standard bank base metals monthly oct 2009

8/14/2019 Standard Bank Base Metals Monthly Oct 2009

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Commodities Research

Base Metals Monthly

Walter de Wet* CFA

+44 (20) 7815 2759

[email protected]

Leon Westgate*

+44 (20) 7815 4090

[email protected]

Manqoba Madinane*

+27 (11) 378 7220

[email protected]

10 November 2009

In general, base metals prices have held up at high levels so far in the fourth quar-

ter. Indeed, zinc prices have run off to set new multi-month highs in recent weeks,

and other metals have attempted to push higher too. Overall, however, prices are

now struggling on the upside, and the uptrends that have been in place for most of

the year now appear to be rolling into sideways trading ranges.

We maintain our view that the markets may end the year on a weaker note and at

lower price levels. For most, stocks are still rising, China is well supplied and buying

interest from this source, temporarily at least, has largely dried up. Meanwhile the

demand pick-up in the West remains subdued and patchy, and investors are likely tobe squaring their books into the year-end.

Therefore, fundamental support and investor appetite for higher prices seems to be

fading, at least in the short term. Meanwhile, dip buying has been a prominent and

recurring presence in the market all year, and we think this will remain the case,

especially on dollar weakness, as long term commodity bulls are likely to continue to

view lower prices as good buying opportunities on a 2-3 year horizon.

In aluminium, prices have struggled to breach $2,000/tonne, though it is becoming

apparent than the market is now in balance. While there seems no stopping Chinese

production growth, the key to a further revival in prices is a clearer pick-up in Euro-

pean and North American demand, something we expect to emerge next year.

In copper, although the risks to the short-term price outlook are to the downside, in

the medium to longer term the risks are firmly to the upside. We reiterate that copper

could be at new record highs in the 2011-2012 period.

In nickel, we had forecast at the start of the year that the nickel market would be

much tighter in the second half of the year, even returning the deficit, after a large

surplus in the first half. This transition to balance/deficit been confirmed by the latest

INSG data and we believe a generally balanced market is likely both for the remain-

der of 2009 and for the duration of 2010.

In zinc, we remain concerned about the abundance of smelter restarts that have

been announced in recent months, and whether the fragile demand recovery in the

West can absorb the extra supply yet.

Short term price risks to the downside

Table of content

Economic trends 2

Aluminium 3

Aluminium alloys 5

Copper 6

Lead 8

Nickel 10

Zinc 12

Tin 14

LME Cash Price Analysis and Forecasts

Actual Prices Forecasts

$/tonne Oct 09 Ytd Ave. Ytd Range 2007 2008 2009 2010 2011

Aluminium 1,879 1,595 1,254 - 2,035 2,639 2,576 1,635 2,190 2,390

Copper 6,288 4,871 3,051- 6,676 7,126 6,969 4,982 6,175 7,700

Lead 2,241 1,624 992 - 2,448 2,595 2,090 1,671 2,200 2,450

Nickel 18,525 14,319 9,405 - 21,070 37,181 21,074 14,802 19,500 23,200

Tin 15,009 13,303 10,055 - 15,850 14,536 18,539 13,560 16,825 20,200

Zinc 2,072 1,549 1,060 - 2,331 3,250 1,873 1,592 2,150 2,550

Aluminium Alloy 1,693 1,399 1,011- 1,820 2,192 2,375 1,447 1,640 1,804NASAAC 1,727 1,363 902 - 1,845 2,183 2,384 1,419 1,590 1,749


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Base Metals Monthly 9 November 2009

Economic trends

12 months on

Twelve months on from the banking crisis that precipitated

the global economic downturn, the economy is continuing

to stabilise, albeit propped up by a bewildering array of

fiscal and monetary stimuli. Central banks remain ex-

tremely reluctant to tighten monetary policy for fear of its

impact on deleveraging consumers, while many govern-

ments are continuing to run huge deficits in an effort to prop

up consumption and, by extension, industrial output.

risks abound

The effectiveness of these measures is best illustrated bywhat happens when they are removed. In the US, new car

sales plunged during September after the government-

backed cash-for-clunkers incentive was wound down at

the end of the previous month. October sales were better,

but concerns remain.

Worryingly, a similar incentive measure in the US housing

market the federal tax credit of $7,500 for home buyers

is scheduled to finish in November, which could nip this

sectors recent tentative (and perhaps somewhat artificial)

recovery in the bud.

US out of recession

At face value, recent macroeconomic data is pointing to an

economy getting back on track. Manufacturing and indus-

trial output is expanding and new orders are rising, capacity

utilization is recovering, and housing and construction data

is generally moving inline with or better than expectations.

This recovery pattern was topped off late last month with

the release of Q3 US GDP growth at 3.5%, which was

above forecasts and confirmed that the US has emerged

from recession.

but not out of the woods yet

However, on closer inspection, the recovery is patchy and

heavily reliant on government spending. The latest Federal

Reserve Beige Book observed that Reports of gains in

economic activity generally outnumber declines, but virtu-

ally every reference to improvement was qualified as either

small or scattered. It also noted that wages were falling in

some areas, with consumer demand remaining weak.

Income and confidence down, unemployment up

According to the latest Census Bureau data, real median

household income declined by 3.6% in 2008, to $50,303, its

steepest year-on-year drop in four decades. It is likely to be

even worse for 2009. Meanwhile, consumer credit fell by a

larger-than-expected 5.8% year-on-year in August, suggest-ing that consumers are still de-leveraging, as unemployment

continues to rise and foreclosure filings continue to exceed

300,000 a month, now for six consecutive months.

This pessimism is also evident in the consumer confidence

index, which eased back from 54.5 in August to 53.1 during

September, with the present situation index falling from 25.4

to 22.7. This suggests that the strong rally in sentiment wit-

nessed during the second quarter has petered out.

