well
recovery is expected to rely on. Essentially, investors as, in the case of tin, the partial unwinding of a major long
are front-running the improvement in the base metals position.
fundamentals and in doing so they have brought forward the
price recovery. Market outlook
In early November, GFMS remain of the view that base
GFMS have often noted that the bulk of investor activity metals prices remain at levels exceeding those justified by
on base metals tends to be part of a wider commodity their immediate fundamentals. Therefore we are slightly
strategy, with base-metal specific players comprising only cautious, at least for the very near-term. Nevertheless, we
a small niche portion of the market. By implication, over appreciate the momentum in base metals investment that
periods of time, base metals prices tend to trend in a has been in place ever since the trough of last spring and
similar trajectory to commodity prices in general, illustrated acknowledge that the potential for what we would see as
in the accompanying graph. In October, base metals a long-overdue correction to be avoided, or to be of very
underperformed the two main commodity indices we track, limited magnitude.
a reflection of the sector’s lacklustre fundamentals as well
as strength in energy-related commodities seen over the In the longer term, we remain largely constructive towards
month. The chart, however, highlights that GFMS’ Base the wider base metals sector and this is reflected in our
Metals Index so far this year has outperformed broader projections outlined in the individual metal sections of
commodity indices, such as the GSCI. this report. This is by and large based on expectations of
ongoing attention by investors coupled with, eventually,
Dollar weakness supports prices a noteworthy improvement in the metals’ demand-side
Another factor that has boosted base metals prices since last fundamentals as we progress into next year. This will most
spring has been the weakness of the US dollar, particularly probably be augmented in the first and second quarter
against the euro, and this continued to support the sector by the restocking cycle we expect will take place in many
in October. For instance, looking at the latest data for the relevant end-use industries, although healthy results are also
GFMS Base Metals Index constructed using euro prices, and seen in the third and final quarter of next year. Our base
making the same comparisons made above, our index is up metals index is forecast to move within a range of 229 and
by a more contained 3% on the 1st October level and 65% 337 over the year, peaking some time in the final quarter.
compared to this year’s low.
I2 Independent - Informed - International

5. Introduction - November 2009
LME Prices Overview
Prices US$/tonne % Change y-o-y
Al Cu Ni Pb Sn Zn Al Cu Ni Pb Sn Zn
Monthly
Oct-08 2,121 4,926 12,140 1,480 14,402 1,302 -13.1 -38.5 -60.9 -60.2 -10.4 -56.2
Nov-08 1,852 3,717 10,702 1,291 13,644 1,153 -26.1 -46.6 -65.0 -61.2 -18.3 -54.6
Dec-08 1,490 3,072 9,686 963 11,240 1,101 -37.4 -53.4 -62.7 -62.9 -30.9 -53.2
Jan-09 1,413 3,221 11,307 1,133 11,373 1,187 -42.2 -54.4 -59.2 -56.6 -30.4 -49.3
Feb-09 1,330 3,315 10,409 1,101 11,039 1,112 -52.1 -58.0 -62.8 -64.3 -35.9 -54.4
Mar-09 1,336 3,750 9,696 1,239 10,676 1,217 -55.6 -55.6 -68.9 -58.8 -46.1 -51.6
Apr-09 1,421 4,407 11,166 1,383 11,744 1,379 -52.0 -49.3 -61.2 -51.0 -45.8 -39.1
May-09 1,460 4,569 12,635 1,440 13,793 1,484 -49.7 -45.5 -50.9 -35.6 -42.7 -32.0
Jun-09 1,574 5,014 14,960 1,674 14,986 1,557 -46.8 -39.3 -33.7 -10.1 -32.6 -17.8
Jul-09 1,668 5,216 15,985 1,679 14,039 1,579 -45.7 -38.0 -20.7 -13.7 -39.3 -14.8
Aug-09 1,934 6,165 19,642 1,900 14,870 1,884 -30.0 -19.2 3.7 -1.2 -25.8 9.3
Sep-09 1,834 6,196 17,473 2,205 14,869 1,822 -27.4 -11.4 -1.8 18.0 -19.1 5.0
Oct-09 1,879 6,288 18,525 2,241 15,009 2,072 -11.4 27.7 52.6 51.4 4.2 59.1
Quarterly
2008 Q1 2,729 7,763 28,863 2,891 17,695 2,443 -2.5 30.7 -30.4 61.8 39.1 -29.1
2008 Q2 2,941 8,448 25,730 2,316 22,612 2,143 6.5 10.6 -46.4 6.2 60.3 -41.5
2008 Q3 2,792 7,693 18,987 1,915 20,522 1,773 9.4 -0.3 -37.2 -39.0 37.0 -45.0
2008 Q4 1,830 3,940 10,885 1,251 13,127 1,189 -25.2 -45.6 -63.0 -61.8 -19.7 -55.1
2009 Q1 1,360 3,435 10,459 1,160 11,024 1,174 -50.2 -55.8 -63.8 -59.9 -37.7 -52.0
2009 Q2 1,488 4,676 12,992 1,506 13,551 1,476 -49.4 -44.6 -49.5 -35.0 -40.1 -30.2
2009 Q3 1,806 5,840 17,614 1,925 14,576 1,757 -35.3 -24.1 -7.2 0.5 -29.0 -0.9
Annual
2002 1,432 1,558 6,772 453 4,062 779 -0.8 -76.9 13.9 -4.9 -53.6 -12.1
2003 1,717 1,780 9,640 516 4,896 828 19.9 14.3 42.4 13.9 20.5 6.4
2004 1,717 2,868 13,850 888 8,513 1,048 0.0 61.1 43.7 72.3 73.9 26.5
2005 1,898 3,684 14,733 976 7,370 1,382 10.6 28.5 6.4 9.8 -13.4 31.9
2006 2,567 6,731 24,287 1,288 8,763 3,273 35.2 82.7 64.9 32.0 18.9 136.8
2007 2,639 7,126 37,181 2,595 14,536 3,250 2.6 2.5 76.8 24.5 -21.4 73.8
2008 2,571 6,952 21,029 2,085 18,499 1,870 78.1 3.3 253.5 338.0 111.1 111.1
Source: LME & GFMS
LME Inventory Overview
End-Period (000 tonnes) No. of weeks consumption
Al Cu Ni Pb Sn Zn Al Cu Ni Pb Sn Zn
Monthly
Oct-08 1,528 238 58 48 4 182 3.3 1.1 3.2 0.5 0.9 1.4
Nov-08 1,533 291 58 48 3 193 3.4 1.3 3.2 0.5 0.8 1.4
Dec-08 2,338 341 79 45 8 253 5.1 1.5 4.3 0.5 2.0 1.9
Jan-09 2,811 491 84 54 9 345 7.2 2.4 5.7 0.5 2.2 2.9
Feb-09 3,227 537 99 60 9 358 8.3 2.6 6.6 0.6 2.1 3.0
