Commodity Call June13 (1)

7/28/2019 Commodity Call June13 (1)

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ANZ RESEARCH

COMMODITY CALL

12 JUNE 2013

INSIDE

Summary 1 Macro Backdrop 2Charts of the Month 3 Commodity Calls 4Feature Note 7Trade Ideas 9Technicals 10Commodity Prices 11CFTC Table 12

Calendar Heatmap 13Forward Curves 14Moving Averages 15Forecasts 16Contacts 17Disclaimer 18

CONTRIBUTORS

Mark PervanGlobal Head of Commodity Strategy+61 3 8655 [email protected]

Paul DeaneSenior Agricultural Economist+613 8655 [email protected]

Victor ThianpiriyaCommodity Strategist+65 6681 [email protected]

Natalie RamponoCommodity Strategist+613 8655 [email protected]

NO QUICK FIX FOR COMMODITIES

We see little chance that the current negative sentiment towards commoditieswill change quickly. While a number of commodity markets are trading at fairvalue on fundamentals, too many broader trends remain at play to spark arecovery. Conflicting data on the state of the Chinese economy has leftinvestors taking the approach of a healthy sceptic when it comes to Chinasoutlook. Sentiment towards commodities is also weak from investors recentlyreducing the risk of a destabilising rise in inflation. Given these dynamics, wethink sentiment is unlikely to change quickly for commodity markets, with ahigh likelihood that inconsistent data reads will continue to complicate the view

on China. Rather, it would likely take a string of better Chinese data releasesover the next quarter, before the market is convinced that a conservativeapproach to commodities is no longer warranted.

FEATURE ARTICLES

This month, we have two feature articles. The first is a review of a recentmarketing trip to China, with focus on the domestic steel market: the second isa short analysis of Chinas proposed ban on low quality coal imports thewinners, the losers, and the implication for prices.

KEY TRADES

Buy iron ore swaps looks oversold after heavy shorting in Chinese steel

Buy Cotton Put periods of inactive buying will leave prices vulnerable

ANZ CHINA COMMODITY INDEX

FIGURE 1. FOUR CONSECUTIVE MONTHS OF DECLINE

380

400

420

440

460

480

500

Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun

ANZ CCI

Points

Period in Reference

-- 2013 -->-- 2012 -->

Source: ANZ Commodity Strategy


2/20

ANZ Commodity Call / 12 June 2013 / 2 of 20

MACRO BACKDROP

CHINA CAUTION TRAPPING SENTIMENT

! Our proprietary China Commodity Index (ANZ-

CCI) declined 2.6% in May, the 4th monthly fall! Focus is still squarely on weak China data, with

commodities underperforming US equities

! Its likely to take a string of better China databefore sentiment improves materially

Commodities were weaker in May, as the marketcontinued to focus on the weak run of China economicdata. Our proprietary ANZ-CCI declined 2.6%, making itthe fourth consecutive monthly fall. Expectations wereagain revised lower for Chinas economic growthprospects, while financial flows continued to favour

riskier developed market assets such as US equitiesrather than commodities. Also a near-uniform fall inglobal inflation indicators pointed to markets largelyremoving the risk of a destabilising rise in globalinflation.

Markets linked to Chinas steel industry were hardest hit,with iron ore and coking coal prices falling 18% and 6%respectively m/m. Precious metal markets alsounderperformed. But base metal prices benefited from amodest amount of short covering, after the extremeshort positioning reached in April. Soybeans were thebest performer in ags, rising 8%, as low US suppliesforces domestic users to outbid export buyers.

For June, we see little chance that the current negativesentiment towards commodities will change quickly.While a number of commodity markets are trading at

fair value on fundamentals, too many broader trendsremain at play to spark a recovery. On-going lowinflation expectations, a strong USD, and a low chance of a run of positive catalysts from China should keepcommodity prices capped near term.

But the chance of further large price corrections in somemarkets is diminishing. Price levels in thermal and cokingcoal, nickel and aluminium are all hovering around 4 yearlows, with a percentage of producers in all these marketsno longer profitable. This is the first stage in helping tostabilise prices, as supply discipline starts to become afactor in the market. The aluminium market is a case inpoint, where three months of depressed prices hasresulted in a large part of the global industry running at acontinual loss. But it is only in recent months that keysuppliers have started to talk about production cutbacks.

The latest China PMIs highlight a seasonal improvementin demand is still lacking from China, and is unlikely tomaterialise based on our ANZs global lead indicators

(ANZ-GLI). The ANZ-GLI for China was down slightly inMay, with momentum favouring a further grind loweryet. The short term cycle also looks unfavourable in theUS, with a modest destocking in inventory alsounderway. In part, this has been driven by a sharp lossof momentum in the US manufacturing sector, but we

view this slowdown as being largely complete by Q32013. This provides scope for a modest recovery in thesecond half, which would favour commodities as marketparticipants look to restock from tight inventory levels.

Commodity markets will continue to be buffeted by thespeculation around the timing and pace of tapering to thecurrent Federal Reserve asset purchase program. Thebroadening of US growth drivers to include US housinghas resulted in market expectations moving forward thestart of US Fed tapering to the latter part of 2013. Thefocus on economic indicators for the US in comingmonths will remain intense, particularly monthly US non-farm payroll releases. Any sign that US momentum iseasing, is likely to leave scope for periods of USD

retracement and mild support for commodities.

In China, indicators have been conflicting in recentmonths, with little clarity as to whether commodityimport levels reflect underlying demand. The governmentalso re-iterating no new major stimulus packages will beforthcoming, resulting in investors taking the approach of a healthy sceptic when it comes to Chinas outlook.

However for commodities, we think a large degree of theadjustment to Chinas lower economic growth profile hasnow taken place. Combined with short investorpositioning, this leaves some scope for commoditymarkets to react positively to a change in sentiment onChina. But the current caution is unlikely to changequickly, with a high likelihood that inconsistent datareads will continue to complicate the view on China. It islikely to take a string of better data releases over thenext few months - higher electricity production, a pick-upin base metal import volumes and better IP and PMIs - toconvince the market that a conservative approach tocommodities is no longer warranted.

FIGURE 2. PRICE MOVEMENTS IN MAY

(20) (15) (10) (5) 0 5 10

Iron oreCottonSilverChina Hot Roll

GoldSugar

Coking CoalNickelWheat

PlatinumANZ CCIBrent Oil

WTI OilThermal Coal

CornAluminium

ZincCopper

Palm OilPalladiumSoybean

Lead

M/M %

Hard/EnergyAgs/Softs

ANZ CCI

Source: ANZ Commodity Strategy


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CHARTS OF THE MONTH

FIGURE 3. GROWING MISMATCH BEWTEENCOMMODITY AND EQUITY MARKETS

FIGURE 4. CHINESE STEEL STOCKS FALLING OFFRECORD LEVELS, BUT STILL AT LAST YEARS PEAK

0

3

6

9

12

15

18

21

07 08 09 10 11 12 13

2,800

3,300

3,800

4,300

4,800

5,300

5,800

Trader stocks Producer stocks

m tonnes RMB/tC hina Rebar Price (RHS)CHINA ST EEL STOCKS

100

200

300

400

500

600

05 06 07 08 09 10 11 12 13400

600

800

1,000

1,200

1,400

1,600

ANZ-C CI S&P 500 (RHS)

Index pointsIndex points

breakdown

ANZ CCI & US EQUITIES

Sources: Bloomberg, CEIC, ANZ Commodity Strategy Sources: Bloomberg, ANZ Commodity Strategy

FIGURE 5. WORLDS SECOND LARGEST COPPER MINE(GRASBERG) OFFLINE FOR 2-3 MONTHS

FIGURE 6. ALCOA CUTS HIGH COST CAPACITY POTENTIALLY MORE TO COME FOR OTHER PRODUCERS

USD/tonne

1,0001,2001,4001,6001,8002,0002,2002,4002,6002,8003,000

0 14,000 23,000 36,000 44,000 52,000

Cash costs (C1)