Manufacturing PMI data shows growth

October PMI data from China, Europe, the US and Japan all

signalled manufacturing activity had returned to growth, with

all readings above the key 50 expansion/contraction thresh-

old. Especially encouraging were gains in the forward-looking

new orders indices. In general the data is painting a bullish

picture of a synchronized expansion in global manufacturing

activity unfolding over the next six months.

European business, consumer confidence rises

In Europe, a run of positive data on manufacturing, industrial

orders and exports has boosted the confidence of both busi-nesses and consumers, with the IFO index rising for the sixth

consecutive month during September, to 91.3. Consumer

confidence is also recovering, rising from a reading of 3.8 in

September to 4.3 in October, driven in part by a decline in

consumer prices during the same month.

Chinese output and investment continue to soar

Year-on-year growth in Chinese IP accelerated in August,

rising from 10.8% in July to 12.3%. Investment in fixed assets

rose by 33% year-on-year during the same month (up 0.1

percentage point from July), with investment in primary indus-try up by a stunning 60.4%.

Meanwhile, year-on-year GDP growth accelerated from 7.9%

to 8.9% between Q2 and Q3. The economy expanded by

7.7% during the nine months to September, and it is on target

for 8% growth during 2009 as a whole.

Indian IP also booming

Indias IP expanded at its fastest rate in almost two years (at

10.4%) during August. The production of consumer durables,

including cars, jumped 22.3%. Meanwhile, Indias monsoonseason, which ended last month, was the driest since 1972,

which will weigh on GDP somewhat during the third quarter.


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3


Aluminium Prices hit a ceiling on the threat of increased supply

After LME Week, the aluminium price tested $2,000/tonne

for the second time this year. This came as the market fo-

cused strongly on both US dollar weakness and crude oilprice strength. However, this rally faltered amid the threat of

increased aluminium supply and continued fears of a delay

to the demand recovery outside of China.

Nevertheless, while the upside seems capped, the downside

also seems to be protected by investor demand in the dips.

While demand seems to remain stubbornly strong in China,

higher prices have been negatively affecting the expected

demand recovery in North America and Europe.

Chinese demand strength has been helping the SHFE main-

tain its $2,200/tonne price level and providing support for theincreased level of aluminium production in the country. Sep-

tember output was a new record high, and it is likely that the

growth will continue. Elsewhere, there has been a very minor

increase in production from non-Chinese smelters, suggest-

ing their production levels have now reached a bottom for

this downturn.

Combining the demand and supply pictures together, along-

with the levelling out of LME stocks, it is becoming increas-

ingly apparent than the market is in balance. While Chinese

production will continue to increase, the key to a further re-

vival in prices is the pick up in European and North Americandemand, something we expect will start to emerge next year,

and the impact this will have on exchange inventory levels.

Western world demand sees little improvement

Aluminium demand in the major economies of North America

and Europe remains pretty stagnant. Underlying demand has

only picked up slightly, while the lack of new builds to re-

placed finished projects is casting doubt on how sustainable

current demand is. However, the scrappage schemes have

been helping demand for aluminium from Central and East-

ern European extruders.

The situation in North America is similar. While demand has

clearly hit a bottom, the recovery is being hampered because

downstream fabricators are still struggling to pass on LME

price increases to consumers. In turn this is serving to cap

demand for aluminium further upstream.

Chinese demand remains robust

Surprisingly high net Chinese import data in September sug-

gests that demand from extruders and rolling mills in the

country is stronger than expected. This is especially true ifwe consider the lack of an apparent build up in stocks and

LME cash and 3-month aluminium price

Sources: LME; Standard CIB Research

Monthly change to LME aluminium stocks vs. cash price


Month-end LME aluminium stocks vs. cash price


1,000

1,600

2,200

2,800

3,400

Nov 07 Apr 08 Sep 08 Jan 09 Jun 09 Nov 09

Cash 3-month

USD/tonne

-200

0

200

400

600

Oct 04 Aug 05 Jun 06 Apr 07 Feb 08 Dec 08 Oct 09

50

75

100

125

150

Stock change Cash average

Thousands of tonnes USc/lb

50

75

100

125

150

0 1 2 3 4 5 6 7

October 09

January 96

USc/lb

Weeks consumption


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4


the continued production increases.

while China continues to ramp up production

Month-on-month Chinese production increased by 4.9% in

September, following a 6% increase in August and a 4.7%

gain July. Chinas September production was a record high

of 1.21m tonnes for the month and 14.76m tonnes on an

annualised basis. However, China still has an estimated

19.9m tpy of capacity, leaving a potential 5.14m tpy or

420,000 tonnes per month available for future production

increases. We expect 15.1m tpy of the industry's capacity

will be utilized by the end of the year.

While it is possible that the Chinese government will suc-

ceed in its goal to block new greenfield capacity until after

2012, there is both enough installed capacity and already-

approved projects for further production ramp-ups and as

such we expect to see more growth in output in 2010.

Outside of China production is essentially flat

Non-Chinese smelters around the world collectively pro-

duced 64,200 tpd in July, 64,400 tpd in August and 64,600

tpd in September. These are minor increases and are

largely due to new smelters coming online in Central Asia

and the Middle East. It is now clear that, forgoing another

demand collapse in the medium term, the July daily produc-

tion level for non-Chinese smelters marked the bottom for

this downturn, and May was the bottom globally.

With the Chinese restarts, we are currently just above the

same level of daily production as in November last year. For

the remainder of 2009 we expect the small monthly gains in

non-Chinese production to continue. Should prices hold

above $2,000/tonne for a sustained period, we may see

smelters elsewhere look to re-start as swing capacity.