Mar-09 3,477 502 108 62 11 344 8.9 2.4 7.3 0.6 2.6 2.9
Apr-09 3,792 399 114 72 13 329 9.7 1.9 7.7 0.7 3.0 2.7
May-09 4,237 312 109 79 14 324 10.8 1.5 7.4 0.8 3.5 2.7
Jun-09 4,395 266 110 92 17 353 11.2 1.3 7.4 0.9 4.1 2.9
Jul-09 4,565 282 106 107 18 408 11.7 1.4 7.1 1.1 4.4 3.4
Aug-09 4,613 300 116 121 20 435 11.8 1.4 7.8 1.2 4.9 3.6
Sep-09 4,585 346 121 128 25 437 11.7 1.7 8.1 1.3 6.1 3.6
Oct-09 4,556 372 130 130 27 429 11.7 1.8 8.7 1.3 6.3 3.6
Annual
2002 1,241 856 22 184 26 651 3.3 3.8 1.1 1.8 6.2 4.8
2003 1,423 431 24 109 14 740 3.6 1.9 1.2 1.1 3.4 5.4
2004 693 49 21 40 8 629 1.7 0.2 1.0 0.4 1.8 4.4
2005 644 92 36 44 17 394 1.5 0.4 1.7 0.4 3.6 2.7
2006 698 191 7 41 13 90 1.6 0.8 0.3 0.4 2.8 0.6
2007 929 199 48 45 12 88 2.2 0.8 2.2 0.4 2.6 0.6
2008 2,338 341 79 45 8 253 5.1 1.5 4.3 0.5 2.0 1.9
Source: LME & GFMS
Independent - Informed - International I3

6. Economic Indicators - November 2009
Economic Indicators
In spite of the aforementioned lack of material recovery manufacturing Purchasing Managers’ Index (PMI) for the
in consumption, in early November, the latest relevant Eurozone breached the important 50 mark, suggesting
economic indicators remain by and large upbeat. Starting positive growth in the sector, for the first time in 17 months
with the OECD Composite Leading Indicator (CLI), in in October.
GFMS’ view the best single gauge of future global industrial
production, August marked the sixth consecutive month- Moving to the United States, the ISM PMI rose to 55.7 in
on-month increase, with the figure reaching 99.2, a level October, marking the third consecutive month of growth.
unseen since July last year. All but a handful of individual Looking at the employment sub-index, this breached the
countries’ indicators were up, with the majority of major 50 mark for the first time since July last year. Lagged by
developed economies showing clear signs of recovery. one month, the latest data on housing starts in the country
saw September starts increase at the margin compared to
Confirming these improvements, it is worth noting the latest August. Finally, October vehicle sales kept to levels virtually
revision by the European Commission of its forecast for unchanged from the previous month, far below the August
growth in the EU-27 region to 0.7% next year, compared figure boosted by the “cash-for-clunkers” scheme.
its May projection of 0.1%. Within the region, the latest
Main Economic Indicators
Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09
Manufacturing PMI
Eurozone 34.4 33.6 33.9 36.8 40.7 42.6 46.3 48.2 49.3 50.7
USA 35.6 35.8 36.3 40.1 42.8 44.8 48.9 52.9 52.6 55.7
China 42.2 45.1 44.8 50.1 51.2 51.8 52.8 55.1 55.0 55.4
Japan 29.6 31.6 33.8 41.4 46.6 48.2 50.4 53.6 54.5 54.3
OECD Composite Leading Indicators
OECD 92.6 92.4 92.7 93.5 94.8 96.2 97.7 99.2
Euro zone 93.2 93.4 94.2 95.4 96.9 98.5 100.2 102.0
France 95.5 96.1 97.1 98.3 99.6 101.0 102.4 103.7
Germany 89.9 89.9 90.6 92.0 93.9 96.1 98.4 100.8
Italy
UK 94.8 94.6 94.8 95.4 96.4 97.7 99.1 100.7
USA 91.3 90.8 90.9 91.4 92.8 94.3 95.9 97.4
NAFTA 91.8 91.3 91.5 92.1 93.4 94.9 96.5 98.1
Japan 92.4 91.5 91.4 92.0 93.0 94.3 95.7 97.0
Brazil 98.2 97.2 96.7 96.7 96.9 97.2 97.6 98.0
China 91.9 92.5 93.6 94.9 96.4 98.0 99.4
India 94.1 94.2 94.7 95.4 96.2 96.9 97.9 98.8
Russia 89.8 88.7 88.6 89.3 90.5 91.8 93.2 94.3
Industrial Production (m-o-m)
Euro-zone -2.7 -2.5 -1.1 -1.6 0.7 -0.2 -0.3 0.9
Germany -6.6 -3.6 0.0 -3.0 5.0 1.1 -1.0 1.5
France -4.3 -0.3 -1.3 -1.4 2.6 0.5 0.3 1.9
Italy -1.2 -4.2 -4.5 1.5 0.1 -0.2 2.4 7.0
UK -2.6 -0.7 -0.2 0.1 -0.6 0.6 0.3 -2.6 1.5
USA -2.2 -0.8 -1.6 -0.6 -1.1 -0.4 0.9 1.2 0.7
Japan -10.1 -9.4 1.6 5.9 5.7 2.3 2.1 1.6 1.4
South Korea (y-o-y) -25.5 -10.0 -10.5 -8.2 -9.0 -1.1 0.7 1.1 11.0
Brazil 3.0 2.3 1.2 1.2 1.4 0.5 2.2 1.2
China (y-o-y) n/a 3.8 8.3 7.3 8.9 10.7 10.8 12.3 13.9
India 0.0 -3.1 10.4 -10.9 4.2 3.8 -0.1 0.5
Consumer/Business Confidence indicators
Eurozone Economic Sentiment 67.2 65.3 64.6 67.3 70.2 73.2 76.0 80.8 82.8 86.2
USA Consumer Confidence 37.4 25.3 26.9 40.8 54.8 49.3 47.4 54.5 53.4 47.7
Japan Consumer Confidence 27.0 27.6 29.6 33.2 36.3 38.1 39.7 40.4 40.7
Brazil Consumer Confidence 100.3 96.3 99.2 97.6 102.1 106.4 108.4 110.3 111.5 114.5
China Consumer Confidence 86.8 86.5 86.0 86.1 86.7 86.5 87.5 88.0 88.1
Source: OECD, Thompson Reuters EcoWin, National Statistics, Dismal Scientist & GFMS
E1 Independent - Informed - International

7. Economic Indicators - November 2009
October was also upbeat for Japanese manufacturing, and 7.9% in the first and second quarter respectively) and
with the country’s PMI remaining comfortably within growth if the trend continues, the country seems set to comfortably
territory at 54.3. Housing starts in the country were up at achieve its 8% target for the full year. Moving to industrial
the margin in September, although they remained down production, growth accelerated to 13.9% in September
notably on and year-on-year basis. Although vehicle (compared to 12.3% in August), and this on a year-on-
production in the country was once again down year-on-year year basis. Going forward, conditions seem set to continue
in September, the rate of declined slowed further and at 21% improving, as the country’s manufacturing PMI rose further
it was the lowest this year-to-date. Industrial production in in October to 55.4, compared to 55 in the previous month.