USD1,928/t

cumulative production (kt)

ALUMINIUM GLOBAL COST CURVE

0

100200

300

400500

600

700800

900

00 01 02 03 04 05 06 07 08 09 10 11 1213F0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Grasberg Output % Global Supplies (RHS)

'000 tonnes %

Potential outage

GRASBERG MINE COPPER OUTPUT

Sources: Wood Mackenzie, ANZ Commodity Strategy Sources: Wood Mackenzie, ANZ Commodity Strategy

FIGURE 7. CHINESE GOLD IMPORTS IN MAY DROPAS ATTRACTIVE ENTRY POINTS DIMINISH

FIGURE 8. BRAZILIAN SOYBEAN EXPORTS ASLOW START BUT RECORDS SET IN APRIL & MAY

0.0

2.0

4.0

6.0

8.0

10.0

Jan Feb Mar Apr May2011 2012 2013

m tonnes BRAZIL SOYBEAN EXPORTS

0.0

2.0

4.0

6.0

8.0

10.0

12.0

07 08 09 10 11 12 13600

800

1,000

1,200

1,400

1,600

1,800USD/oz

Imports from HK SGE Gold Price (RHS)

USD CHINA GOLD IMPORTS

Sources: CEIC, ANZ Commodity Strategy Sources: Bloomberg, CEIC, ANZ Commodity Strategy


4/20


COMMODITY CALLS

COMMODITY COMMENTS Bearish Neutral Bullish

ENERGY

Oil markets could remain choppy in June, as mixed data in the US and negative data from China generatesfluctuations in market sentiment. The US dollar appears to be less of a headwind, but speculation around the easing of US stimulus could remain a drag. Funds appear to be pricing in better seasonal demand from top consumers, US andChina, but they could be disappointed. Although the traditional seasonal demand catalyst should be mildly supportive,we believe growing non-OECD supplies and pick-up in Saudi Arabian exports will cap the upside.

The US crude oil contract continues to outperform Brent, and this should remain a feature in June. The Brent/WTIspread hit a low of USD7.7/bbl in May and we think the spread could remain within the current USD8-10.0/bbl rangein June should US economic data and seasonal demand remain supportive. However, US crude prices are at riskfrom rising oil inventories, with supplies expanding faster than demand. Recent local refinery outages in the Gulf Coast halted stockpile declines in Cushing and Houston (further south), despite a mild pick-up in demand. We expect

the impact to be temporary and pipelines to begin diverting crude to the Gulf Coast as the driving season continues,but gains in WTI could be limited by increased pipeline costs. With more domestic supplies reaching the Gulf Coast wewould expect imports of sweet crudes to be cut back, keeping the Brent/WTI spread under pressure this month.

Brent prices could temporarily break higher than the recent USD100-105/bbl trade range with a lot of the downsidealready priced-in, but we expect conditions to remain soft. After a strong correlation with Chinese equity markets inthe first quarter, Brent prices have disconnected against the stronger performing Shanghai Composite. We think Brentmight be oversold compared to Chinese equities and could experience short-covering rallies. However, with the focuson slowing industrial activity, we believe bearish sentiment will prevail and dent expectations for stronger seasonaldemand which was flat in March and April. China has also been exporting crude products, constraining Asian refinerymargins elsewhere. Although, we think Asian (ex-China) refinery margins could recover in June as Chinese refinersgrapple with export quotas and difficulties obtaining VAT tax refunds. Supply-side losses from increasing Middle Easttensions could surprise on the upside, but rising Saudi Arabian output should negate some of these outages.

BULKS

Bulk markets look oversold, but face the headwinds of the passing in stronger seasonal demand. Chinesemanufacturing activity tends to dip in June/July and destocking of bulk inventories starts to kick-in. That said, thedownside risks may have already been factored-in, with heavy shorting of Chinese steel prices in late May. Thesupply-side looks mixed, with a tighter backdrop for iron ore (particularly inventories) contrasting with more amplesupply in coal.

Iron ore is a trade off between weak China data flow and bottom fishing by Chinese consumers. The sharp 14%decline in April was a precautionary reaction to heavy shorting in Chinese steel prices over the same period but the

moves looks exaggerated. The risk is any positive Chinese data should squeeze steel shorts and trigger a relief rally iniron ore. A mild pick-up in Baltic Capesize rates since the start of June may also be suggesting that Chinese traderslike the iron ore price entry level. That said, we think we import activity could be muted, with traders unable to accesssufficient credit lines from overly cautious domestic banks.

Like iron ore, coking coal looks oversold, but needs stronger Chinese steel prices to get it out of its funk. The supplydynamic looks less favourable and is unlikely to improve while higher availability of Chinese coal output and inflatedcoal stockpiles prevail. The closure of high-cost Australian supply would help, although most producers appearhesitant to curtail output, while stringent (take-or-pay) access fees to port and rail infrastructure apply.

Seaborne thermal coal will continue to be dogged by weak Chinese coal prices. A combination of soft domesticdemand and high domestic coal supply means Chinese coal consumers have become very price sensitive. The recentreports of a proposed Chinese ban on low quality thermal coal imports is unlikely to prop-up prices in the near term,with still low visibility on the actual ban and ample back-up supply. Like coking coal, an inelastic supply response fromAustralian coal producers is not helping a price recovery.


5/20


COMMODITY CALLS


BASE METALS

Base metals should improve mildly in June, but the volatility experienced last month may continue. A greater focus onsupply, particularly for copper and aluminium, should influence prices, but ultimately Chinese demand is what themarket will watch out for. Increasingly we think Chinese inventory levels could be a better guide for real demand, withthe end of local speculative financing deals in the first quarter. Although the market will probably look to headlineeconomic data for a better view on manufacturing activity, which could slightly disappoint after holding steady in May.

Global LME inventory flows are providing little guidance for demand, with the ongoing influence of inventory financingdeals keeping levels inflated. In contrast, the end of speculative financing deals in China has cut bonded copperwarehouse stocks by half since the beginning of the year to about 500-550kt and will possibly be a truer reflection of demand. Traders appear to be selling into the domestic market rather than shipping the material overseas, confirmedby trade data showing refined copper exports in April of only 29kt. Shanghai warehouse stocks are also pointing to

rising demand, with a 28% decline to 179kt over the past two months. With Chinese stocks reaching lower levels,restocking demand could start to rise in the coming months. However, the Shanghai/LME arbitrage is now looking lessfavourable and could dampen appetite for imports.

Supply disruptions have been growing steadily in the background over the last two months, but the impact on pricesshould be relatively short-lived. A 2-3 month production outage at Indonesias Grasberg copper mine has garneredthe most attention, but stoppages at smelters in India and the absence of scrap in China has also pushed regionalpremias higher. The long-awaited start-up of production and exports from Mongolias Oyu Tolgoi (Rio Tinto) couldalso be a drag on the market. There could be greater upside in aluminium after Chinas top aluminium producer,Chalco, cut to 380kt of its capacity. We estimate the floor price for the industry is about USD2,000/t and have beenwaiting for cuts from China with current prices trading below this level over the last two months. Nickel might alsoexperience relief rallies, with low nickel prices pressuring marginal operations. However, NPI producers are stilloperating at full tilt. We think there will be little support for base metal prices until global stocks start to decline.

PRECIOUS METALS

The spot gold price fell 6.0% in May, accentuating the 7.6% decline in April. The short term outlook remains highlycontingent on the US data flow, which continues to dictate market expectations of Fed QE tapering. Speculativepositioning in precious metals remains mostly negative. In gold, the net long CFTC position (as a share of openinterest) remains at a record low 8.4% and outflows from gold exchange-traded products are still occurring.Sentiment towards silver has not changed as speculative net longs are at a record low 4% of open interest. However,platinum prices outperformed in May as ETFs saw record monthly inflows of 453.28koz, nearly four times as much asthe increase in palladium holdings.