Annual Global Supply/Demand Balance for Aluminium, 2001-2011

Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Production

Africa 1,369 1,372 1,428 1,711 1,752 1,864 1,815 1,715 1,688 1,884 1,854

North America 5,222 5,415 5,495 5,109 5,375 5,332 5,642 5,783 4,850 4,620 4,523

Latin America 1,991 2,229 2,275 2,356 2,391 2,493 2,559 2,660 2,536 2,588 2,714

Asia (ex. China) 2,099 2,113 2,317 2,585 2,944 3,296 3,504 3,700 4,239 4,850 5,995

Western Europe 4,196 4,260 4,425 4,667 4,741 4,541 4,664 4,840 3,862 3,666 3,383

Australasia 2,121 2,170 2,198 2,246 2,252 2,274 2,314 2,296 2,175 2,112 2,120China 3,385 4,420 5,465 6,589 7,743 9,349 12,607 13,129 13,550 14,895 16,600

CIS and Eastern Europe 4,049 4,141 4,345 4,569 4,643 4,749 5,021 5,182 4,583 4,473 4,460

Total 24,432 26,120 27,948 29,831 31,840 33,898 38,126 39,305 37,482 39,088 41,649

Year-on-year % change 0.0% 6.9% 7.0% 6.7% 6.7% 6.5% 12.5% 3.1% (4.6%) 4.3% 6.6%

Consumption

North America 6,251 6,595 6,829 7,500 7,567 7,653 7,526 6,913 5,043 5,446 5,712

Asia (ex. China) 5,304 5,473 6,001 6,646 6,780 6,960 7,100 7,140 6,675 7,020 7,240

Western Europe 5,720 6,038 6,192 6,603 6,717 7,055 7,244 7,256 5,900 6,074 6,403

China 3,599 4,189 5,148 6,086 7,091 8,480 11,497 12,934 14,100 15,720 17,800

Others 3,202 3,243 3,408 3,637 3,855 4,098 4,187 4,288 4,065 4,191 4,643

Total 24,075 25,538 27,577 30,473 32,009 34,246 37,554 38,531 35,784 38,451 41,541

Year-on-year % change (3.3%) 6.1% 8.0% 10.5% 5.0% 7.0% 9.7% 2.6% (7.1%) 7.5% 8.0%

Implied surplus (deficit) 357 581 371 (641) (169) (348) 571 773 1,699 637 109

Stocks analysis

IAI 1,740 1,660 1,629 1,788 1,797 1,621 1,553 1,676

LME 821 1,241 1,423 693 644 698 929 1,338

COMEX 270 340 213 61 160 122 40 35

SHFE 34 11 27 60 46 19 89 207

Total 3,873 4,455 4,826 4,184 4,016 3,667 4,239 5,012 6,711 7,348 7,457

Stocks as weeks of consumption 8.4 9.1 9.1 7.2 6.5 5.6 5.9 6.8 9.8 9.9 9.3

LME cash prices

Historical & base case ($/tonne) $1,443 $1,350 $1,431 $1,716 $1,898 $2,567 $2,639 $2,576 $1,635 $2,190 $2,390

Historical & base case (cents/lb) 65.5c 61.2c 64.9c 77.8c 86.1c 116.4c 119.7c 116.8c 74.2c 99.3c 108.4c

Sources: IAI; WBMS; LME; COMEX; SHFE; Standard CIB Research


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Aluminium alloy

After hovering at just above $1,700/tonne since the middle

of September, the LME aluminium alloy contract embarked

on a gentle rise in October that saw it gain over 2% lastmonth.

Although the upward trend has been very much in line with

the trend observed in the LME primary aluminium contract,

it has still lagged behind. However, supply is still tight and

LME stocks declined by 1,540 tonnes (or by 1.8%) in Octo-

ber.

This relative underperformance by the alloy is not surpris-

ing, given the overall state of the transportation markets in

Europe. Although the stimulus schemes are certainly help-

ing car sales in the region, alloys demand is still not re-

flected in the figures. Once again, this brings us to the

question of customers stocks. If they are as low as we be-

lieve, extensions to the regions scrappage schemes may

well see alloy demand increase significantly over the next

few months.

Automotive production in mainland Europe finds itself at a

crossroads, as the money for the government-funded mini-

boom runs out. Calls for an extension to Germanys scrap-

page scheme have been mooted, but there are doubts that

the government will respond. Surprisingly, the UK incentive

scheme has been extended until early next year, and there

are hints that Italys scheme will also run into 2010.

In China, car output increased by nearly 80% year-on-year

in September. However, although sales have also in-

creased substantially, they grew at a much lower pace than

production, raising the question of whether alloys demand

in the country will continue to increase in the coming

months.

LME cash and 3-month aluminium alloy price


The North American Alloy contract outperformed the Euro-

pean alloy equivalent contract in October, with NASAAC

rising by 2.5% to just over $1,800/tonne currently. NASAACtherefore managed to preserve its premium over the Euro-

pean alloy, which has been a feature of the last couple of

months.

Both alloys received support from a higher primary alumin-

ium price, but the fundamentals of NASAAC look slightly

stronger than those of its sister alloy. Indeed, the supply of

scrap and alloyed ingot in North America remains tight, with

LME NASAAC stocks declining by 4,920 tonnes (or by

2.6%) in October.

Looking forward, predictions for the automotive build rate

for Q4 remain hazy, but not entirely pessimistic. However,

judging by car sales for the first month after the cash for

clunkers scheme ended, output may fall back towards pre-

vious levels. Toyota, which had the largest number of sales

related to the scheme, suffered a drop in sales of 13% in

September compared to August, while General Motors

sales dropped by 37% month-on-month.

Car makers stocks are widely reported to be low, but it is

not certain that they will restock to previous levels main-

taining a low level of stocks seems to be the default posi-

tion for everyone at the moment. It was thought that the

ending of the auto finance scheme might introduce a sub-

stantial restocking scenario but, despite anecdotal evidence

that there is indeed a slight improvement, this appears not

to be the case just yet. We are more optimistic for 2010

however, and can see restocking activity picking up more

concertedly from the second quarter onwards.

