metal bulletin q 12012

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Monday 30 January 2012 | Metal Bulletin |5

2011 akigs INTL FCStones Ed Meir, Deutsche Bank and Citigroup top 2011 table or base metal analysts

Mei takes to sot with 95.8% accuacy

Edward Meirhas been in thecommodities business or about30 years in various capacities. Atergetting his bachelor o arts degreein economics rom MontrealsMcGill University in 1978 and hisMBA rom New York University in1980, Meir started his career incommodities with DrexelBurnham Lambert as a commodityutures research analyst coveringthe sugar, coee and cocoamarkets beore leaving in 1985. Hespent the next nine years in thephysical markets, tradingaluminium, tin and steel orTrans-World Metals.

Ater leaving Trans-World Metalsin 1994, Meir ormed MadisonHoldings and, operating romLondon, was active in the physicalmarkets, acting as an agent orvarious US companies sourcing

non-errous metals out o Europe,China and Russia. Since then, andover the past eight years, his rmwas retained by MF Global as asenior commodity analyst or basemetals and energy.

In November 2011, along withthe rest o the MF Global team, hemoved to INTL FCStone, where hecontinues to provide researchcommentary, both long-term andshort-term, on the base metalsmarkets to the rms customerbase and trading desks.

Ewa Mei: etea commoities eet

ApEx: OvErAll lEAdErbOArd 2011Rank Analyst Accuracy

1 INTL FCStone*, Ed Meir 95.8%

2 Deutsche Bank 94.1%

3 Citigroup 93.4%

4 Standard Bank, Leon Westgate 93.1%

5 Metal Bulletin Research 92.6%

Secia eot: Ae 2011

lOndOnbY ClAIrE HACK

Edward Meir, ormerly o MF Globaland now o INTL FCStone, scoopedrst place on the overallleaderboard or price orecasts inbase metals during 2011, with95.8% accuracy across all six.

For the ull year, Meir took the topspot in every metal, with theexception o aluminium, where hecame third.

In copper, Meir, who writes adaily report or Metal Bulletin,managed 97.6% accuracy, while inzinc, it was 97.3%, in tin, 92.6%, innickel, 95.2%, in lead, 97.2%, andin aluminium, 95.2%.

The main things we look at inour orecast reports are currencies,und fows, external markets, andperhaps lastly, undamentals, hetold Metal Bulletin.

The undamentals would havebeen on top in years gone by, butnow, theyre on the bottom, asother things displace them.

The actors that drive markets arealways changing, according toMeir, particularly as volatilitycontinues to reign across mostmarkets.

Things are unpredictable. Werestill grappling with the Europeancrisis, and just a ew months ago,there were predictions about thedemise o the euro, he said.

The Middle East is alsocompletely in upheaval. There aresweeping revolutions in a numbero countries, and you have towatch out or other black swanevents will protests spread toRussia or China? Meir added.

Unexpected major world events

can upset long-term orecasts, hesaid, meaning short-termpredictions are now more reliable.

Weve guided people very muchto go short-term. The reason wedid well in our orecasts was thatwe saw these events as bearish orcommodities, Meir said.

We didnt join in with the hypeon the upside. The euro was a bigcloud that people didnt really ullyappreciate. Every time there was anagreement, people would orgetuntil it reared its head again.

When commodity prices ralliedearlier in 2011, urthermore,analysts at what was thenMF Global became gun shybecause o the volatility in theeuro, Meir added.

We didnt want to join thecrowd because interest rates weregoing higher across the board, andwe thought that would impactdemand, he said.

Theres always a surprise, so youhave to adapt your models, andnot get stuck into a particularmode o thinking.

To make an accurate orecast,moreover, one must not be swayedby group thinking, and must beprepared to make changes whennecessary.

There are a lot o institutionsthat have a consistent bias towardprice traction, and they dont seem

to change it, no matter whathappens, Meir said.