the country was up in September month-on-month, for the
seventh consecutive month. Improvements were also noted for two of the other BRIC
countries recently, with manufacturing PMIs for both Brazil
Looking at China, where base metals consumption has and India, at 52.3 and 54.5 respectively, continuing to
grown rapidly so far this year, the latest economic data suggest expansions in October. The index for Russia, in
remains uniformly positive. Real GDP growth accelerated contrast, saw a return below the 50 mark, largely as a result
in the third quarter, to reach at 8.9% (compared to 6.1% of weak export orders.
OECD Leading Indicators & GFMS Base Metals Index US & Eurozone PMI & GFMS Base Metals Index
105 400 65 400
GFMS Base Metals Index GFMS Base Metals Index
60
350 Eurozone PMI
102 350
55 USA PMI
300 300
50
GFMS Index
OECD Index
99
GFMS Index
PMI Index
250 45 250
96
40
200 200
35
93 OECD Composite
Leading Indicators 150 150
30
90 25
100 100
Jan-06 Jan-07 Jan-08 Jan-09 Jan-06 Jan-07 Jan-08 Jan-09
Source: GFMS, Thomson Reuters EcoWin Source: Markit Economics, GFMS
Jan-07 Jan-08 Jan-09
Jan-06
China & Japan PMI & GFMS Base Metals Index Chinese IP Growth & GFMS Base Metals Index
65 400 25 400
GFMS Base Metals Index GFMS Base Metals Index
60
350 350
China PMI 20
% year-on-year IP growth
55
300 300
50
GFMS Index
GFMS Index
15
PMI Index
45 250 250
10
40
200 200
35
5
150 150
30
Japan PMI
25 100 0 100
Jan-06 Jan-07 Jan-08 Jan-09 Jan-06 Jan-07 Jan-08 Jan-09
Source: Markit Economics, GFMS Source: GFMS, China National Bureau of Statistics
Jan-07 Jan-08 Jan-09
Jan-06
Note: The GFMS Basel Metals Index is an average of the six base metals indexed prices with equal weights. This is in
contrast to the LME index, which is heavily weighted towards aluminium and copper.
Independent - Informed - International E2

8. Aluminium - November 2009
Aluminium
Recent developments Outlook for the next 12 months
● In dollar terms, aluminium prices strengthened ● The price outlook remains muted by the rapid
slightly during October. However, this was restart of Chinese capacity in the past six
more a reflection of dollar weakness than any months and the record overhang of stocks.
improvement in the underlying fundamentals.
In particular, the dollar fell by 3% against the ● Providing some comfort for the market at
euro between the start of the month and the present is the tied nature of much of the LME
low point on 23rd October. stocks, which are in financing deals.
● Chinese output soared higher in data for ● Overall, our base case scenario foresees the
September from the CNI-A. This showed counterveiling forces of investment strength
output reaching a new all-time annualised high and restocking in the OECD being largely offset
of 14.8 million tonnes. Output on a daily basis by the prospects for a continued, surplus during
was 43% up from the March low. the next year. Given our expected 900,000
tonne surplus prices under the base case prices
● Indicators of Chinese demand continue to are averaging $1,850/tonne in 2010.
provide support to the market, with the latest
industrial production data showing an increase ● Our alternative scenarios see substantially
of 13.9% year-on-year. different balances, but due to the overhang
of stocks the price outlooks do not vary as
● Outside China, demand remains generally much as other LME metals. Scenario B expects
muted but signs of improvement are emerging. prices to average $1,975 and in Scenario C the
Indeed, Japanese aluminium shipments were average is $1,525 for the next year.
up 13.1% month-on-month in September.
● Production excluding China registered the
second consecutive month-on-month increase, GFMS’ Forecast Scenarios
although by still modest amounts. Aided by Base Case, 40% Probability
rising output in India and Bosnia. Represents what GFMS consider the most likely outcome for the
markets.
Scenario B, 35% Probability
Faster recovery than under our Base Case in the near-term and
stronger growth thereafter.
Scenario C, 25% Probability
Anaemic recovery extends well into 2010 for mature economies
while growth in China eventually slows, as the impact of the
stimulus package wears off.