LME cash and 3-month NASAAC price


NASAAC

800

1,400

2,000

2,600

3,200


3-month Cash

USD/tonne

800

1,400

2,000

2,600

3,200


Cash 3-month

USD/tonne


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6


Copper Near term weakness offering entry points to long term bulls

LME cash and 3-month copper price


Monthly change to LME copper stocks vs. cash price


Month-end LME copper stocks vs. cash price


Copper prices have so far held up better than previously ex-

pected in the final quarter. Investor demand has provided

support in the dips, though prices have also struggled to ex-

tend this years rally with any convincing breakout to the up-

side. This is in spite of a run of generally upbeat macroeco-

nomic data, a weak dollar, and supply disruptions.

Demand is still subdued in the West and China is still well

supplied; even though imports blipped higher again in Sep-

tember the trend for the coming months should be downward.

Given this short-term outlook, we maintain that prices could

come under pressure between now and the year end, espe-

cially if labour contracts at Codelco are settled without strikes.

In the longer term we remain concerned about supply short-falls that we see occurring once the global economy gets

back on track over the course of the coming year. The global

mine supply pipeline looks insufficient to keep up with the

expected pace of the demand recovery, and this will yield a

deficit in H2 2010 and through 2011.

Therefore, although the risks to the short-term price outlook

are to the downside, in the medium to longer term the risks

are to the upside. As such, any price weakness that occurs in

the coming few months is likely to be viewed by many as a

good buying opportunity.

We maintain our price forecasts this month at $4,982/tonne

this year, $6,175/tonne in 2010 and $7,700/tonne in 2011 and

we reiterate that copper could be at new record highs in the

2011-2012 period.

Mixed picture painted by latest Chinese data

Recent data from China showed that refined copper produc-

tion rose to a new record high of 395,000 tonnes in Septem-

ber. Taken together with the unexpected rebound in imports

in the same month (up 29% to 282,828 tonnes) and very

strong Q3 GDP growth of 8.9%, demand would appear to be

much stronger than expected. Indeed, our apparent con-

sumption calculations put Septembers growth at more than

50% year-on-year and still above 40% for the year to date.

However, high SHFE stocks, reports of significant off-market

stocks, and falling spot premiums (down to around $55-60/

tonne from $80/tonne previously), and a local forward price

curve in contango, all continue to fan fears of an oversupplied

market. We share those fears and maintain our view that im-

ports should continue to fall away in the coming months.

Slower Chinese import demand in the final quarter has led to

a pattern of copper prices tending to tail off in November andDecember in recent years. We expect to see the same trends

2,000

4,000

6,000

8,000

10,000


3-month Cash

USD/tonne

-160

-80

0

80

160


50

150

250

350

450



0

1

2

3

4

0 1 2 3 4 5

October 09

January 96

USD/lb

Weeks consumption


7/16


7


this year, and our price forecasts reflect this.

Labour contract settlements may trigger price fall

Supply disruptions may be keeping dip buyers interested.However, although the Vale Inco strike in Canada and the

Spence strike in Chile are ongoing, and a vote for strike

action has been announced at Antamina in Peru, workers at

Escondida have agreed their new contract. If Codelco work-

ers follow suit (as many suspect, now that Escondida has

set a precedent), then the majority of the labour-related sup-

ply risks hanging over this market will have been removed.

With stocks rising on both the LME and SHFE indicating

well-supplied markets in China and the West, there would

appear to be little fundamental reason for prices to remain

well bid into the year end.

No respite for TC/RCs

The latest data from the ICSG showed that global mine cop-

per capacity utilisation fell to just 76.1% in July its lowest

level of the year. Although Escondida has since come back

on line, the strikes in Chile and Canada, the accident at

Olympic Dam and problems in Indonesia and elsewhere are

still likely to be keeping utilisation below 80%. In this context

we are not surprised that TC/RCs have stuck to, and remain

at, extremely low levels reportedly $10-20/tonne and 1-2/

lb on a spot basis in China.

