Solid Minerals
Aluminum Price Falls to Four-Year-Low Territory
SYDNEY — Aluminum prices have fallen sharply this month, as investors fret about a sustained glut of the material used in products ranging from soda cans to cars, high-speed trains and airplanes.
The benchmark price of the metal has skidded 6.6% over the past month and 15% since the start of the year, reflecting caution among investors given plans afoot that could result in a flood of excess metal from overstocked warehouses that would add to already burgeoning global supplies.
Three-month aluminum on the London Metal Exchange fell to $1,748 a metric ton during intraday trading Wednesday, the market’s lowest point since July 2009. In Asia Wednesday the contract was trading close to the overnight settlement price of $1,756.50 a ton.
Traders and analysts say there is no sign of an immediate upswing. The LME announced new rules earlier this month that are aimed at shortening queues for aluminum and other metals by requiring warehouses registered with it to ship more metal out than they take in if waiting times exceed 50 days. Concerns about the new rules, which are expected to hit aluminum the hardest due to massive warehousing stockpiles, are exacerbating the metal’s fall.
Standard Bank analyst Leon Westgate said the market “is still brimming with theories on the impact this will have over the next year or so.”
But Barclays analyst Sijin Cheng said it is unrealistic to expect that aluminum will flood the physical market because of the LME’s new rules, which she said will “only penalize those [warehouses] with ultralong waiting times.”
Nevertheless, LME aluminum stocks stood at a near-record 5.4 million tons on Nov. 27, according to the exchange’s data, up from 5.2 million tons six months ago.
The global aluminum market surplus totaled 1.2 million tons in the first nine months of the year, according to the latest figures from the World Bureau of Metal Statistics. That is more than double the 539,000-ton surplus recorded over the whole of 2012.
The companies that use aluminum to make things don’t seem quite ready to increase their demand. U.S. factory orders for durable goods—products designed to last three years or more, such as appliances, cars and farm equipment—fell 2% on month in October, according to the Commerce Department, underscoring fragile business sentiment despite signs of recent strength in the housing and labor markets.
The gauge of business sentiment showed the decline in orders was broad-based, covering everything from machinery and computers to airplanes.
A stronger dollar is also diminishing interest in metals, which are denominated in the U.S. currency, making them less attractive for buyers using other currencies. The greenback has strengthened against many of its counterparts, including the Japanese yen and Australian dollar, supported by robust employment data in the world’s No. 1 economy. The U.S. Dollar Index, which measures the currency against a basket of currencies, has risen 1.3% over the past month.
Ratings agency Fitch expects aluminum will continue to struggle, as persistent overproduction of the metal outstrips demand. New supplies have exceeded demand for eight years in a row.
Citigroup forecasts aluminum prices will slip to an average of $1,780 a ton in the first quarter of 2014, from its estimate of $1,810 a ton this quarter.
Ms. Cheng of Barclays said that if prices stay at such low levels, it may “prompt producers to cut back output, and ultimately we may see a tightening in the market,” at least outside China, where oversupply is more intractable, despite some producers having cut output this year.
A Shanghai-based trader at a large aluminum producer in China said he expects aluminum to test $1,700 a ton support in the next few trading sessions, adding that holiday-thinned trade may exacerbate big swings in aluminum prices.
Activity in the base metals markets has been light this week, with many investors and traders in the U.S. absent for the Thanksgiving holiday.
Many other investors are also keeping to the sidelines. “Unless they have a big jolt either way, I think many [traders] are standing aside,” a Sydney-based trader said.
– WALL STREET JOURNAL
Business
Nigeria set to boost Naira value and foreign reserve with local gold production, as Tinubu receives gold bar
IN a significant move to strengthen Nigeria’s economy, President Bola Tinubu received a symbolic gold bar on Sunday from the Minister of Solid Minerals Development, Dele Alake.
This gesture marks the commencement of the National Gold Purchase Program (NGPP), aimed at boosting the naira’s value and enhancing the country’s foreign reserves.
Minister Alake expressed gratitude to President Tinubu for his support of reforms in the solid minerals sector.
He highlighted that the NGPP, which involves sourcing gold from artisanal and small-scale miners and refining it to meet the London Bullion Market Association’s Good Delivery Standard, will substantially contribute to Nigeria’s economic stability.
Alake stated “This initiative will significantly increase our foreign reserves and strengthen the naira. The refined gold will be supplied to the Central Bank of Nigeria, marking a crucial step in our economic strategy.”
The presentation also underscored the first commercial transaction under the NGPP, establishing a centralized gold purchasing system that integrates small-scale miners, cooperatives, and production units across the nation.
This program is expected to provide a structured market for gold, fostering economic growth and stability.
He said, “The successful completion of the first commercial transaction clearly demonstrates the National Gold Purchase Program’s effectiveness. It has increased the nation’s foreign reserves assets and shown that using the Nigerian Naira to purchase a liquid asset traded in United States Dollars, such as gold, is a viable strategy. This transaction has also underscored the potential of the National Gold Purchase Program to enhance fiscal and monetary stability.”
Alake added that the initial commercial transaction under the program resulted in a +US$5 million boost in Nigeria’s foreign reserve assets.
The transaction involved refining over 70 kilograms of gold to meet the London Bullion Market quality standard and aggregating locally mined gold, thereby infusing approximately NGN6 billion into the rural economy.
President Tinubu expressed appreciation for the Ministry’s accomplishment in advancing the government’s goal of economic diversification by acknowledging and displaying the symbolic gold bar
The Nigerian Government has threatened to come down heavily on foreigners sponsoring bandictory as a way of sustaining illegal mining activities in parts of the country.
The warning was handed down in Abuja by Minister, Solid Minerals Development, Dr Oladele Alake, while receiving a delegation of the Nigeria-China Chamber of Mines led by its National President, Dr. Olugbenga Ajala.
Details of these were contained in a statement released by Head, Press & PR, Ministry of Solid Minerals Development, Alaba Balogun over the weekend.
The statement cited, Dr Alake, thus, “The government will come down firmly on these unscrupulous foreign operators sponsoring banditry to perpetrate illegal mining: let me use this medium to appeal through you to tell those sponsors to desist or face the full wrath of the law.”
According to Dr Alake, the Ministry is committed to establishing a multi-agency task force that will end the activities of illegal miners and their collaborators.
The Minster made it clear that the FG had given illegal miners a 30-day-ultimatum to legitimise their businesses, quit Nigeria or incur the wrath of the law.
According to him, this will help “to streamline and structure the Small-Scale Artisanal Miners for maximum yield to the Federal Government.”
The delegation paid a courtesy call on the Minsiter at the Ministry’s headquarters in Abuja.
By Edozie Obasi-Eze
Amidst heightening uncertainties in the domestic petroleum products market characterised by scarcity and irregular pricing, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has declared that there’s no intention to review pump prices upwards.
This was contained in an advisory issued by General Manager, Corporate Communications, NMDPRA, Kimchi Apollo.
He stated that the Nigerian National Petroleum Corporation Limited (NNPCL) had imported PMS with current stock levels sufficient for 34 days.
In an attempt to address panic buying and speculations which have seen price of Premium Motor Spirit (PMS) oscillate between N180-N250 in the Lagos area, Apollo assured that there was enough quantity of the product in the country already.
He said, “Consequently, marketers and the general public are advised to avoid panic buying, diversion of products and hoarding.
“In keeping with the Authority’s responsibilities as outlined in the Petroleum Industry Act (PIA), the Authority assures the public that it would continue to monitor the supply and distribution of petroleum products nationwide, especially during this holiday season.”
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