Aluminium Supply-Demand & Price Forecast Quarterly Aluminium Price & Forecast
2010 2200
Q1 Q2 Q3 Q4 Scenario B
Supply/Demand Forecast (Base Case) 2000
Consumption 9,787 9,750 9,850 10,000
1800
US$/tonne
Production 9,946 10,050 10,100 10,200 Base Case
Balance 159 300 250 200
Stocks 6,303 6,603 6,853 7,053 1600
Scenario C
Price Forecast ($/tonne) 1400
Base Case 1,850 1,800 1,850 1,900
Scenario B 1,950 2,000 2,050 2,100 1200
Q1 2009 Q3 2009 Q1 2010 Q3 2010
Scenario C 1,550 1,500 1,450 1,400
Source: GFMS
Source: GFMS
A1 Independent - Informed - International

9. Aluminium - November 2009
Market background industrial production data, which recorded 13.9% year-on-
October started with aluminium prices drifting lower and year growth for September.
testing lows, of just above $1,750/tonne, which had not
been seen since July. However, a broad based rally took Tentative improvement in the mature economies
place across the base metals in the immediate lead up Our discussions during LME week merely reinforced our
to LME week before gently correcting during that period. belief that, with the noteworthy exception of China, demand
Thereafter, the price headed higher during much of the rest is improving but remains lacklustre through the developed
of the month largely fuelled by a rapidly falling US dollar. economies. Indeed, the hope of a rapid rebound in mature
Indeed, as the dollar plumbed to levels not seen since economies in the fourth quarter, in large part to be fuelled by
pre-Lehman Brothers collapse with the dollar going below restocking, has receded to the New Year with more modest
$1.50/euro, this pushed aluminium towards $2,000/tonne. gains likely before that date.
However, as the dollar strengthened prices ended the month
a touch softer, at around $1900/tonne. This was further highlighted by cautious outlooks this month
from a number of the major integrated aluminium producers
Overall though, October’s average LME cash price of with downstream operations in the latest quarterly results.
$1,879/tonne was only 2% higher in dollar terms, and was For example, Hydro stated that “underlying demand for
actually down in some producer countries currencies such as metal products (extrusion ingot, sheet ingot, foundry alloys
Australia and Canada. and wire rod) in Europe and North America improved slightly
during the third quarter 2009 compared to the previous
Strong macroeconomic background fails to inspire quarter but there is still uncertainty regarding the timing of
aluminium any significant recovery.” Indeed, when compared to a year
Even the official news that the US had exited recession, ago demand levels are still very poor, with latest Japanese
with an above consensus growth of 0.9% for the July - vehicle production still showing a 21.6% year-on-year fall for
September period compared to the prior quarter, caused only September.
a minor rally above the prior trading range. This followed
US industrial production rising 0.7% in September, the More specifically for aluminium, Japanese shipments of the
third straight month of improvement, although production light metal are down 18.3% year-on-year in September
remained down 6.1% compared to a year before. However, according to the Japan Aluminium Association.
the troubles of the US housing sector remain, with new
home sales dropping 3.6% in September, from a downwardly On a brighter note, this did however, represent a double-
revised 417,000 units in August. A brighter spot came digit increase on the prior month and extruded shipments
from durable goods orders, which are a leading indicator of were up particularly strongly. In part the latest data is aided
industrial activity which climbed 0.8% on the prior month. by government incentives over the past couple of months,
which aided sales of hybrid cars in particular.
Earlier in the month, Chinese economic data had also been
positive for its implications for aluminium demand, even More encouragingly, Taiwan’s biggest flat-rolled aluminium
though the 8.9% year-on-year growth in GDP was marginally products mill, C.S. Aluminium, is reportedly getting close
below market expectations. This marginal disappointment to full production of 180,000 tpy of flat-rolled products.
was in contrast to the strong growth in the more important This contrasts starkly with operating at only 40% in the
Aluminium Premiums Chinese Primary Aluminium Imports
200 400
150 99.7% ingot duty Paid 300
tonnes 000s
US$/tonne
100 200
Cif Japan
50 100
99.7% ingot duty Unpaid
0 0
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Source: GFMS Source: Chinese Customs, GFMS
Independent - Informed - International A2

10. Aluminium - November 2009
first quarter and 70% in the second quarter as a result of China for these purposes). The chief cause of this is the
the economic downturn. This improvement in utilisation is commissioning of the last portion of a delayed 115,000
aided by increased orders, mainly from Asia, in the second tonne expansion at Nalco’s Angul smelter. Additionally in the
half of this year as that region bounces back more robustly, region the Indonesian smelter has marginally raised output
and earlier, than elsewhere. However, for 2009 as a whole and while it is not captured by IAI statistics increased output
utilisation is only expected to be around two-thirds. is also believed to be occurring in Iran.
All time record Chinese production Elsewhere, the Eastern Europe region is also showing
Crucial to the underlying weakness of the fundamentals increased production in the latest data. This is chiefly due
in the market at present is the continuing and dramatic to the restart of 30,000 tonnes of capacity at the Mostar
rebound in Chinese primary output since the spring lows. smelter in Bosnia since the start of September. Meanwhile
Chinese production data continues to support the view that in Western Europe, output fell in the latest data due to the
the vast majority of the capacity in China has restarted, closure of the 145,000 tonne Anglesey smelter in Wales at
or is in the process of reaching full production. This is the end of September. Accordingly another decline is likely
unsurprising given the profitability of these operations and in the October data for this region.
the lower restart costs compared to the rest of the world,
largely due to lower labour costs. There are also signs that US production may have hit the
bottom. Output rose, admittedly slightly, in September,
Output in September rose month-on-month by an annualised which was the first rise since May last year. Thereafter
1.25 million tonnes to a new all-time record of over 14.8 Noranda’s restart of the third and final potline at its New
million. In fact, this is more than 500,000 tonnes greater Madrid smelter from early October, which had been down
than the prior record, set in June last year. Indeed, GFMS since an ice storm back in January, should trigger continued
believe that while further growth in output is expected the increases in US output over the remainder of this year. In
rate of increases is set to slow considerably over the next aggregate, announcements of non-Chinese restarts though
six months as the restarts stop and only a relatively limited remain few and far between, while typically being in very
amount of new capacity comes on stream. Predominantly small tonnages but closures are almost non-existent.
due to these restarts global output is up 11% compared to
the April lows, although still 5% short of equalling world Market surplus shifts from LME and IAI to SHFE and
highs set back in mid-2008. unreported
Given the previously mentioned restarts and only limited
Rest of the world raises supply, slowly for now upturn in non-Chinese demand the market remains
Outside China, the level of production has started to rise, in surplus. Despite this LME stocks are drifting lower,
albeit marginally and remaining well below prior highs (it although very slowly when compared to the overall total.
is still below levels achieved as far back as 2005). The Furthermore, IAI unwrought aluminium stocks fell to 1.191
International Aluminium Association (IAI) figures show world million tonnes in September, compared with a revised 1.236
(excl. China) output rose compared to the prior month for million in August. Compared to a year earlier these producer
the second consecutive month in September, but remains stocks are almost half a million tonnes lower. The change is
10% down year-on-year. The growth that is occurring partly reflected by rising stocks on the SHFE, particularly at
is chiefly due to just one region - Asia (which excludes its Zhongchu Dachang warehouse in Shanghai.