Annual Global Supply/Demand Balance for Copper, 2001-2011

Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mine production

Total 13,626 13,578 13,785 14,607 14,921 15,020 15,580 15,440 15,240 15,580

Year-on-year % change 3.1% (0.4%) 1.5% 6.0% 2.1% 0.7% 3.7% (0.9%) (1.3%) 2.2%

Refined production

Africa 413 447 454 508 513 563 627 680 770 860

North America 2,793 2,326 2,074 2,198 2,162 2,155 2,175 2,210 2,060 2,080

Latin America 3,595 3,564 3,608 3,566 3,549 3,553 3,595 3,535 3,600 3,660

Asia (ex. China) 3,362 3,358 3,489 3,541 3,831 4,200 4,330 4,340 4,030 4,100

China 1,510 1,613 1,836 2,199 2,600 3,047 3,497 3,779 3,950 4,108

Australasia 560 543 484 490 469 429 442 502 480 505

Europe 3,411 3,420 3,309 3,449 3,533 3,605 3,620 3,710 3,560 3,610

Total 15,644 15,271 15,254 15,951 16,657 17,552 18,286 18,756 18,450 18,923

Year-on-year % change 5.5% (2.4%) (0.1%) 4.6% 4.4% 5.4% 4.2% 2.6% (1.6%) 2.6%

Refined consumption

North America 3,310 2,971 2,900 3,101 2,967 2,863 2,805 2,720 2,610 2,665

Latin America 533 432 494 541 552 554 568 580 560 570

Asia (ex. China) 3,864 4,196 4,216 4,564 4,522 4,680 4,900 4,860 4,500 4,600

China 2,357 2,774 3,097 3,371 3,540 3,820 4,525 4,930 5,520 5,962

Europe 4,732 4,651 4,754 5,031 4,814 5,208 5,155 5,050 4,615 4,700

Others 295 337 332 333 355 343 350 352 340 345

Total 15,090 15,361 15,793 16,941 16,750 17,468 18,303 18,492 18,145 18,842

Year-on-year % change (1.8%) 1.8% 2.8% 7.3% (1.1%) 4.3% 4.8% 1.0% (1.9%) 3.8%

Implied surplus (deficit) 554 (90) (539) (990) (93) 84 (17) 264 305 81

Stocks analysis

LME 799 856 431 49 92 191 199 341

COMEX 244 362 255 44 6 31 14 31

SHFE 94 75 121 32 58 31 26 15

Producer 290 240 238 233 238 283 259 256

Merchant 27 19 23 20 17 18 21 26

Consumer 181 161 145 141 135 149 154 135

Total 1,636 1,712 1,212 519 546 703 673 804 1,109 1,190

Stocks as weeks of consumption 5.6 5.8 4.0 1.6 1.7 2.1 1.9 2.3 3.2 3.3

LME cash prices

Historical & base case ($/tonne) $1,577 $1,558 $1,780 $2,866 $3,684 $6,730 $7,126 $6,969 $4,982 $6,175

Historical & base case(cents/lb) 71.5c 70.7c 80.7c 130.0c 167.1c 305.3c 323.2c 316.1c 226.0c 280.1c

Sources: ICSG; WBMS; LME; COMEX; SHFE; Standard CIB Research


8/16


8


Lead Short term risk to prices are to the downside

Chinas lead poisoning crisis that flared up in late August

continues to be one of the main focuses of the lead market.

However, also important is identifying any signs of a pick-up in consumer interest as we approach the high-demand

winter replacement auto battery season, especially after a

disappointing summer season this year.

Both factors supply disruptions and seasonal demand

have the potential to be bullish influences on lead prices.

However, both are proving to be a disappointment to lead

bulls, at least so far. Production losses in China are looking

minimal and demand remains stubbornly subdued.

Therefore, we see a lack of fundamental support for prices

at the moment. That said, the fundamentals are not the

main driving force currently; investor money flows and cur-

rency markets are setting the tone. But if the fundamentals

start to reassert themselves, the risks for lead prices in the

near term appear to be to the downside.

Moreover, if runaway Chinese production growth, particu-

larly from the secondary sector, is not reined in one way or

another, the upside to prices may start to become limited

next year too.

About 700,000 tpy of Chinese capacity suspended

There continues to be a trickle of news emanating fromChina about the ongoing crackdown on lead smelters sus-

pected of causing pollution. There have been a few more

closures over the past month, and we think the total capac-

ity affected amounts to around 700,000 tpy.

Market still well supplied...

Lead prices had rallied strongly in September of the back of

supply shortages potentially caused by this crackdown, and

prices have largely held on to those gains as concerns

have persisted. However, as noted in previous reports,

Chinese production is unlikely to be severely affected over

the long term, with the market seemingly well enough sup-

plied at the moment to ride out any production cutbacks.

with September data supporting that view

In the official production and trade figures for September

the first full month of data after the crackdown started in

late August, output was reported to have been 335,153

tonnes, which is only 8% lower than Augusts level and still

11% above the year-to-date monthly average of 301,949

tonnes. We will wait to see how much of a further decline, if

any, occurred in October. Based on September's data it

LME cash and 3-month lead price


Monthly change to LME lead stocks vs. cash price


Month-end LME lead stocks vs. cash price


800

1,600

2,400

3,200

4,000


3-month Cash

USD/tonne

-40

-20

0

20

40


0

50

100

150

200



0.0

0.5

1.0

1.5

2.0

0.0 0.4 0.8 1.2 1.6 2.0

October 09

January 96

USD/lb

Weeks consumption


9/16


9


seems we were correct to warn that Chinese output would

prove to be resilient.

Meanwhile, net imports of refined lead into China in Sep-

tember continued their declining trend from Aprils all-time

high, which is again indicative of a market feeling no ill ef-

fects of the clampdown.

No seasonal demand pick-up yet

The summer replacement battery season was disappoint-

ing in the Northern Hemisphere this year, as motorists

tended to use their vehicles less and defer maintenance

costs. Now in the run-up to the winter battery season, the

indicators are again looking disappointing. LME lead stocks

continue to rise, cancelled warrants have faded away to

almost zero again, physical premiums are largely stagnant,

and high prices are deterring restocking by keeping poten-

tial buyers at bay.

Vehicle production in Europe and the US has ramped up in

recent months, which is helping original equipment battery

demand, but with consumer confidence still poor and un-

employment still rising, potential buyers are still putting off

purchases of big-ticket items like new cars. That said, we

note that some weather forecasters are now starting to

predict that the US East Coast will see its coldest winter in

10 years, so this could provide a boost to the replacement

battery market in North America in the coming months.

