Oil twisting in the wind on Syria uncertainty

Twist and Turns.

The comments came as U.S. Secretary of State John Kerry met with U.K. Foreign Secretary William Hague in London this morning. The pair is expected to discuss the possibility of postponing a strike on Syria until UN weapons inspectors return a report on the events in Damascus last month.

Gold prices are lower after the South African gold miners' strike ended. Workers at Harmony Gold Mining Co. Ltd. accepted a final wage increase of 7.5% to 8%. Yet Dow Jones reports that Africa's gold mines could be hit by another strike, after members of the National Union of Mineworkers accepted a revised wage increase Friday, ending a strike that started last Tuesday, but up-and-coming NUM rival union, the Association of Mineworkers and Construction Union, said Saturday that it rejected the same offer and would issue a strike notice if companies didn't come up with a better deal."

Copper was up on China data but also a lot of other news. Bloomberg reports that Pan Pacific Copper Co., Japan's biggest producer of the metal, said it may increase the premium it charges customers in China by 53% next year as demand increases. "We are thinking of annual premiums to Chinese clients at about $130 a metric ton for 2014," said Yoshihiro Nishiyama, an executive officer in the Tokyo-based company's marketing department. This compares with the 2013 surcharge of $85 over the cash price on the London Metal Exchange, he said at a briefing today. 

Codelco, the world's top producer, is preparing to set its annual sales premiums for buyers in Europe and Asia, including China, the world's top user. The Chilean company, which sets a benchmark for producers each year, settled its 2013 premium for China at $98 a ton, down from $110 in 2012 as demand slowed. Pan Pacific may conclude its negotiations for 2014 sales later this month, Nishiyama said. 

Premiums for copper for immediate delivery jumped to $210 a ton for Shanghai in August as stockpiles at bonded warehouses dropped in China amid a shortage of scrap, he said. The premiums include insurance and shipping costs. The company projected the global surplus of refined copper to increase more than fourfold in 2014, rising for the second straight year, as Chinese production outpaces demand. Supply will exceed demand by 305,000 tons, compared with 69,000 tons estimated for this year, according to Pan Pacific.

China's output will increase 9.7% to 7 million tons in 2014, while the country's demand will grow 4.5% to 9.2 million tons, the company said. Pan Pacific forecasts that world mine output will increase by 13% to 16.2 million tons in 2014. Japanese smelters, including Pan Pacific, will negotiate with mining companies including BHP Billiton Ltd. (BHP) and Freeport-McMoRan Copper & Gold Inc. (FCX) later this year to settle processing fees of next year's raw material supply. "With mine supply increasing, we are looking for higher treatment and refining charges for next year, close to $100 a ton and 10 cents a pound," said Shigeru Oi, an executive officer for raw materials at Pan Pacific. "Electricity bills have jumped for Japanese smelters, increasing our costs." Smelters and mining companies settled 2013 processing fees at $70 a ton and 7 cents per pound, he said. Spot processing fees have recently risen to about $80/8 cents, he said. The fees usually rise when mine supply increases. Treatment fees are expressed in dollars per ton of concentrate received and refining fees in cents per pound of copper in the ore. The fees are deducted from the price paid by smelters to mining companies for the raw material. Pan Pacific is the joint venture between JX Nippon Mining & Metals Corp., a unit of JX Holdings Inc., and Mitsui Mining & Smelting Co.

Futures in London tumbled into a bear market in April and fell 9% this year as economic growth slowed in China, the world's biggest user. Concentrate output will expand 2.6% to 17.1 million tons this year, Morgan Stanley said in July in a report. That will exceed demand by 53,300 tons, the bank said. New output from mines in Oyu Tolgoi in Mongolia, Las Bambas in Peru, and Esperanza in Chile is estimated to add 3.53 million tons in global supply from 2012 through 2015, Zhang Mei, a researcher with China's Ministry of Land and Resources, told the conference in Shanghai. 

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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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