Whats really struck me is thateven when the market provesthem wrong, they dont changetheir thinking. It would behovethem to be fexible, and say whenthey are right or wrong.

Edward Meir receives his overall winner award or 2011 at his ofcein New York rom Metal Bulletin executive Mary Connors

There are a lot o institutions that have a consistentbias toward price traction, and they dont seem tochange it, no matter what happens Meir

*INTL FCStone acquired the metals division o MF Global UK in Q4 2011

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6 | Metal Bulletin | Monday 30 January 2012

Suss Team rom German bank marries ocus on undametals with macro view

Left to right: Metal Bulletin publisher Spencer Wicks, Daniel Brebner, Xiao Fu, MB editor Alex Harrison

Duts B us-up bs mtlsLonDonBy cLaire hack

The metals research team atDeutsche Bank took second placeon the overall Apex leaderboard orprice orecasts in base metalsduring 2011, with 94.1% accuracyacross all six.

For the ull year, the team tookthird place in copper orecasts,with 96% accuracy; fth place inzinc, with 94.2%; second in tin,with 92.2%; second in nickel, with92.1%; and fth in lead, with93.9%.

The key to this success, accordingto Daniel Brebner, head o metalsresearch at Deutsche Bank, is aocus on microeconomic actors,such as supply and demand.

Were looking at what kind ochanges were going to see overthe coming year on supply-sideconstraints, costs, potentialdisruptions, and those kinds othings, Brebner told MetalBulletin.

We also look at relevant data,not only on the global side, but or

specifc regions as well. China hasclearly been very important, orexample, he added.

The team also looks closely at

market expectations, Brebner said,

and how these expectations mightchange over time.Its joining the markets

anticipation o the balances [o

Nickel and copper are likely to outperorm

undamentally in the near term, but were slightlymore bullish on zinc and nickel over the mediumterm, Fu said

Copper Aluminium Zinc Tin Nickel Lead

Analyst Accuracy Analyst Accuracy Analyst Accuracy Analyst Accuracy Analyst Accuracy Analyst Accuracy

1 INTL FCStone*,Ed Meir

97.6% CLSA, Ian Roper 96.6% INTL FCStone*,Ed Meir

97.3% INTL FCStone*,Ed Meir

92.6% INTL FCStone*,Ed Meir

95.2% INTL FCStone*,Ed Meir

97.2%

2 Standard Bank,Leon Westgate

96.1% Standard Bank,Leon Westgate

95.6% Credit Agricole,Robin Bhar

95.2% Deutsche Bank,Daniel Brebner

92.2% Deutsche Bank,Daniel Brebner

92.1% CLSA, Ian Roper 96.6%

3 Deutsche Bank,Daniel Brebner

96.0% INTL FCStone*,Ed Meir

95.2% Citigroup 94.9% Citigroup 91.9% BAML, MichaelWidmer

92.0% Citigroup 95.9%

4 Metal BulletinResearch

95.9% Barclays Capital 94.5% Standard Bank,Leon Westgate

94.7% Standard Bank,Leon Westgate

91.4% VM Group/ABN AMRO

91.2% Standard Bank,Leon Westgate

94.6%

5 Citigroup 94.7% Metal BulletinResearch

94.4% Deutsche Bank,Daniel Brebner

94.2% Credit Agricole,Robin Bhar

90.6% CLSA, Ian Roper 91.1% Deutsche Bank,Daniel Brebner

93.9%

Apex: leaderboards, metal by metal, 2011

apx vs vg pThe value o the Apex system,weighting the orecasts towardsthe best analysts, is shown in theperormance o the weighted Apexaverage relative to the unweighted

vanilla average.There is a spread o results but,

averaging across the metals, in 2011the Apex orecasts outperormedthe vanilla orecast in Q1 and Q3,with a close fnish in Q4.

Apex has shown its value in themedium-term outlook, the criticalarea or undamental analysis.Based on annual orecasts at thebeginning o 2011, the Apexweighted numbers outperormed

in fve o the six metals. Overallaccuracy was 97.1%, against 96.6%or the unweighted average.