Annual Global Supply/Demand Balance for Lead, 2001-2011Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mine production

Total 3,032 2,831 3,120 3,138 3,437 3,540 3,685 3,890 3,800 3,960 4,150

Year-on-year % change (0.5%) (6.6%) 10.2% 0.6% 9.5% 3.0% 4.1% 5.6% (2.3%) 4.2% 4.8%

Refined production

Africa 132 144 138 100 111 114 90 97 100 110 130

North America 1,866 1,848 1,854 1,745 1,775 1,806 1,802 1,827 1,720 1,780 1,760

Latin America 229 244 238 270 270 266 265 270 180 220 300

Asia (ex. China) 1,014 1,036 1,066 1,058 1,093 1,106 1,152 1,315 1,330 1,360 1,410

China 1,196 1,325 1,564 1,934 2,391 2,715 2,757 3,106 3,440 3,740 4,150

Australasia 280 311 315 281 277 253 252 275 252 260 270

Europe 1,905 1,762 1,589 1,569 1,702 1,655 1,747 1,794 1,680 1,730 1,740

Total 6,622 6,670 6,764 6,957 7,619 7,915 8,065 8,684 8,702 9,200 9,760

Year-on-year % change (0.3%) 0.7% 1.4% 2.9% 9.5% 3.9% 1.9% 7.7% 0.2% 5.7% 6.1%

Refined consumption

North America 2,003 1,861 1,823 1,816 1,891 1,923 1,777 1,848 1,720 1,740 1,780

Latin America 191 205 207 224 237 236 221 241 240 244 250

Asia (ex. China) 1,359 1,458 1,535 1,585 1,533 1,566 1,610 1,620 1,540 1,580 1,643

China 720 957 1,183 1,510 1,973 2,213 2,543 2,890 3,260 3,749 4,311

Europe 2,054 2,027 1,933 2,007 1,998 1,968 1,944 1,855 1,690 1,700 1,740

Others 149 134 153 153 142 145 140 142 140 142 144

Total 6,476 6,642 6,834 7,295 7,774 8,051 8,235 8,596 8,590 9,155 9,869

Year-on-year % change (0.2%) 2.6% 2.9% 6.7% 6.6% 3.6% 2.3% 4.4% (0.1%) 6.6% 7.8%

Implied surplus (deficit) 187 34 (10) (282) (119) (117) (170) 88 112 46 (107)

Stocks analysis

LME 98 184 109 40 44 41 45 45

Producer 188 142 138 127 145 137 97 114

Consumer 149 156 159 132 118 130 138 146

Merchant 1 1 1 1 2 2 2 1

Total 436 483 407 300 309 310 282 306 418 464 357


LME cash prices

Historical & base case ($/tonne) $476 $453 $516 $887 $976 $1,288 $2,595 $2,090 $1,671 $2,200 $2,450

Historical & base case (cents/lb) 21.6c 20.5c 23.4c 40.2c 44.3c 58.4c 117.7c 94.8c 75.8c 99.8c 111.1cSources: ILZSG; WBMS; LME; Standard CIB Research


10/16


10


Nickel Market balanced now

We had forecast at the start of the year, and discussed in recent

reports that the nickel market would be much tighter in the sec-

ond half of the year, even returning the deficit, after a large sur-plus in the first half. This transition to balance/deficit been con-

firmed by the latest INSG data which shows demand exceeding

supply in August for the first time in well over a year.

Whether the tighter fundamentals persist to the year-end is be-

coming less certain, but overall we still think a generally bal-

anced market is the most likely outcome, both for the remainder

of 2009 and for the duration of 2010. This should be supportive

to prices, though the ongoing relocation of Russian metal onto

LME warrant in Rotterdam is masking the underlying balance at

the moment.

The short term risks to this balanced market outlook include the

resolution of labour disputes in Canada, the continuing rise in

Chinese nickel pig iron production, the possibility of restarts to

previously idled mine capacity, and patchy demand.

Our price forecasts remain unchanged this month at $14,802/

tonne for 2009 and $19,500/tonne for 2010, rising to $23,200/

tonne in 2011 with the arrival of the first annual deficit in 5 years.

Market returned to deficit in August

The latest data from the INSG is noteworthy because it shows

that the global nickel market returned to deficit in the month of

August - for the first time since February 2008. Production de-

clined for the third consecutive month, coming in at 108,200

tonnes, as ongoing cutbacks and the start of the strike at Vale

Incos Canadian operations offset rising nickel pig iron output in

China. At the same time, consumption in August rose to 115,300

tonnes the highest level in 16 months due to stainless steel

mills gradually raising output levels since around mid-year.

As we have noted in our previous reports, a deficit is in line with

our own reading of the market, and we think that demand will

generally match or exceed supply for the remainder of this year

and through 2010.

North America getting tight

With a disappointing demand recovery in Europe so far

(Outokumpu reports no recovery yet and Acerinox is cutting ca-

pacity back again) and oversupply of Chinese stainless steel in

Asia, the main bright spot for demand is North America.

There seems to be more buying activity occurring in this region

and physical premiums are on the rise. Although stainless mills

are ramping up output and are rebuilding nickel stocks, the main

cause of the tightness is the ongoing strike at Vale Incos nickeloperations in Canada. Workers walked out in July and there still

Monthly change to LME nickel stocks vs. cash price


Month-end LME nickel stocks vs. cash price


LME cash and 3-month nickel price


8,000

16,000

24,000

32,000

40,000


3-month Cash

USD/tonne

0

7

14

21

28

0 1 2 3 4 5 6

October 09January 96

USD/lb

Weeks consumption

-16

-8

0

8

16


2

8

14

20

26


Thousands of tonnes USD/lb


11/16


11


appears to be no end in sight to the pay dispute. Moreover,

we note that workers at Xstratas Sudbury operations also

have labour contracts up for renewal in February, so the

disruptions could run well into next year.

Mine restarts may still be some way off

We were interested to note last month that Chinas Minmet-

als says it needs a steady nickel price above $20,000/tonne

to consider reopening its suspended Avebury mine in Tas-

mania. This is a broadly similar figure to the $18,000/tonne

price that Toledo Mining recently said was its breakeven

level at Berong in the Philippines. And although BHP Billi-

tons mothballed Ravensthorpe mine is making headlines

again as potential buyers cast their eyes over it, there are

still serious doubts about its viability at current prices (with

these concerns also casting a shadow over Vale Incos

much delayed Goro mine in New Caledonia)

The high costs relative to current prices for many idled and

next-generation nickel mines underscores our view that

nickel still needs to go higher before the overhang of ca-

pacity starts to become a more pressing risk.