Physical gold demand remains strong, particularly to China. However, the onshore-offshore arbitrage has significantlyreduced in the last few weeks, from over $20 - $25/oz to closer to $10 -$18/oz. This is still a healthy premium forChinese arbitrage activity, but could signal that prompt demand is starting to wane. Hong Kong trade figures alsoshowed a sharp drop in gold exports to China in April, though this was reportedly due to slow quota approvals. Weexpect the decline is temporary. India should see a significant decline in import volumes as the market works throughthe details of the Reserve Bank of India (RBI) import restrictions. In a further move, the RBI raised the import tax ongold to 8%, from an earlier 6%. Their intention to combat the current account deficit by targeting gold is clear, andthis will continue to act as another headwind for the market.

We expect price gains in gold will be difficult to hold in the near term as the financial markets price in Fed tapering(higher treasury yields and higher USD) and amid signs that physical demand could be slowing. We are cautious of being bullish in the near term and expect to see gold find a bottom around USD1,320/oz in the near term.


6/20


COMMODITY CALLS


GRAINS

The last month has seen Brazil cement itself as a key grain exporter, with weather risks passing for Brazils secondcrop of corn. Brazils 2013 corn production is expected to reach close to 80 million tonnes for the first time, puttingthe first key pillar in place to potentially pressure corn prices below USD5/bu in Q4 2013. The rising prominence of Brazil has created a corn exporter the equivalent size of the US in the November/December trade window increasingthe risk that the seasonal low in global grain prices in Q4 could be more pronounced this year. However, enough nearterm weather-related concerns are evident across a number of countries to keep price risks skewed to the upsidethrough June and July. Persistent wet weather in parts of the US has left the market concerned that areas too wet toplant will miss the window for seeding, leading to a reduction in area planted to corn and spring wheat. While rainfallover the past few weeks in parts of central and eastern Europe have raised concerns that as much as 5 million tonnesof wheat could be lost or damaged and that wet weather will remain a problem through harvest.

Equally, dryness in parts of the Ukraine and Russia will keep grain markets on edge. The ability of the Black Searegion to once again be a significant wheat export in the second half of 2013 will depend on temperature and rainfallover the next two months. While the existing Russian winter wheat crop is deemed to be better than average, Russianwheat export availability will depend on spring wheat production in the country a notoriously volatile crop with ahighly variable yield. Demand should also be supportive for near term prices. Corn consumption is likely to be strongthrough June, with US corn based ethanol production margins the highest in 12 months. Also, demand from the feedsector should be robust, with US poultry, pork and beef cut-out values all rising through May. US chicken breast pricesare for the first time since 2004 trading above USD2/lb. US pork belly prices have also surged and are currently 70%higher than year ago levels. The rise in pork bellies has pushed overall pork production returns higher, with cashmargins the highest since August 2012.

SOFTS

There is likely to be little reprieve in coming months from the existing downward pressure on sugar prices. Pricesreached close to 16USc/lb in late May, earlier than anticipated given peak global export supply has yet to even hit themarket. A more rapid start-up for Brazils centre south cane mills and favourable weather conditions through May,squashed any risk that Brazils early season sugar exports would be limited. By mid-May Brazils centre south millshad crushed more than double the volume of cane compared with the same period last year. Compounding this highervolume, the percentage of raw sugar retrieved from every tonne of cane is higher, running at 117kg versus 110kg lastyear. With sugar availability from Brazil only set to increase in the months ahead, sugar prices are likely to remainunder pressure seasonally through to at least November. However we are cautious in extrapolating price action in Mayas an indication that prices will continue to erode at the same pace in the months ahead. Speculative fundsaggressively shorted ICE sugar in May, but this is likely to have run its course. Also a significant component of weakerprices was the depreciation in the Brazilian Real, rather than any change to sugar fundamentals.

The cotton market is caught between two opposing forces - with the high and low points over the last quarter as likelyto define the trading range for the rest of the year. We expect ICE cotton futures to be capped above 90USc/lb. Abovethis level, profitability for Chinese spinning mills importing cotton becomes marginal relative to buying domestically.Also if prices persist above these levels for any notable length of time, cotton risks losing market share to syntheticfibres in select countries. This would increase the risk of downgrades to global cotton demand for 2013-14, pushingending stocks higher. Equally prices should find support at 78USc/lb. At this level, the price differential betweenimported cotton and domestic prices in China is attractive for mills to import out-of-quota. Support below 80USc/lbhas been evident in recent weeks, with active buying from spinners on the latest pullback. This opportunistic, hand-to-mouth activity is likely to be a feature of the cotton market in the second half. Leaving periods where prices hoverat or below 80USc/lb, but then rally on periods of active trading where spinners buy to cover near term requirements.


7/20

Commodity Insight / 12 June 2013 / 7 of 20

FEATURE NOTE

CHINA STEEL TRIP NOTE

! Mood more cautious than we thought! Weaker steel output expected in second half

! But traders will buy more Australian iron ore

Weve just returned from China and the mood on theground appears cautious. Participants are still unsureon the direction of the new government and areoperating on very short term just-in-time basis. Mostwould have expected a more proactive stimulatoryresponse, but the new administration appears set onreigning in over-supply. This is keeping inventories lowand is slowing the normal seasonal uptick in demand.Tight credit conditions and/or banking restrictions isalso making it difficult for traders and consumers torebuild stocks. Were therefore not too surprised by therecent run of flat to weak economic reports.

Our main focus was on the China steel market, whichyear to date has been running at record high levels.This appears to conflict with the cautious demandbackdrop and feedback was that it was more aproduction rather than consumption based dynamic.This is evident in record high steel inventories beingbuilt in the first quarter. The view was that the fasterthan expected first quarter steel make would seeannual steel production growth surprise on the upside somewhere close to 7.0%, but that the second half would slow from a much stronger first half.

Strangely, the upshot for iron ore demand (notnecessarily price) is mildly positive. Imported iron oredemand should see stronger growth than domestic ironore demand. Feedback was that iron ore prices wouldhave to rise back over $150/tonne to promptdevelopment of new iron ore mines in China and thatthe only domestic supply response near term wouldcome from existing mines. The view was that withseaborne iron ore supply set to increase materially in2013, particularly from Australia, steel mills and traderswould take advantage of the larger seaborne market.

The steel demand backdrop looks mixed. On the strongside is automobile output and transport infrastructure.The pick-up in autos is a function of commissioning of large new assembly plants in China over the past 12months which is spurring stronger production and salesoutput (figure 2). Construction of central and westernhighway and high-speed rail development is performingstrongly. On the weaker side is manufacturing,particularly heavy machinery and export orientatedsteel goods. The ship-building industry also remainsvery weak. The key property market looks mixed withstill strong public housing construction being offset byweaker private and commercial development.

On housing, the recent property investment curbs tocontrol prices dont appear to be working (figure 9). Infact, its fuelling stronger demand. Housing sales lookstronger than starts, with investors getting quicklyahead of further controls. The view was that if newcontrols were announced it could fuel even strongerinvestor interest. Perversely, property prices could easeback if the government were to drop the controls. Theother interesting dynamic was rising demand in publichousing, where investors were looking to exploit theprice arbitrage, upgrading many of the properties tohigher-priced private and commercial dwellings.

Excess steel capacity continues to be an issue.Feedback suggests total annual steel capacity sits atabout 1 billion tonnes (70% state owned), whileconsumption lies closer to 700 million tonnes. Moststeel state-owned-enterprises (SOEs) are operating at aloss, but will remain open propped up for social stabilityand employment reasons (unemployed workers inChina do not receive government assistance). Closurewill come from the privately owned small-to-medium-sized enterprise (SME) capacity, but not at current steelprices while most remain profitable. If prices fallfurther, SME output should start to fall, but the steelprice declines will have to be sustained.