Aluminium LME Stocks & Price
LME Stocks vs Spot Price Aluminium Daily Stocks vs Price
3500
5000 3500
3000 4000
Spot Price 3000
tonnes 000s
3000
US$/tonne
2500
US$/tonne
2500
Oct 09
2000 2000 2000
1500 1000 1500
Stocks
0 1000
1000
0 2 4 6 8 10 12 Jan 02 Jan 04 Jan 06 Jan 08
Stocks (No. of Weeks Consumption)
Source: Thomson Reuters EcoWin, LME
Source: GFMS, LME
A3 Independent - Informed - International
Jan 03 Jan 05 Jan 07 Jan 09

11. Aluminium - November 2009
The overall balance in China indicates a surplus at present Chinese imports hold up but at lower level
given the huge volume of restarts and in some cases the The balance in the domestic Chinese market has ensured
inaugural commissioning of capacity that had remained idled that Chinese imports have slowed substantially of late.
since completion. Further surplus is also being absorbed by Imports in the past two months slowed to an average of just
invisible stocks at present, especially from the arrangement above 120,000 tonnes compared to an average of almost
between UC RusAl and Glencore. Consequently, little 300,000 tonnes per month over the prior quarter. This is
comfort for the price can be drawn from the relative a clear sign that the market in China is becoming more
improvement in the LME stocks data in recent times, as it balanced. Indeed current import levels now largely reflect
merely reflects a change in the location of stocks rather than longer term deals, sometimes of an annual duration. The
a fundamental switch from surplus to deficit in our view. reduced level of imports however now means more of the
surplus in the rest of the world needs to find a home in other
regions.
Aluminium Supply-Demand Balance 2004-2010
(000 tonnes) 2004 2005 2006 2007 2008 2009 2010
Global Production 29,922 32,017 33,969 38,056 39,479 36,828 40,296
% change y-o-y 6.9 7.0 6.1 12.0 3.7 -6.7 9.4
Consumption
Europe 7,560 7,554 7,945 8,297 7,912 5,849 6,664
Japan 2,319 2,276 2,323 2,197 2,250 1,485 1,770
USA 5,800 6,114 6,150 5,580 5,615 4,503 5,130
Total Mature 15,679 15,945 16,418 16,074 15,777 11,837 13,564
% change y-o-y 3.3 1.7 3.0 -2.1 -1.8 -25.0 14.6
Brazil 651 759 773 854 932 810 965
China 6,043 7,119 8,648 12,347 12,413 14,081 15,420
India 861 958 1,080 1,207 1,323 1,343 1,550
Russia 1,020 1,020 1,047 1,020 1,020 847 950
Total BRICs 8,575 9,856 11,548 15,428 15,687 17,080 18,885
% change y-o-y 16.4 14.9 17.2 33.6 1.7 8.9 10.6
ASEAN 917 964 1,063 1,070 1,155 1,028 1,167
% change y-o-y 15.0 5.2 10.2 0.7 7.9 -11.0 13.5
South Korea 1,118 1,201 1,153 1,081 965 869 1,065
Taiwan 497 412 422 368 362 286 385
Others 3,499 3,663 3,762 3,933 4,174 4,038 4,321
Global Consumption 30,285 32,040 34,366 37,953 38,120 35,138 39,387
% change y-o-y 8.6 5.8 7.3 10.4 0.4 -7.8 12.1
Metal balance -363 -24 -397 104 1,360 1,690 909
Reported stock change -639 -23 -245 197 1747
Reported stocks
Producer stocks 1,788 1,797 1,621 1,554 1,676
German 37 37 37 37 37
Japanese 421 422 362 327 442
Exchange stocks
Comex 28 62 21 15 10
Shanghai Exchange 60 46 19 98 203
Tokyo Exchange 6 2 6 1 3
LME 693 644 698 929 2,338
Total Stocks 3,033 3,010 2,764 2,961 4,709 6,398 7,307
Total as no. weeks consumption 5.2 4.9 4.2 4.1 6.4 9.5 9.6
LME as no. weeks consumption 1.2 1.0 1.1 1.3 3.2
LME cash ($/tonne) 1,717 1,898 2,567 2,645 2,571 1,605 1,850
% change y-o-y 19.9 10.5 35.2 3.0 -2.8 -37.6 15.3
Source: GFMS, WBMS, LME
Independent - Informed - International A4

12. Aluminium - November 2009
Market outlook Aluminium Price & Forecast Trading Range
Our projections, as updated in our recently released Three
2500
Year Forecast*, show that the aluminium market is set
to remain in a 900,000 tonne surplus over the next year.
Given this backdrop, it is difficult to be overtly bullish on the
price. Indeed given the latest record production data from 2000
China and indications of still further increases in output to
come, it is hard to envisage a scenario whereby global stocks
(including unreported) are falling, no matter how positive we 1500
project demand. It is in this light that the three scenarios
should be viewed, especially when supported by the massive
stock overhang and excess capacity outside of China.