NPI here to stay

It also underscores the fact that Chinese nickel pig iron

(NPI) producers now appear to have a niche in this market

for the long term, as their breakeven price starts from about

$15,000/tonne. Indeed, nickel ore imports surged to a new

all-time high in September some 25% above the previous

monthly record confirming that the sector can operate

viably at current prices and is more competitive than many

conventional producers in the current environment.

Annual Global Supply/Demand Balance for Nickel, 2001-2011


Mine production

Total 1,224 1,248 1,264 1,327 1,387 1,503 1,595 1,530 1,380 1,415 1,590

Year-on-year % change 4.3% 1.9% 1.3% 5.0% 4.5% 8.4% 6.1% (4.1%) (9.8%) 2.5% 12.4%

Refined production

Africa 53 55 54 57 56 55 50 42 40 45 48

North America 141 145 124 152 140 147 154 168 125 152 167

Latin America 124 146 157 161 168 171 168 137 122 128 146

Asia (ex. China) 164 167 174 177 173 167 180 178 166 176 190

China 50 54 65 73 98 137 219 200 220 225 240

Australasia 174 181 167 166 178 163 156 142 151 158 164

Europe 449 434 451 468 463 512 514 510 450 472 500

Total 1,154 1,181 1,191 1,253 1,276 1,352 1,441 1,377 1,274 1,356 1,455

Year-on-year % change 6.5% 2.3% 0.9% 5.2% 1.8% 6.0% 6.6% (4.4%) (7.5%) 6.4% 7.3%

Refined consumption

North America 147 133 130 139 148 155 145 137 126 136 140

Latin America 23 27 29 26 26 25 26 24 22 23 25

Asia (ex. China) 353 408 422 430 402 429 380 348 299 340 380

China 88 94 125 150 190 245 330 360 405 460 506

Europe 461 476 461 454 447 492 424 400 333 352 380

Others 33 38 48 46 34 46 41 40 36 41 42

Total 1,104 1,176 1,215 1,245 1,247 1,392 1,346 1,309 1,221 1,352 1,473

Year-on-year % change (1.6%) 6.5% 3.3% 2.5% 0.2% 11.6% (3.3%) (2.7%) (6.7%) 10.7% 8.9%

Implied surplus (deficit) 50 (51) 37 8 29 (40) 95 68 53 4 (17)

Stocks analysis

LME 19 22 24 21 36 7 48 79

Producer 74 69 73 72 71 75 70 71

Consumer and merchant 28 18 22 5 4 6 9 6

Total 121 109 119 98 111 88 127 156 209 213 196


LME cash prices


Historical & base case ($/lb) $2.70 $3.07 $4.37 $6.28 $6.68 $11.02 $16.87 $9.56 $6.71 $8.85 $10.52

Sources: INSG; WBMS; LME; Standard CIB Research


12/16


12


Zinc Can the demand recovery keep pace with rising supply?

The run of announcements about smelter restarts since

around mid-year from the likes of Nyrstar, Teck and others

appears to have slowed. However this is largely becausemost previously idled capacity is now back on line. There-

fore, with Western World output rising again and Chinese

output breaking records, the key question for zinc is

whether demand is recovering quickly enough to absorb

the additional material now being produced.

The fact that LME stocks have been flat-to-lower since Au-

gust would suggest that the market is largely in balance. If

Octobers strong rally in zinc prices to more than $2,300/

tonne was driven by the fundamentals, then this return to

equilibrium, between supply and demand is likely to have

been a key factor.

However, our own view is that the price move was more to

do with investment money flows than fundamentals, and

although we remain zinc bulls on a medium to long-term

horizon, the short term fundamental outlook is starting to

get a little clouded by uncertainties.

China is starting to look oversupplied

Although LME stocks have flat-lined, suggesting a largely

balanced market, SHFE stocks have started to rising rap-

idly, and this is a concern. The headline total in Shanghai

has jumped by 30% in the last two weeks alone, to a new

all-time high. We have heard reports for some months

about large off-market stockpiles in China following the

surge in imports earlier this year, so it is not a surprise that

the domestic market is starting to look oversupplied, espe-

cially given record high production data recently.

amid record high production

Refined zinc production was reported by the NBS to have

been 410,413 tonnes in September, only fractionally down

from Augusts record high of 415,000 tonnes. Productionhas now risen by nearly 70% since Januarys low, as previ-

ously idled smelters have been quickly restarted and as

new capacity has been commissioned. Moreover, with con-

centrate imports up 38% this year and domestic mine out-

put having more than doubled since the start of the year,

apparent supply of zinc concentrate in China is also at a

record high, which will continue to fuel high refined metal

output, as long as availability remains easy.

The concs market is now tightening up

This may be changing now, however, as many WesternWorld smelters have now restarted and there is more

LME cash and 3-month zinc price


Monthly change to LME zinc stocks vs. cash price


Month-end LME zinc stocks vs. cash price


800

1,400

2,000

2,600

3,200


3-month Cash

USD/tonne

-100

-50

0

50

100


20

70

120

170

220



0.2

0.7

1.2

1.7

2.2

0 1 2 3 4 5 6

October 09

January 96

USD/lb

Weeks consumption


13/16


13


smelting capacity chasing material in the concentrate mar-

ket. Indeed, we estimate that some 466,000 tpy of non-

Chinese smelter cutbacks have been reversed since the

start of H2. This compares with mine supply that has re-

mained little changed in the West, as idled mine capacityhas been far slower to restart than smelter capacity.

The changing balance in the global zinc concentrate market

is already affecting TCs, with spot terms in China dropping

in October by around $10-20/tonne to $180-200/tonne.

They could fall further on rising demand and seasonally

lower Chinese mine output.