Inventory positions looked mixed. Steel stockpiles aredeclining, but only slowly off record high levels in April.On the flipside, iron ore stockpiles at steel mills arerelatively low at around 20 days - normal levels arecloser to 30 days. Stocks at mills near large northerniron ore ports are even tighter at 7 days (normal coverat 20 days). But while credit conditions are tight andbanks shy away from trading activity, inventories willnot be restored quickly to higher levels. Order booksand production schedules are also being conducted on avery short term basis, so inventories are being run on a

just-in-time basis.

FIGURE 9. CHINA PROPERTY PRICES

(2)

0

2

4

6

8

10

12

14

16

05 06 07 08 09 10 11 12 13

% y/y

controls notworking

Source: Bloomberg, ANZ Commodity Strategy


8/20

Commodity Insight / 12 June 2013 / 8 of 20

FEATURE NOTE

CHINAS PLANS TO BAN LOW QUALITY COAL

! Ban still needs to be quantified! Indonesia exporters are the biggest losers

! High stocks means seaborne coal pricesunlikely to benefit

Chinas proposal to restrict low calorific value (CV) coalconsumption seems a first step in tackling a growingcarbon emissions problem, but the timing andrestriction level of a ban looks uncertain. The biggestnegative impact would be on Indonesian coalproducers, the largest exporters of low quality thermalcoal to China. Higher quality Australian coal exporters

could benefit, but we think Chinese utilities will likelyconsume a greater level of domestic supply. Some of the lower quality Chinese coal producers and domesticimporters would be impacted. However, it could end upbeing a prop for the domestic producers, less affectedby competitively priced coal imports.

Pollution is a big problem in China and we believe thenew government will be more hard-lined on this topicthan the previous government. Ultimately, this meansChinas power supplies need to be cleaner and moreefficient but we believe will still be significantlyskewed towards coal (cheapest and most abundant

energy source). We anticipate little change in the powermix over the next 4-5 years, with thermal coal stillaccounting for about 65% of power consumption by2015, from about 70% currently. This is due tobottlenecks in renewable energy developmentsstemming from safety concerns surrounding nuclearpower, post Fukishima in Japan and higher costs.

Although the government should (or would like to)reconfigure to cleaner power output, a higher coalquality consumption target appears a quicker andeasier method to manage emissions. This compares toother long term initiatives, such as carbon capture andpower plant furnace upgrades. The timing looksstrategic. A weak coal demand backdrop is giving thelocal power industry more flexibility on pricing andsourcing of supply. We note other recent structuralchanges in the China coal industry. In 2009, (alsounder a weak coal market) local authorities forced theclosure or consolidation of many smaller private minesfor safety concerns. This successful initiative ended uphaving little disruption on the domestic power industry.

The softer demand conditions are also weighing onChina coal producers, which we think is another

motivation behind the proposed import ban. Shanxicoal industry profits fell almost 70% in the first fourmonths of 2013. Coal companies are facing significant

pressure from imported coal an example being low-priced coal from Mongolia, who are prepared to takeprice cuts to maintain market share. Domesticinventory levels are high, while sales volume and priceshave both declined, resulting in a sharp fall in revenue.

The low CV ban is unlikely to hurt domestic Chinesecoal producers as much, because the ban has lowerquality limits for domestic suppliers. We think about1% or 36 million tonnes of Chinas 3.6 billion tonnes of annual output will be impacted. However, coalproducers that are also trading companies could be hitby lower import volumes. China largest coal producer,Shenhua Coal is an example, whose share price has

declined following the announcement.

Under the proposed ban, as much as 60 million tonnesor 30% of Chinas thermal coal imports could beaffected. Indonesia is the largest coal exporter toChina, accounting for 95 million tonnes or 52% of Chinas 2012 thermal coal imports. On the initial targetof banning imports below 4,544kcal NAR, Indonesiawould have about 28 million tonnes or 8% of its totalcoal exports exposed to the ban. The exposure dropsmaterially to 13 million tonnes or 3.5% of total exportsif the ban is reduced to a rumoured sub 4,000kcal

The impact on other countries should be lower. US coalexports with high sulphur content would be at risk. Butthe US has only recently become a meaningful coalexporter to China - 8 million tonnes or 0.8% of total UScoal output. The large coal producer could swing intoother export markets or shut down the unwantedsupply. Vietnam looks more exposed off a low base,with about 10 million tonnes or 70% of its total exportspotentially impacted. Overall, we think lower rankedseaborne coal prices will underperform higher rankedcoal as the bigger buyer (China) restricts purchases.

First published as a larger note on June 7 Chinas plans to ban low quality coal

FIGURE 10. CHINA IMPORT BAN PROPOSAL

Ash Sulphur Kcal/kg NAR

Imports 25% 1% 4,544

Revised Imports 20% 1%


9/20


TRADE IDEAS

IRON ORE

Despite a cautious backdrop, we think too muchdownside has been priced into iron ore. Werecommend a short term buy trade in a near term ironcontract on the rising expectations of a relief rally inthe underlying. Chinese steel prices have had a biginfluence, and the large (short) open interest positionin this market now looks vulnerable to covering. A mildpick up Baltic Capesize shipping rates also suggestsphysical traders are starting to see value importingiron ore.

We recommend waiting for Chinese investors to returntomorrow from a three day break - price in thedownside in commodity markets over since the start of

the week and enter the July iron swap contract$1.20/tonne below the current price level.

Long July iron ore swap (TION3 Comdty) Entry: Buy @ USD108/t Target: USD115/tStop Loss: USD104/t

FIGURE 11. CHINA REBAR OPEN INTEREST & IRONORE PRICE

0

500

1,000

1,500

2,000

2,500

3,000

Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 60

80

100

120

140

160

180

200

C hina Rebar C ontract (open interest)

'000 contracts US/tonne

Iron ore Price (RHS) Potential shortcovering

Sources: Bloomberg, ANZ Commodity Strategy

Timeframe: 2 months

COTTON

We maintain the view that the mid-March peak incotton prices was the likely high for calendar year

2013. However despite retracing from these highs,physical cotton prices are at their least competitivelevel to polyester staple in 12 months. With impliedoption volatility for cotton historically low againstboth pre and post GFC periods we look to initiate along put.

We view the recent opportunistic, hand-to-mouthbuying activity by spinning mills as an on-goingfeature of the cotton market in the second half. Thiswill leave distinct periods of buying inactivity, whereprices fall to the bottom of our forecast trading rangeof 78USc/lb.

Long Dec 13 ICE Cotton PutEntry: Buy 82 strike @ 3.4 USc/lbTarget: 6.0USc/lbStop Loss: 1.0USc/lbTimeframe: 3 months

FIGURE 12. ICE COTTON PRICE

3.0

4.0

5.0

6.0

7.0

8.0

Jan-13 Feb-13 Apr-13 May-13

USc/lb

Sources: Bloomberg, ANZ Commodity Strategy


10/20


TECHNICAL PERSPECTIVES

THE DARK CLOUD TURNS TO A SILVER LINING! A distinct basing structure has now developed

! A retest of USD20.70 cannot be denied, but the shiftin trend suggests buying into dips

! Once a base is confirmed broad consolidation tradingrange should be defined during 2H13

Our last technical report focussed upon the risk of sharpfalls should silver fail to regain levels above USD25.00.Rebounds in the first half of May duly faltered in the highUSD24s and the subsequent slippage below the pivot of USD23.50 triggered a sharp flush to the top of theUSD20.00-20.70 target zone. Momentum indicators inFigure 13 indicators now show that a potential base isdeveloping. Although there is no classic divergence(when indicators display higher lows as the underlyinginstrument hits notable new lows), the spike off USD20.70 raises the possibility that the C-leg declinehas been completed.

FIGURE 13. WEEKLY SILVER (LOGGED SCALE) WITHRSI & SLOW STOCHS.