This is a signifcant dierence asthe range o accuracies is typicallyin the range o 85-100%.

www.metalbulletin.com/Apex

*INTL FCStone acquired the metals division o MF Global UK in Q4 2011

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Monday 30 January 2012 | Metal Bulletin | 7

Breber a XiaDan Bbn (right) is head o

metals research at Deutsche Bank,but his ocus also includes bulkmaterials such as iron ore and coal.Prior to joining Deutsche Bank,

Call one, call all: Apex rewards analyst consistencylondon

The nal calculations or the Apexorecasts over the our quarters o2011 show there is consistency inaccurate orecasting o base metalprices traded on the London MetalExchange.

Quarter by quarter, and acrossthe annual results, there appearsto be a pattern in which the sameanalysts reappear several timesacross the dierent metals. Thissuggests that when an analyst ordesk calls copper correctly they arealso likely to are well in their callon, or example, aluminium.

There is some predictability inthis due to the correlation in pricemovements between the base

metals at a macro level.The same economic actors drive

a wide range o industrial metals,although supply-side actors aremore independent or each metal.

Factors such as expectations oChinese consumption growth wouldaect all metals. Auto productiongures would also aect mostmetals in some manner.

In addition, nancial actorssuch as exchange rates, equityprices and interest rates have asimilar infuence across all themetals, with those analysts able tomake the correct call getting goodresults across the board.

Some o the results across theyear refect Apexs concentration

on accuracy rather than rankings.Ed Meir, now o INTL FCStone

(which bought the metals divisiono MF Global in Q4 2011), managedto achieve a remarkable rst placeor his orecasting o ve o the sixmetals in 2011, and a third place inthe remaining metal, copper.

Meirs perormance wasconsistently strong across 2011,with a ourth place in Q2, rst placein Q3 and second place in Q4, theonly one to achieve a leaderboardposition in every quarter.

Deutsche Bank also scored wellin the middle o the year, but didnot appear on any leaderboard inQ4. Despite this their average scoregave them second place overall.

How is Apex AccurAcycAlculAteD?

There are several ways o lookingat average accuracy in orecastingbase metal prices over the year,and Metal Bulletin has prioritisedaccuracy over quarterly rankings.

The annual average accuracycalculations are an average o thequarterly accuracies in each metal,the critical parameter or clients.

Analysts/desks needed to bepresent in all our quarters, andalso to have orecasts in at leastour o the six base metals, to beincluded.

Quite a ew institutions did notpublish (or only occasionallypublished) lead and tin orecasts,but these have not beenpenalised.

supply and demand] with how wethink they will evolve, he said.

Increasingly, what has beenimportant is the macroenvironment. Its to do with howinvestors perceive risk, and how

they perceive the way the debtsituation will evolve in Europeand the USA. That leads tocomplications in howcommodities perorm, as theyrenow a distinct asset class.

Exposure to metals and othercommodities, he said, has beenviewed as a way to hedge risksassociated with actors such as lowinterest rates and increasedquantitative easing.

Its becoming much morecomplex, versus how things wereten years ago. There are extremes

in leverage, particularly at a statelevel, which have led to risksbecoming more apparent in termso infation or defation, Brebnersaid.

The team makes orecasts acrossthe London Metal Exchangecomplex, but it also looksspecically at individual metals,Xiao Fu, the research analyst whoworks alongside Brebner atDeutsche Bank, added.

For example, nickel and copperare likely to outperorm

undamentally in the near term,but were slightly more bullish onzinc and nickel over the mediumterm, she said.

Brebner spent ten years as ananalyst at UBS, where he held

various positions, most recentlyco-head o commodities research.He was a geologist in Lima, Peru,beore working in banking.

xa F (let) joined Deutsche Bankin July 2008 through the graduate

programme and now has threeyears experience as a commoditiesanalyst. Xiao has a BSc rom theLondon School o Economics.