1000
Jan-09 Jul-09 Jan-10 Jul-10
Consequently we expect prices to average $1,850/tonne next Source: Thomson Reuters EcoWin, GFMS
year, as the aluminium market is dragged higher in the wake
of the wider commodities complex and copper in particular. If restocking does not take place in the New Year it
Further support however, is likely from restocking in the is likely that the surplus in the aluminium market will
New Year. We had expected this trend to emerge in the become increasingly visible again and that stocks will rise
fourth quarter of 2009. However, the anecdotal evidence to over 5 million tonnes on the LME alone. Alternatively,
suggests that this did not take place. However, relatively low if the dramatic growth in Chinese output does not slow
inventories at consumers (semis producers) suggest that a substantially in the near future then we doubt whether other
restocking cycle should boost demand in early 2010. markets will pick up the “slack”. Under this outlook prices
are set to head gradually lower through the next year and
Turning to the most bullish scenario, this is predicated on could approach marginal costs by the end of the forecast
investor flows largely ignoring the lack of tightness in the period. Consequently, Scenario C foresees prices averaging
physical market and alternatively following the wider rally $1,475/tonne in 2010.
of the base metals complex, which is essentially what has
happened so far in 2009. However, even under this scenario
it is still difficult to expect a return to anywhere near prior
highs. This is due to the initially higher prices leading to
restarts of more idle capacity in Europe, USA and Russia as
prices are sustained at over $2,000/tonne. Consequently,
we expect prices to average $2,025/tonne on average under
this scenario.
Quarterly Aluminium Supply-Demand Balance - Base Case
2009 2010
(000 tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Global production 8,760 8,838 9,430 9,800 9,946 10,050 10,100 10,200
% change y-o-y -9.3 -12.0 -7.1 1.9 13.5 13.7 7.1 4.1
Global consumption 7,748 8,600 9,200 9,590 9,787 9,750 9,850 10,000
% change y-o-y -20.9 -13.2 -3.3 7.8 26.3 13.4 7.1 4.3
Market Balance 1012 238 230 210 159 300 250 200
Reported Stocks 5,083 5,685 5,934 6,144 6,303 6,603 6,853 7,053
As no. weeks consumption 8.5 8.6 8.4 8.3 8.4 8.8 9.0 9.2
LME Cash $/tonne 1,360 1,488 1,806 1,770 1,850 1,800 1,850 1,900
% change y-o-y -50.2 -49.4 -35.3 -3.3 36.0 20.9 2.4 7.3
Trading Range
High 1,575 1,647 2,035 2,050 2,200 2,100 2,200 2,300
Low 1,254 1,337 1,532 1,650 1,700 1,600 1,700 1,700
Source: GFMS, WBMS, LME
* In order to receive more information about GFMS’ Quarterly 3-Year Forecast on the aluminium market, please contact:
charles.demeester@gfms.co.uk
A5 Independent - Informed - International

13. Aluminium - November 2009
Statistical appendix
Refined Aluminium Production 2004-2010
(000 tonnes) 2004 2005 2006 2007 2008 2009 2010
South Africa 864 851 887 898 810 802 790
Mozambique 547 554 563 560 530 538 530
Other Africa 302 344 416 358 369 350 388
Africa 1,713 1,748 1,867 1,816 1,709 1,690 1,708
Bahrain 524 708 872 860 865 864 864
China 6,689 7,150 9,358 12,559 13,176 12,775 15,611
India 861 942 1,105 1,222 1,308 1,485 1,656
UAE 683 850 789 890 940 913 1170
Other Asia 901 1,617 966 983 1,212 1,415 1,837
Asia Total 9,657 11,268 13,091 16,513 17,501 17,452 21,138
Germany 668 648 516 551 606 302 284
Norway 1,322 1,376 1,427 1,357 1,359 1,126 1,085
Russia 3,594 3,647 3,718 3,955 4,187 3,724 3,655
Other Europe 3,253 3,311 3,257 3,348 3,355 3,059 3,005
Total Europe 8,837 8,982 8,917 9,211 9,507 8,211 8,029
Brazil 1,457 1,498 1,605 1,655 1,662 1,539 1,534
Canada 2,592 2,894 3,051 3,083 3,118 3,005 2,982
USA 2,517 2,480 2,281 2,560 2,660 1,724 1,652
Other Americas 903 895 890 903 1008 979 982
Total Americas 7,470 7,767 7,826 8,200 8,448 7,246 7,151
Australia 1,895 1,903 1,929 1,959 1,974 1,951 1,960
Total Oceania 2,245 2,252 2,267 2,317 2,314 2,228 2,270
Global Total 29,922 32,017 33,969 38,056 39,479 36,828 40,296
Western World 18,674 19,583 19,898 20,513 21,148 19,668 20,420
Former Socialist 11,218 12,434 14,071 17,544 18,332 17,121 18,640
Source: GFMS, WBMS, LME
Independent - Informed - International A6

14. Aluminium - November 2009
Refined Aluminium Consumption 2004-2010
(000 tonnes) 2004 2005 2006 2007 2008 2009 2010
Africa/Oceania 840 877 840 887 1026 943 1022
China 6,043 7,119 8,648 12,347 12,413 14,081 15,420
India 861 958 1,080 1,207 1,323 1,343 1,550
Japan 2,319 2,276 2,323 2,197 2,250 1,485 1,770
South Korea 1,118 1,201 1,153 1,081 965 869 1,065
Other Asia 2,627 2,662 2,807 2,940 3,050 2,778 3,109
Total Asia 12,967 14,216 16,010 19,772 20,000 20,556 22,914
France 749 719 713 737 689 530 615
Germany 1,795 1,758 1,823 2,008 1,950 1,170 1,420
Italy 987 977 1,021 1,087 951 590 750
Russia 1,020 1,020 1,047 1,020 1,020 847 950
Spain 603 624 620 642 603 482 530
UK 439 353 362 364 350 263 300
Other Europe 2,988 3,122 3,406 3,459 3,370 2,814 3,049
Total Europe 8,580 8,574 8,992 9,317 8,932 6,696 7,614
Brazil 651 759 773 854 932 810 965
Canada 755 801 846 718 714 603 665
USA 5,800 6,114 6,150 5,580 5,615 4,503 5,130
Other Americas 691 699 754 825 901 1,028 1,077
Total Americas 7,897 8,374 8,524 7,977 8,161 6,944 7,837
Oceania 437 451 374 396 385 382 396
Global Total 30,285 32,040 34,366 37,953 38,120 35,138 39,387
Western World 22,392 22,964 23,617 23,544 23,729 19,404 22,116
Former Socialist 7,892 9,077 10,749 14,408 14,391 15,734 17,271
Source: GFMS, WBMS, LME
A7 Independent - Informed - International

15. Copper - November 2009
Copper
Recent developments Outlook for the next 12 months
● Copper prices rose through the psychologically ● Supply disruptions (actual and potential)
important $6,600/tonne ($3/lb) barrier during may provide some support to this market.