Figure 13 also shows that a broad and deep, if violent,correction has been forming since the effective test of USD50.00 in mid-2011. Mays spiked low not only met an

interim measured target, but also the top of thecongestion range that developed into mid-2010,immediately prior to silvers near asymptotic accelerationtowards USD50.00. Another slide to retest USD20.70should not be denied, but this likely change in silverstrend suggests that the bias should now be to buying intodips, rather than the previous selling into rebounds. Thisalso suggests that silver could form rebounds towardsthe USD26.00-50 area (which acted as such strongsupport) as a broad consolidation pattern developsduring 2H13.

The updated daily chart in Figure 14 highlights the singleday spike below USD22.00. Once again, a slide belowUSD22.00-10 could still trigger a retest of the USD22.70level (or even the deeper if now stale targets either sideof USD20.00). However, as noted above, bias is nowvery much swinging to a base having already formed.Ideally dips should not break below USD22.20 now. A

break above USD23.00 could confirm the base and allowfor a swift move to the relatively important USD24.00-80zone. This would also test the channel which hascontained the C-leg decline.

FIGURE 14. DAILY SILVER (LINEAR SCALE) WITH RSI& SLOW STOCHS.


A break of the down channel may initiate calls for animpulsive rally, but the favoured profile is for a broadconsolidation range to form under the USD26.25-30retracement level, which (as previously noted) coincideswith a series of lows seen since early 2011.

DIVERGING PATH IN GOLDGold faltered in front of USD1,500 and duly began toslide in May, but its fall was not as dynamic as that insilver. The failure to make a new low (despite the allureof USD1,300) as silver spiked below USD22.00underscores the potential that the C-leg decline may beover.

FIGURE 15. DAILY GOLD (LINEAR SCALE) WITH RSI & SLOW STOCHS.


Rebounds may not be dynamic and a break of USD1,370could still trigger a test of the USD1,245-1,300 area, butthe bias would be to buy into further slippage as the biasis now for a USD1,370-1,500 trading range to develop.

TIM RIDDELL


11/20


COMMODITY PRICES (% CHANGE)

LONDON METALS EXCHANGE (UDS/lb, USD/t) LONDON METALS EXCHANGE (kt)

Aluminium 0.86 1,903 3.3 (1.0) (8.8) (2.3) (6.7) (0.0) (0.5)

( 2.1 ) (6.6) (1 0.2) (1.2) (9.0)

(2.0) (10.2) (12.7) (11.2) (11.9)

(4.4) (6.8) (8.8) (7.1) (10.0) (8.9)

(1.8) (2.1) (7.0) (16.4) (28.0) (42.5) (40.6) (34.8)

(11.6) (3.6) (10.2)

(4.7) (6.0) (2.8) (5.9) (15.1) (19.8) (8.3) (11.4)

(1.0) (6.6) (0.9) (8.8) (11.6) (7.9) (3.6)

(0.7) (1.3) (1.9) (4.5) (11.9) (5.8) (14.1) (7.3)

(4.6) (5.3) (8.1) (5.4)

(2.5) (6.9) (10.8) (0.5) (10.5) (9.4)

(4.5) (12.4) (18.8) (13.2) (17.4) (1.0)(5.6) (10.4) (9.4) (8.6) (4.2) (3.1)

(9.3) (25.3) (34.5) (24.0) (28.6) (0.7) (0.6)

(6.3) (6.5) (2.4) (2.4) (2.9) (2.2)

(3.2)

(1.1) (0.1) (19.1) (6.8)

(0.0) (12.2) (20.6) (24.2) (6.6) (17.9)

(5.8) (2.4) (6.8) (4.9) (9.6) (9.6) (0.2) (2.7)

(6.0) (0.7) (3.8) (1.4) (3.6) (5.1) (1.9) (2.7)

(5.7) (3.3) (2.5)

(3.5)

(3.1) (19.2) (8.6)

(0.1) (5.6) (3.6) (2.5) (3.2)

(1.4) (6.4) (1.7) (8.5) (12.2) (2.5)(0.6) ( 4.1) (19.3) (1.2)

(1.6) (7.5)

(9.0) (11.3) (22.5) (15.2)

(5.0) (16.4) (11.5) (36.6) (12.3)

(8.3) (17.7) (13.3) (35.5) (13.7) (2.4) (11.5) (24.1) (2.7) (16.3)

(4.9) (14.6) (10.1) (34.3) (11.2) (0.1) (13.7) (6.8)

(1.3 ) (3.8)

(3.9)

(4.2) (10.8) (2.8) (12.7) (2.8) (13.8) (11.0) (6.6) (2.9) (3.4)

( 5.1) (15.7) ( 5.6) (16.4) (8.1)

( 0.3) (3.8) ( 4.9) (19.6) (10.2)

(4.5) (0.7) (5.7) (12.4) (14.5) (17.8) (12.8)

(8.0) (12.1) (11.9) (17.5) (19.3) (13.8)(3.4) (3.1) (4.9) (19.7) (7.3) (1.8)

(9.8) (17.9) (30.3) (37.0) (30.3) (1.9) (2.3)

(14 .4 ) (24 .2 ) (8.3) (16 .2 ) (23 .5 )

(1.6) (9.9) (6.6) (16.6) (5.7)

(9.0) (1 5.3 ) (2.5) (1 0.9 ) (5 .1)

( 8.1) (3.7) (1 5.9) (7.4) ( 50.0)

(2.2) (26.2) (54.2)

(23.1) (32.0) (18.4) (16.4) (52.8) (17.4)

(5.3) (7.2) (9.4) (4.2) (9.7)

(4.9) (4.0) (5.2) (5.2) (0.3) (2.3) (2.4) (2.2)

(1.8) (1.2) (1.0) (3.9) (10.4) (2.7)

(0.3) (5.7) (9.0) (1.1) (9.6)

(4.0) (4.8) (28.7)

Aluminium 5,187 0.8 0.0 6.6

Copper 3.27 7,198 Copper 610 0.9 19.7 139.0 165.5 90.6

Nickel 6.79 14,978 Nickel 182 2.3 13.3 31.6 73.1 28.6

Zinc 0.85 1,869 2.3 0.3 Zinc 1,110 6.4 16.6

Lead 0.98 2,154 9.1 14.1 Lead 205

Tin 9.52 20,990 1.1 6.2 Tin 14 2.5 6.8 27.3 18.8 13.9

SHANGHAI (RMB/t) SHANGHAI (kt)

Copper 53,600 0.1 Copper 181 37.0

Aluminium 14,920 2.8 3.0 Aluminium 426 33.1

Zinc 15,400 1.7 1.5 Zinc 288

Lead 13,975 0.9

COMEX (USD/t) COMEX

Copper 7,205 Copper 77.7 3.2 19.2 34.3 9.9

OIL & GAS - US DOE (mbbls)

Gold (USD/oz) 1,383 Crude 391 3.7 5.3 1.7 8.7Gold (AUD/oz) 1,456 0.8 Gasoline 219 1.3 3.2 7.5

Silver (USD/oz) 21.7 Distillate 123 6.5 7.1 2.7

Platinum (USD/oz) 1,502 0.5 4.8 Refinery utilisation (%) 88.4 4.7 3.9

Palladium (USD/oz) 758 7.0 8.5 23.3 7.6

CBOT (US/bu)

OIL & GAS (USD/bbl) Wheat 696 10.5

WTI Cushing (US) 96.0 4.4 11.8 14.2 4.6 Corn 559

Brent Crude (UK) 104.3 0.9 4.7 Soybeans 1,330

Tapis (Asia) 110.3 1.0 1.1 Soybean Oil (US/lb) 48.5

Gasoil 0.5% (Sing) 119.0 0.8 5.5 Soybean Meal (USD/st) 453 11.2 4.0 3.3 5.3 13.4

Fuel Oil 180cst (Sing USD/t) 620.8 0.2 3.0 4.2 1.5 KCBOT (US/bu)

THERMAL COAL (FOB USD/t) HRW 735 0.1 12.0

Newcastle 86.9 MGE (US/bu)