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8 | Metal Bulletin | Monday 30 January 2012

Heath Jansen (pictured let) is md and heado the Citi investment research & analysis(CIRA) metals, mining and steel team, whichcovers both equities and commodities.Jansen rejoined Citi in 2010 ater starting up acommodity hedge und. He originally joinedthe company in 2005 rom JP Morgan, wherehe headed the European metals and miningteam. Jansen began his career with ComalcoAluminium (100% Rio Tinto) as a processengineer, beore advancing to the positiono smelter superintendent. He holdsbachelor degrees in science (chemistry) andcommerce (accounting).

David Wilson (pictured right) is the directoro metals research and strategy in the Citi

investment research and analysis (CIRA)commodities team.

Wilson is responsible or short-term andlong-term base metals orecasting andanalysis. He joined Citi in 2011 with 17 years oexperience as an economist/analyst, largelycovering metals and energy markets.

Previously, Wilson worked or SocitGnrale as director o metals research(2008-2011) and or Norilsk Nickel(2005-2008) as senior economist.

Prior to that, Wilson held various positionsincluding senior consultant at CRUInternational, covering aluminium andenergy. Wilson holds a BA in economics andan MA in economics & policy analysis, bothrom the University o Nottingham.

Js Wls: a combination o metals industry experience and commodities expertise

Londonby cLaire hack

The metals research team atCitigroup came in third on theoverall Apex leaderboard or basemetals price orecasts or the wholeo 2011, with 93.4% accuracy.

The team also came th in theircopper predictions, with 94.7%accuracy, third in zinc, with94.9%, third in tin, with 91.9%,and third in lead, with 95.9%.

In a closely ought battle, theycame in behind Edward Meir,ormerly o MF Global and now oINTL FCStone, who took the overalltop spot, with 95.8% accuracy, andthe team at Deutsche Bank, insecond spot, with 94.1% accuracy.

David Wilson, ormerly o SocitGnrale, joined Citigroup towardsthe end o 2011, and is now directoro metals research and strategy.

We start o by building aundamental picture. We comparemine supply expectations, renery

capacity, renery utilisation rates we get a lot o data rom lookingat companies, Wilson said.

He added that Citi also looks ata range o data points on thedemand side, including stockreduction expectations, and

ctgup t t pl f t

fstg ps wt 93.4% uIts really putting the research

behind the idea. Sometimes, youlleel more convinced on one metalthan another, he said.

The biggest issue to contendwith over the course o 2011 hasbeen the lack o supply in certaincommodities, Jansen said, whilethe demand scenario has beenrelatively strong across the complex.

In the short term, he added,price orecasts in base metals can

in act be a driving orce or themarket, as actors such as shitingund fows can cause instantreactions among participants.

It depends on the liquidity othe market. Arguably, in lessliquid markets, such as tin ornickel, an analyst could have animpact, Jansen said.

In the longer term, supply anddemand will always be the mostdominant actors aecting themarket, he said.

A lot o macro hedge unds will

oten look in detail at marketundamentals. Some proactiveunds will be looking at nextyears expectation or supply anddemand. Their impact is to bringthese expectations into todaysmarket, Wilson said.

intensity o use expectations.

Its drilling down, looking atproduction rates, and what guidesproduction rates, and then buildinga airly detailed supply and demandpicture, Wilson explained.

On top o that, there are macroassumptions GDP growth rates,

exchange rates, expectations or

und fows.Heath Jansen, md and head oCiti Investment Research andAnalysis (CIRA) metals, mining andsteel team, added that there mustalso be strength o conviction inorder to make a credible orecast.

Left to right: David Wilson and Heath Jansen accept their award fromMetal Bulletin editor Alex Harrison and publisher Spencer Wicks

Its building a supply and demand picture. On topo that, there are macro assumptions GDP growthrates, exchange rates, expectations or und fows

T pl vll Team led by Jansen and Wilson impress by putting research behind the idea

www.metalbulletin.com/Apex