October, aided by a series of supply problems. However, the potential upward effect on prices
However, they have subsequently retraced is capped however by the poor demand outlook
back below that level. between now and the end of the year. This is
particularly the case given major restocking in
● An accident at Olympic Dam has led to developed economies is not set to take place
production at this mine being cut to just 25% until the first quarter of 2010.
of capacity until the first quarter of 2010.
● The prospects for prices in 2010 however are
● An ongoing, and protracted, strike at BHP strong, as demand is set to grow robustly,
Billiton’s Spence mine has underpinned the finally supported by restocking in the early part
copper price throughout the second half of the of the year and continuing supply problems.
past month. Importantly, there is the potential
for further industrial action in the coming ● Our alternatives (see below) suggest fairly
months. limited downside from current inflated levels.
Given the price performance of copper so far
● Demand concerns were a crucial drag on the in 2009, we expect that buyers (both physical
price, as discussions in LME week reinforced and speculative) will be encouraged back into
the view that demand outside Asia still shows the market on any correction. Our high case
few tangible signs of restocking. scenario, given the on-going supply tightness,
suggests a fairly swift return towards the levels
● LME inventories continued their recent upward seen in the recent bull market.
trend and Shanghai stocks are also edging
higher as China continues to import in large
volumes.
GFMS’ Forecast Scenarios
Base Case, 40% Probability
Represents what GFMS consider the most likely outcome for the
markets.
Scenario B, 35% Probability
Faster recovery than under our Base Case in the near-term and
stronger growth thereafter.
Scenario C, 25% Probability
Anaemic recovery extends well into 2010 for mature economies
while growth in China eventually slows, as the impact of the
stimulus package wears off.
Copper Supply-Demand & Price Forecast Quarterly Copper Price & Forecast
2010 8000
(000 tonnes) Q1 Q2 Q3 Q4
Scenario B
Supply/Demand Forecast (Base Case) 7000
Production 4,700 4,785 4,865 4,969 Base Case
Consumption 4,700 4,800 4,850 5,057 6000
US$/tonne
Balance 0 -15 15 -88
Scenario C
Stocks 1,262 1,247 1,262 1,174
5000
Price Forecast ($/tonne)
4000
Base Case 6,600 6,800 7,000 7,300
Scenario B 7,000 7,250 7,500 7,800
3000
Scenario C 5,750 5,800 5,600 5,400 Q1 2009 Q3 2009 Q1 2010 Q3 2010
Source: GFMS Source: GFMS
Independent - Informed - International C1

16. Copper - November 2009
Market background is continuing at the secondary Whenan Shaft, but at this
After slipping below $6,000/tonne in early October prices stage, we expect ore hoisting will be at approximately 25%
picked up strongly fuelled by the combination of a weakening of capacity until full production resumes in the first quarter
US dollar and a strike at the BHP Billiton operated Spence of 2010. Olympic Dam produced 194,000 tonnes of copper
mine. This led to prices breaking through the psychologically in the year ended June 30, 2009. This is therefore expected
important $6,600/tonne ($3/lb) level on October 24th, to cause a loss of approximately 60,000 tonnes of production
to new 2009 highs. Overall though, the monthly average over the next six months. Meanwhile Escondida, majority-
price was only up 1% on the prior month and if the effect owned by BHP Billiton, said in a statement it produced
of the dollar depreciation is stripped out, the price received 540,740 tonnes of copper in concentrates during the first
by many producers actually dropped, despite the supply nine months of 2009, down from 812,605 tonnes in the
problems. same period last year.
Strike takes centre stage However, the company has officially confirmed that
As highlighted in our earlier research the potential for strikes the repairs to Escondida’s Laguna Seca SAG mill were
to occur and consequently to impact the copper supply chain successfully completed in August 2009. Consequently,
is substantial in the last third of this year. This potential has Escondida’s production in the July 2009 to June 2010 period
become a reality. On 13th October workers at the Spence is expected to increase by approximately 5-10% due to the
mine in Chile went out on strike, which is still on-going in successful repairs to the SAG mill and higher average ore
early November. Unavoidable therefore, this fairly rapidly grade. Additionally, Escondida produced 247,386 tonnes of
led to the majority of all production at the operation having copper cathodes compared with 184,396 tonnes in the year
to cease. In 2008 it produced 165,000 tonnes of copper earlier period due to an increase in the level of activity and
cathode. Two questions naturally remain; how much longer ore accumulation in the process stockpiles.
will it last and will strike action become more widespread?
Despite a recent successful conclusion of negotiations at Chile produced 464,560 tonnes of copper in September, up
Escondida, there are other operations in Chile and Peru from 428,280 tonnes in September last year. In the first
which have not reached any conclusions regarding labour nine months of the year, copper production was down 1.1%
contracts and both these countries exhibit a long track from a year earlier at 3.94 million tonnes. Codelco was
record of strikes at mines. It is worth bearing in mind that critical to this, as its copper production rose 16% to 1.21
while disruptions are likely it is our opinion that a minor level million tonnes. The increase over last year’s output was
of disruption from such an event is already factored into the chiefly due to higher production at its Gaby and Codelco
price as the market has been apprehensive about such a Norte operation. The former was only starting production
scenario for a long time. during this period last year, while the latter raised output
by 11% year-on-year (although it still produced less than in
Technical problems contribute to supply tightness the same period of 2007). Slightly higher output was also
Even ignoring the strike, and further potential labour recorded at Salvador and El Teniente, while output at Andina
disputes, there have also been other supply disruptions. was unchanged. In fact, overall Codelco’s production was
Most significantly the haulage system in the Clark Shaft at their highest since their record year of 2004.
BHP Billiton’s Olympic Dam mine was damaged. Hoisting
Copper Premiums Jan 05 - to Present Chinese Copper Imports
250 400
High grade cathode
200
300
tonnes 000s
150
US$/tonne
200
100
100
50
Grade A European
0 0
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Source: GFMS Source: Chinese Customs, GFMS
C2 Independent - Informed - International

17. Copper - November 2009
Higher prices start to lead to higher output Asian demand bounces back...