Richards Bay 82.4 0.9 HRS 820 1.4 3.5 7.8Qinhuangdao 102.1 1.0 ASX (AUD/t)

Wheat 283 8.4 34.5 1.8

EURONEXT Liffe (/t)

COKING COAL (USD/t) Wheat 174 1.5

Australia FOB 139.8 EURONEXT Paris (EUR/t)

China CIF 149.1 Wheat 204

India CIF 155.8 Corn 219 2.0 4.2

STEEL (USD/t) Rapeseed 426 0.4 1.9 0.2

HRC US (Short ton) 610 0.0 4.7 3.4 4.7 ICE Winnipeg (CAD/t)

HRC Russia 518 Canola 559

HRC China 510

OTHER METALS

Uranium (USD/lb) 40.4 ICE NY (US/lb)

Alumina (USD/t) 330 0.5 0.4 3.7 Sugar #11 16.4

Cobalt (USD/lb) 13.8 1.9 11.1 19.8 19.8 Coffee 127Molybdenum (USD/lb) 10.8 Cocoa 2,368 3.0 11.7 8.4 6.7

Coke (USD/t) 230 Cotton 85 15.0 21.4 13.1

Iron Ore Spot (USDt) 111 EURONEXT Liffe (USD/t)

Sugar 481

Coffee 1,848

Baltic Freight Rate 812 Cocoa (/t) 1,555 1.8 7.9 0.6 1.6 9.4

Baltic Capesize 1,352 7.1 10.5 MDEX (MYR/t)

Baltic Panamax 764 Crude Palm Oil 2,457 6.0 0.4 7.0 0.5

AUD/USD - Aussie 0.950 S&P 500 1,643 0.6 5.9 15.9 24.0 12.1

NZD/USD - Kiwi 0.789 2.5 CRB Index 288 5.4

DXY - USD trade weighted 81.7 1.6 1.6 S&P GSCI Agri Index 427 0.5 6.1

EUR/USD - Euro 1.322 1.8 1.6 2.3 5.6 0.8 LME Metals Index 3,153

USD/JPY - Yen 97.6 1.6 18.3 22.7 12.3 Market Volatility Index (VIX 15 20.3 20.3 9.5

3 MTH 6 MTH

SPOT

SPOT 1 MTH

SPOT 1 MTH

1 MTHSPOT 3 MTH

12 MTH YTD3 MTH 6 MTH KEY INDICES12 MTH YTD SPOT 1 MTH 3 MTH

YTD

SPOT

6 MTH

12 MTH YTD

SPOT 1 MTHSOFTS/PALM

12 MTH YTD

3 MTH 6 MTH

6 MTH

12 MTH

6 MTH 12 MTH YTD

SPOT 1 MTH 3 MTH 6 MTH 12 MTH YTD

YTD SPOT 1 MTH 3 MTH

AGRICULTURE 3 MTH

INVENTORIES

1 MTH

KEY CURRENCIES

6 MTH 12 MTH YTD

3 MTH YTD6 MTH 12 MTH

SPOT 1 MTH

PRECIOUS METALS

ENERGY

OTHER

FREIGHT

6 MTH 12 MTHBASE METALS 1 MTH 3 MTH

Note: Prices as of 7 June 2013Sources: Bloomberg, globalCOAL, FIS, ANZ Commodity Strategy


12/20


CFTC DATA

SPOT 1 WK 1 MTH 3 MTH 6 MTH 12 MTH SPOT 1 WK 1 MTH 3 MTH 6 MTH 12 MTH

GOLD (t) WTI CRUDE OIL (mbbls)

Long 524 524 535 613 636 580 Long 392 394 388 390 363 336

Short 322 352 268 259 100 177 Short 105 108 130 110 124 125

Net Position 202 172 267 353 536 403 Net Position 287 286 258 280 239 211

Open Interest 2,053 2,152 2,332 1,998 1,898 2,190 Open Interest 1,741 1,745 1,771 1,654 1,549 1,457

SILVER (t) NATURAL GAS (1000 mmbtu)

Long 5,271 5,111 5,201 5,662 7,908 4,500 Long 3,463 3,464 3,726 2,507 2,423 2,525

Short 4,628 4,652 3,395 2,366 969 2,437 Short 4,083 4,081 4,226 3,834 3,633 3,509

Net Position 643 459 1,805 3,297 6,938 2,063 Net Position (620) (617) (500) (1,328) (1,210) (984)

(108) (149) (265) (8) (189)

(62) (120) (3) (166) (42) (1,081) (1,077) (368) (281)

(356) (328) (306) (351) (358) (184)

(211) (136) (245) (169) (225) (186) (117)

(336) (651) (15) (903) (228)

Open Interest 31,709 31,236 30,228 27,687 26,927 25,016 O pen Interest 14,993 15,331 16,037 12,286 11,867 12,394

COPPER (kt) RBOB GASOLINE (m gallons)

Long 471 440 491 530 502 457 Long 3,006 3,383 3,162 5,293 4,644 3,561

Short 579 589 756 539 400 645 Short 1,128 1,515 1,250 1,474 1,533 599

Net Position 102 Net Position 1,878 1,868 1,912 3,819 3,111 2,963


SPOT 1 WK 1 MTH 3 MTH 6 MTH 12 MTH SPOT 1 WK 1 MTH 3 MTH 6 MTH 12 MTH

CBOT WHEAT (m bu) ICE SUGAR (kt)

Non-Com Long 579 549 588 536 598 548 Non-Com Long 11,643 11,399 10,647 9,809 8 ,309 9,276

Non-Com Short 640 669 591 702 457 590 Non-Com Short 12,724 12,476 11,015 10,090 6,370 5,750

Net Non-Com Position 141 Net Non-Com Position 1,939 3,525

Index Long 930 949 926 866 1 ,049 1,209 Index Long 17,186 16,951 16,570 17,006 15,130 14,048

Index Short 179 180 165 139 141 215 Index Short 1,432 1,180 833 792 1,258 2,016

Net Index Posit ion 751 769 761 727 908 994 Ne t Index Posi tion 15,754 15 ,771 15,736 16 ,214 13,872 12,032


CBOT CORN (m bu) ICE COFFEE (kt)

Non-Com Long 1,815 1,870 1,636 1,627 1,999 1,300 Non-Com Long 785 726 736 757 602 482

Non-Com Short 1,126 1,109 1,089 1,070 391 850 Non-Com Short 1,141 1 ,054 1,042 1 ,108 960 666

Net Non-Com Position 688 761 546 556 1,609 450 Net Non-Com Position

Index Long 2,215 2,195 2,262 2,127 1,981 2,405 Index Long 1,010 1,011 1,030 998 799 830

Index Short 303 294 290 215 162 413 Index Short 65 59 63 51 42 192

Net Index Position 1,912 1 ,900 1 ,972 1 ,911 1 ,818 1 ,992 Net Index Position 945 953 968 947 757 637


CBOT SOYBEANS (m bu) ICE COCOA (kt)

Non-Com Long 350 376 354 339 271 299 Non-Com Long 747 737 775 586 634 273

Non-Com Short 561 512 599 508 496 485 Non-Com Short 256 250 311 423 187 390

Net Non-Com Position Net Non-Com Position 491 487 464 162 448

Index Long 774 762 758 723 921 1,061 Index Long 360 352 367 343 352 420


Net Index Position 629 622 664 583 657 756 Net Index Position 326 335 348 332 350 352


CBOT SOYBEAN OIL (kt) ICE COTTON (k bales)

Non-Com Long 3,150 2,989 3,202 2,918 3,255 2,982 Non-Com Long 7,290 7,911 7,642 9,251 6,094 5,902

Non-Com Short 3,486 3,640 3,217 3,822 2,488 3,210 Non-Com Short 1,441 1,271 1,431 1,390 4,058 4,875

Net Non-Com Position 767 Net Non-Com Position 5,848 6,640 6,211 7,860 2,036 1,026

Index Long 2,740 2,745 2,581 2,693 2,883 3,165 Index Long 8,034 7,799 8,215 7,668 7,509 7,948


Net Index Posit ion 2,392 2,444 2,411 2,482 2,696 2,370 Net Index Posit ion 7,443 7,436 7,898 7,287 7,176 7,080


ENERGYMETALSACTUAL ACTUAL

AGRICULTURE SOFTSACTUAL ACTUAL

(USD/lb, USD/t)

Note: Data as of 4 June 2013Sources: Bloo Aprilg, globalCOAL, FIS, ANZ Commodity Strategy


13/20


CALENDAR HEATMAP

CHINA UNIT PERIOD MARKET ACTUAL PREVIOUS DATE

Foreign Direct Investment (FDI) % YoY APR 6.2 0.4 5.7 16-May

Leading Index % MoM APR - 99.8 100.0 28-May

PMI Manufacturing Points MAY 50.0 50.8 50.6 1-Jun

Exports % YoY MAY 7.4 1.0 14.7 8-Jun

Imports % YoY MAY 6.6 -0.3 16.8 8-Jun

Producer Price Index (PPI) % YoY MAY -2.5 -2.9 -2.6 9-Jun

Consumer Price Index (CPI) % YoY MAY 2.5 2.1 3.2 9-Jun

New Yuan Loans RMB bn MAY 815 667 793 9-Jun

Money Supply - M2 % YoY MAY 15.9 15.8 16.1 9-Jun

Fixed Asset Investment (FAI) % YTD YoY MAY 20.5 20.4 20.6 9-Jun

Retail Sales % YoY MAY 12.9 12.9 12.8 9-Jun

Industrial Production % YoY MAY 9.4 9.2 9.3 9-Jun

US UNIT PERIOD MARKET ACTUAL PREVIOUS DATE

Factory Orders % YoY MAR -2.9 -4.0 3.9 3-Apr

FOMC Rate Decision % MAY 0.25 0.25 0.25 2-MayRetail Sales (Less Autos) % YoY APR -0.2 -0.1 -0.3 13-May

Producer Price Index (PPI) % YoY APR -0.6 -0.7 -0.6 15-May

NY Empire Manufacturing % YoY MAY 4.0 -1.4 3.1 15-May

Industrial Production % MoM APR -0.2 -0.5 0.3 15-May

Consumer Price Index (CPI) % YoY APR -0.3 -0.4 -0.2 16-May

Building Permits '000s APR 941 1017 890 16-May

Housing Starts '000s APR 970 853 1021 16-May

Philadelphia Fed % YoY MAY 2.0 -5.2 1.3 17-May

Leading Indicators % YoY APR 0.2 0.6 -0.2 18-May

Durable Goods Orders % YoY APR 1.5 3.3 -5.9 24-May

New Home Sales '000s APR 425 454 444 24-May

Dallas Fed % YoY MAY -10.0 -10.5 -15.6 29-MayGDP % YoY 1Q 2.5 2.4 2.5 30-May

Uni of Michigan Confidence Points MAY 83.7 84.5 83.7 31-May

Chicago PMI Points MAY 50.0 58.7 49.0 31-May

ISM Manufacturing Points MAY 51.0 49.0 50.7 4-Jun

Vehicle Sales (Total) '000,000s MAY 15.1 15.2 14.9 4-Jun

Change in Nonfarm Payrolls '000s MAY 163 175 149 7-Jun

EURO-ZONE UNIT PERIOD MARKET ACTUAL PREVIOUS DATE

Retail Sales % YoY APR -0.8 -1.1 -2.2 6-May

Industrial Production % YoY MAR -2.0 -1.7 -3.2 14-May

Zew Survey (Econ Sentiment) Points MAY - 27.6 24.9 14-May

GDP % YoY 1Q -0.1 -0.2 -0.6 15-May

Economic Confidence Points MAY 89.4 89.4 88.6 30-MayConsumer Price Index (CPI) % YoY MAY 1.1 1.2 1.0 31-May

Unemployment Rate % YoY APR 12.2 12.2 12.1 31-May

PMI Manufacturing Points MAY 47.8 48.3 47.8 3-Jun

ECB Refinancing Rate % MAY 0.50 0.50 0.50 6-Jun

JAPAN UNIT PERIOD MARKET ACTUAL PREVIOUS DATE

BoJ Target Rate % APR 0.1 0.1 0.1 7-Mar

Tankan Lge Manufacturers Index Points 1Q -7.0 -8.0 -12.0 1-Apr

Consumer Confidence Points APR 45.5 44.5 44.8 15-May

Industrial Production % YoY APR -3.4 -2.3 -6.7 31-May

Vehicle Sales % YoY MAY - -7.3 2.0 3-Jun

Leading Index Points APR 98.8 99.3 98.0 7-Jun

GDP % QoQ 1Q 0.9 1.0 0.9 10-JunMachine Tool Orders % YoY APR -4.3 -1.1 2.4 12-Jun

Note: Blue is stronger than expected (+5%), orange is weaker than expected release (-5%).Source: Bloomberg, ANZ Commodity Strategy


14/20


FORWARD CURVES

2,250

2,300

2,350

2,400

2,450

2,500

2,550

1M 6M 1Y 2Y

MYR/t PALM OIL

1,850

1,900

1,950

2,000

2,050

2,100

2,150

2,200

2,250

1M 6M 1Y 2Y 3Y

USD/t ZINC

74

76

7880

82

84

86

88

1M 6M 1Y 2Y 3Y

US/lb COTTON

14,500

15,000

15,500

16,000

16,50017,000

17,500

18,000

1M 6M 1Y 2Y 3Y

USD/t NICKEL

16.016.517.0

17.518.018.519.0

19.520.020.5

1M 6M 1Y 2Y 3Y

US/lb RAW SUGAR

80.0

80.5

81.0

81.5

82.0

82.5

83.0

1M 6M

Points USD DXY

92

94

96

98

100

102

104

106

1M 6M 1Y 2Y 3Y

USD/bbl BRENT

1,500

1,520

1,540

1,560

1,580

1,600

1,620

1M 6M 1Y

USD/oz PLATINUM

650

700

750

800

850

900

1M 6M 1Y 2Y

US/bu CHICAGO WHEAT

1,800

1,900

2,000

2,100

2,200

2,300

2,400

1M 6M 1Y 2Y 3Y

USD/t ALUMINIUM

84

86

88

90

92

94

96

1M 6M 1Y 2Y 3Y

USD/bbl WTI

105

110

115

120

125

130

1M 6M 1Y

USD/t IRON ORE

7,2007,3007,4007,5007,6007,7007,800

7,9008,0008,100

1M 6M 1Y 2Y 3Y

USD/t COPPER

1,200

1,250

1,300

1,350

1,400

1,450

1,500

1M 6M 1Y 2Y

US/bu SOYBEANS

700

710

720

730

740

750

760

770

1M 6M 1Y

USD/oz PALLADIUM

1,200

1,250

1M 6M

CNY/t COKING COAL

TBC

120

130

140150

160

170

180

190

1M 6M 1Y 2Y 3Y

USD/lb COFFEE

500

550

600

650

700

750

1M 6M 1Y 2Y 3Y

US/bu CORN

3,400

3,500

3,600

3,700

3,800

1M 6M 1Y

CNY/t CHINA REBAR

22.0

24.0

26.0

28.0

30.0

32.0

34.0

1M 6M 1Y 2Y 3Y

USD/oz SILVER

2,340

2,360

2,380

2,400

2,420

2,440

2,460

1M 6M 1Y 2Y

USD/t COCOA

1,350

1,4001,450

1,5001,550

1,600

1,6501,700

1,750

1M 6M 1Y 2Y 3Y

USD/oz GOLD

2,000

2,050

2,100

2,150

2,200

2,250

2,300

2,350

1M 6M 1Y 2Y 3Y

USD/t LEAD

828486889092949698

100102104

1M 6M 1Y

USD/t NEWC THERMAL COAL

CURRENT LAST MONTH LAST SIX MONTHS Note: Prices as of 7 June 2013Sources: Bloomberg, globalCOAL, FIS, ANZ Commodity Strategy