The sustained strength of prices in the past couple of months The past month has seen a degree of conflict between some
has led to a market response. Most clearly this came from strong macroeconomic indicators and anecdotal evidence still
Freeport McMoRan which is resuming work at its Miami indicating weak copper demand across all of the developed
operation in Arizona. This project, was initially expected to economies. Indeed, our discussions confirmed our thesis
require a $100 million investment, and was deferred in late that substantial restocking in the copper industry is not
2008. These activities will improve efficiencies of ongoing set to take place until the start of next year as consumers
reclamation projects associated with historical mining remain wary of end use demand and the price increase in
operations at the site. During the approximate five-year recent months. This has represented a key barrier in the
mine life the company expects to ramp up production to price sustaining levels above $6,600/tonne.
approximately 145,000 tonnes of copper per year by the
second half of 2011. Elsewhere, the Zambian central bank That said, Asian economies - especially outside Japan
has raised its projected output due to restarts of some - continue to rebound particularly strongly from the sharp
operations due to higher prices. downturn experienced at the start of this year. This has
led the IMF to recently upgrade their projected growth
rates for these countries in both 2009 and 2010. Naturally
Chinese imports surprise market the strength of the Chinese economy is having an impact
China’s imports of refined copper bounced back in across the region and industrial production surged higher
September, surprising many in the market. China’s imports in the latest release to be up 13.9% year-on-year. More
of refined copper increased by 28.7% compared to August specifically impacting copper, Chinese property market floor
at 282,828 tonnes, after declining for two straight months space completed was up by 25% year-on-year in the year
following a record high of 378,943 tonnes in June. Average to September 2009. In fact, copper semis output is now
monthly imports of refined copper were just over 120,000 up 28% year-to-date. This is substantially quicker than the
tonnes in 2008, as opposed to 286,000 tonnes this year. 7.6% growth in refined production and is enabled by the
Therefore, the increase in September took imports back to increase in imports so far this year. The production of power
marginally below the average level achieved this year. High cables increased by 14.6% over the same period of last year.
import prices are expected to have curbed further growth in The production of power generating equipment is aided by
copper imports in October. Indeed, with SRB and national the government’s investment in the power sector.
grid purchases completed, it is expected that imports
will average less than 200,000 tonnes per month for the In Japan, output of rolled copper product rose for the sixth
final quarter of the year. This will largely reflect ongoing consecutive month in September aided by the recovery in
contracts, particularly those that have regular monthly automobile and semiconductor sectors. The figure from
amounts set to be delivered per month for the entire year. preliminary data released by the Japan Copper and Brass
Association were up 4.7% from August to 66,145 tonnes.
However, it was down 17.4% compared to a year earlier.
Copper LME Stocks & Price
LME Stocks vs Spot Price Jan 03 - July 09 Copper Daily Stocks vs Price
10000
1200 9000
8000
Oct 09 1000
7000
US$/tonne
6000 Spot Price
800
tonnes 000s
US$/tonne
4000 600 5000
400
2000
3000
200 Stocks
0
0 1 2 3 4
0 1000
Stocks (No. of Weeks Consumption) Jan 02 Jan 04 Jan 06 Jan 08
Sources: GFMS, LME Source: LME
Jan 03 Jan 07 Jan 09
Independent - Informed - International C3

18. Copper - November 2009
...but mature economies are still weak
Meanwhile, in the US and Europe demand remains weak.
This was highlighted by General Cable stating for the USA
that “we expect continuing declines in non-residential
construction spending as well as a residential construction
market that will recover slowly.” The company further
highlighted the weakness of the Spanish market and
especially the troubled construction sector and hence the
knock on impact for copper use.
Copper Supply-Demand Balance 2004-2010
(000 tonnes) 2004 2005 2006 2007 2008 2009 2010
Global Production 15,928 16,573 17,295 17,952 18,272 18,268 19,319
% change y-o-y 4.3 4.1 4.4 3.8 1.8 0.0 5.8
Consumption
Europe 4,170 3,877 4,254 4,111 3,901 3,460 3,750
Japan 1,279 1,223 1,282 1,252 1,184 900 1,015
USA 2,415 2,274 2,130 2,137 1,952 1,740 1,900
Total Mature 7,864 7,374 7,666 7,500 7,038 6,100 6,665
% change y-o-y 4.1 -6.2 4.0 -2.2 -6.2 -13.3 9.3
Brazil 332 334 339 330 386 332 365
China 3,381 3,652 3,604 4,957 5,199 6,330 6,819
India 350 415 440 475 500 530 565
Russia 588 635 692 671 650 595 635
Total BRICs 4,651 5,036 5,075 6,434 6,735 7,787 8,384
% change y-o-y 11.9 8.3 0.8 26.8 4.7 15.6 7.7
ASEAN 707 731 780 772 758 742 770
% change y-o-y 10.7 3.4 6.7 -1.0 -1.8 -2.1 3.8
South Korea 937 864 812 821 780 795 820
Taiwan 690 638 639 603 582 470 500
Others 1,989 2,045 2,073 2,045 2,115 2,130 2,268
Global Consumption 16,838 16,689 17,045 18,175 18,007 18,023 19,407
% change y-o-y 7.1 -0.9 2.1 6.6 -0.9 0.1 7.7
Metal balance -910 -116 250 -223 264 245 -88
Reported stock change -862 -22 264 -109 132
Reported stocks
Producer stocks 614 596 745 630 595
Consumer stocks 135 104 122 134 140
Merchant stocks 11 6 6 15 25
Exchange stocks
Comex 44 6 31 14 31
Shanghai Exchange 32 58 31 26 18
LME 49 92 191 199 341
Total Stocks 884 862 1,126 1,017 1,149 1,394 1,307
Total as No. weeks con 2.7 2.7 3.4 2.9 3.3 4.0 3.5
LME as No. weeks con 0.2 0.3 0.6 0.6 1.0 0.0 0.0
LME cash ($/tonne) 2,868 3,864 6,731 7,126 6,952 5,100 6,925
% change y-o-y 61.1 34.7 74.2 5.9 -2.4 -26.6 35.8
Source: GFMS, ICSG, LME
C4 Independent - Informed - International