15/20


MOVING AVERAGES

1,400

1,600

1,800

2,000

2,200

2,400

2,600

Jan-10 Oct-10 Jul-11 Apr-12 Jan-13

ZINCUSD/t

70

80

90

100

110

120

130

140


THERMAL COALUSD/t

6,000

6,500

7,000

7,500

8,000

8,5009,000

9,500

10,000

Jan-10Oct-10 Jul-11 Apr-12Jan-13

COPPER USD/t

1,400

1,6001,800

2,000

2,200

2,400

2,600

2,800

3,000


LEADUSD/t

900

1,100

1,300

1,500

1,700

1,900


GOLDUSD/oz

300

400

500

600

700

800

900

Jan-10 Oct-10 Jul-11 Apr-12

PALLADIUMUSD/oz

12

18

24

30

36

42

48


SILVER USD$/oz

100

140

180

220

260

300


USD/lb COFFEE

60

70

80

90

100

110

120

130


BRENTUSD/bbl

250

350

450

550

650

750

850


CORNUS/bu

1,900

2,100

2,300

2,500

2,7002,900

3,1003,300

3,500

3,700


COCOAUSD/t

40

60

80

100

120140

160180

200

220


COTTONUS/lb

800

1,000

1,200

1,400

1,600

1,800


SOYBEANSUS/bu

80

100

120

140

160

180

200


USD/t IRON ORE

400

500

600

700

800

900

1,000


WHEATUS/bu

3,200

3,400

3,600

3,8004,000

4,200

4,400

4,6004,800

5,000


USD/t HOT ROLLED STEEL

100

150

200

250

300

350


COKING COALUSD/t

60

70

80

90

100

110

120


WTIUSD/bbl

2,000

2,400

2,800

3,200

3,600

4,000


PALM OILMYR/t

10

15

20

25

30

35


US/lb SUGAR

1,8001,9002,0002,1002,2002,3002,4002,5002,6002,7002,800


USD/t ALUMINIUM

14,000

16,000

18,000

20,000

22,000

24,00026,000

28,000

30,000


NICKELUSD/t

72

74

7678

80

82

8486

88

90


USD DXYPoints

1,300

1,400

1,500

1,600

1,700

1,800

1,900


PLATINUMUSD/oz

Note: Prices as of 7 June 2013 Sources: Bloomberg, globalCOAL, FIS, ANZ Commodity Strategy


16/20


ANZ PRICE FORECASTS

ANZ FORECAST TABLE

COMMODITY Unit Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 2013F 2014F 2015F 2016F LT

BASE METALS

Aluminium USD/lb 0.85 0.87 0.90 0.92 0.95 0.96 0.97 0.92 0.99 1.02 1.04 1.05

Copper USD/lb 3.41 3.30 3.45 3.60 3.70 3.80 3.80 3.60 3.70 2.97 2.85 2.80

Nickel USD/lb 7.53 7.25 7.50 7.80 8.20 8.50 8.80 7.80 8.80 8.50 8.20 8.00

Zinc USD/lb 0.85 0.88 0.90 0.93 0.96 0.99 1.03 0.93 1.06 1.09 1.04 1.02

Lead USD/lb 0.95 0.92 0.95 0.97 1.00 1.02 1.05 0.97 1.07 1.07 1.02 1.00

Tin USD/lb 10.52 9.50 9.90 10.10 10.20 10.40 10.40 10.10 10.20 9.10 8.40 8.00

Aluminium USD/t 1,880 1,920 1,980 2,030 2,090 2,120 2,140 2,030 2,180 2,250 2,290 2,310

Copper USD/t 7,510 7,270 7,610 7,940 8,160 8,380 8,380 7,940 8,160 6,550 6,280 6,170

Nickel USD/t 16,590 15,980 16,530 17,200 18,080 18,740 19,400 17,200 19,400 18,740 18,080 17,640

Zinc USD/t 1,860 1,940 1,980 2,050 2,120 2,180 2,270 2,050 2,340 2,400 2,290 2,250

Lead USD/t 2,090 2,030 2,090 2,140 2,200 2,250 2,310 2,140 2,360 2,360 2,250 2,200Tin USD/t 23,190 20,940 21,820 22,270 22,480 22,930 22,930 22,270 22,490 20,060 18,520 17,640

PRECIOUS METALS

Gold USD/oz 1,599 1,360 1,320 1,350 1,420 1,460 1,520 1,350 1,560 1,535 1,480 1,450

Platinum USD/oz 1,572 1,510 1,560 1,620 1,660 1,700 1,720 1,620 1,730 1,690 1,630 1,480

Palladium USD/oz 772 710 740 780 800 825 830 780 835 810 765 700

Silver USD/oz 28.5 22.5 22.2 23.2 24.5 25.2 26.5 23.2 27.6 27.5 27.0 26.5

ENERGY

WTI NYMEX USD/bbl 98 95 97 100 103 104 105 100 102 94 92 90

Dated Brent USD/bbl 109 104 106 109 112 113 115 109 112 102 98 95

Uranium USD/lb 42 42 43 45 46 46 48 45 50 62 65 7

BULKS

Iron ore Spot (CIF China, fines) USD/t 137 130 124 127 128 128 127 127 125 118 115 100

Iron ore Contract (FOB Aust, fines) USD/t 138 128 121 116 118 119 118 116 117 110 105 90

Coking coal - Premium hard USD/t 165 172 155 170 180 185 185 170 190 185 180 175

Coking coal - Hard USD/t 155 157 140 155 160 165 165 155 170 165 160 155

Coking coal - Semi-soft USD/t 117 122 110 125 137 142 142 125 147 142 137 132

Newc Thermal Coal (Spot) USD/t 88 88 91 95 97 100 102 95 104 110 110 100

Newc Thermal Coal (JPY Contract) USD/t 115 95 95 95 95 98 98 95 98 108 110 100

OTHER METALS

Alumina USD/t 234 240 248 253 262 264 267 253 273 281 284 289

Molybdenum USD/lb 10.8 11.3 11.8 12.2 13.0 13.5 14.0 12.2 14.0 14.5 14.8 15.0

Cobalt USD/lb 12.0 13.0 13.5 14.0 14.5 14.8 15.0 14.0 15.2 15.6 15.8 15.0

AGRICULTURE

Corn US/bu 711 626 555 516 544 551 491 602 520 550 550 550

Wheat US/bu 742 705 632 599 638 637 680 669 658 661 661 661

Soybeans US/bu 1,437 1,418 1,300 1,200 1,185 1,116 1,104 1,339 1,150 1,150 1,150 1,150

Cotton US/lb 90 92 85 90 90 88 88 89 90 95 95 95

Sugar US/lb 18 17 16 17 17 17 17 17 17 20 20 2

Palm Oil MYR/t 2,473 2,341 2,400 2,400 2,400 2,400 2,400 2,404 2,400 2,400 2,450 2,450

0

0

Note 1: Base/precious metals, energy and bulk forecasts are end of period prices; Agriculture forecasts are average pricesNote 2: Historical data are actualsSources: Bloomberg, ANZ Commodity Strategy


17/20


ANZ CONTACTS

ANZ COMMODITY RESEARCH

Mark Pervan Global Head of Commodity Research +61 3 8655 9243 [email protected]

Paul Deane Senior Agricultural Economist +61 3 8655 9078 [email protected]

Natalie Rampono Commodity Strategist +61 3 8655 9258 [email protected]

Victor Thianpiriya Commodity Strategist +65 6681 8869 [email protected]

ANZ ASIA RESEARCH

Tim Riddell Head of Global Markets Research, Asia +65 6681 8718 [email protected]


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Commodity Call June13 (1)

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