Short term demand outlook mixed and uncertain

US spot zinc premiums have eased slightly as consumers

many of which have not yet seen any real improvement in

orders are in no hurry to jump into the market, especially

at recently elevated LME prices. How they react to lower

prices might be a more useful gauge of underlying de-

mand. In Europe, sentiment is more upbeat. Pressure isbuilding on premiums and a rise is expected from the

$100-120/tonne range as a number of steel mills are re-

starting galvanising lines.

However, in both regions there is the threat of Chinese

HDG exports. This is dominating the galvanised steel mar-

ket, threatening price stability and raising the possibility

that mills may have to maintain/resume production disci-

pline through Q4 and Q1 2010 in order to avoid a glut.

Annual Global Supply/Demand Balance for Zinc, 2001-2011Thousands of tonnes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mine production

Total 8,933 8,904 9,520 9,709 10,146 10,444 11,129 11,680 11,120 11,350 11,680

Year-on-year % change 1.1% (0.3%) 6.9% 2.0% 4.5% 2.9% 6.6% 5.0% (4.8%) 2.1% 2.9%

Refined production

Africa 135 147 197 260 273 257 279 262 266 272 276

North America 1,294 1,438 1,431 1,496 1,401 1,377 1,394 1,404 1,240 1,310 1,360

Latin America 423 465 499 496 482 486 545 565 470 510 560

Asia (ex. China) 1,898 2,034 2,136 2,187 2,280 2,412 2,433 2,670 2,620 2,660 2,730

China 2,038 2,155 2,319 2,720 2,776 3,163 3,743 3,913 4,080 4,240 4,360

Australasia 556 567 553 474 457 466 502 499 495 502 510

Europe 2,877 2,904 2,744 2,720 2,563 2,508 2,516 2,470 2,180 2,220 2,300

Total 9,221 9,710 9,879 10,353 10,232 10,669 11,412 11,783 11,351 11,714 12,096

Year-on-year % change 2.7% 5.3% 1.7% 4.8% (1.2%) 4.3% 7.0% 3.3% (3.7%) 3.2% 3.3%

Refined consumption

North America 1,569 1,634 1,573 1,680 1,496 1,540 1,520 1,478 1,360 1,410 1,480

Latin America 367 389 378 443 414 436 457 471 442 455 474

Asia (ex. China) 2,259 2,359 2,505 2,551 2,525 2,578 2,533 2,510 2,290 2,330 2,510

China 1,500 1,750 2,155 2,690 3,041 3,225 3,597 4,014 4,280 4,622 4,992

Europe 2,817 2,754 2,780 2,833 2,684 2,786 2,850 2,628 2,280 2,320 2,450

Others 405 470 440 457 452 475 480 472 440 470 481

Total 8,917 9,356 9,831 10,654 10,612 11,040 11,437 11,573 11,092 11,607 12,387

Year-on-year % change (1.0%) 4.9% 5.1% 8.4% (0.4%) 4.0% 3.6% 1.2% (4.2%) 4.6% 6.7%

Implied surplus (deficit) 327 357 55 (269) (351) (343) (15) 210 259 108 (289)

Stocks analysis

LME 433 651 740 629 394 91 89 254

SHFE 0 0 0 0 0 0 54 63

Producer 377 315 293 280 308 332 347 356

Consumer 120 115 114 116 111 114 101 105

Merchant 16 14 12 13 15 12 11 12

Total 946 1,095 1,159 1,038 828 549 602 790 1,049 1,157 867


LME cash prices

Historical & base case ($/tonne) $886 $779 $828 $1,048 $1,382 $3,273 $3,250 $1,873 $1,592 $2,150 $2,550Historical & base case (cents/lb) 40.2c 35.3c 37.6c 47.5c 62.7c 148.5c 147.4c 85.0c 72.2c 97.5c 115.7c

Sources: ILZSG; WBMS; LME; SHFE; Standard CIB Research


14/16


14


Tin Another offensive against illegal mining in Indonesia

The rise in LME tin stocks over the past year has been phe-

nomenal, and on a year-on-year comparative basis even

exceeds the rise seen in aluminium stocks: tin has had aneight-fold increase from 3,000 tonnes last November to

26,000 tonnes currently, while aluminium has merely tri-

pled. Not all of the rise represents a surplus of production

this year over consumption we put that at around 14,000

tonnes in tins case. The rest of the increase in LME stocks

represents the relocation of producer and consumer inven-

tories on to LME warrant, and this trend has now become

clearly visible in WBMS data.

However, as the latest (and ongoing) production disruptions

in Indonesia are starting to tighten supply in Asia now, at

the same time as demand is beginning to reaccelerate. Asa result, the LME stock rise finally appears to be topping

out and we think the tin market may be moving back into

deficit.

We have maintained a bullish view on tin prices for some

time and this remains unchanged. We see the market stay-

ing in deficit for much of 2010 and recording a large annual

deficit in 2011 amid consumer restocking, recovering end-

use markets and long-term structural supply constraints.

Accordingly, our 2009 price forecast remain unchanged at

$13,560/tonne, we see an average next year of $16,825/

tonne, rising to $20,200/tonne in 2011.

Indonesian crackdown over, but problems remain

Since late-August when the police crackdown on suspected

illegal mining in Indonesia resulted in the shutdown of the

independent mining and private smelting sectors, supply

issues in the country the worlds largest tin exporter

have rarely been far from the headlines. The crackdown is

effectively over now and, as of late October, most inde-

pendent miners had returned to work. However, bad

weather is apparently hampering attempts to ramp ore pro-

duction back up again. As a result, many of those private

smelters that have restarted furnaces are experiencing ore

shortages and have so far only been able to achieve utilisa-

tion rates of 20-25% at best. With seasonal rains likely to

continue for the next few months, we would expect Indone-

sias ingot output and shipments to the global market to

remain constrained for some time.

PT Timah and PT Koba Tin have been unaffected by the

crackdown and are still aiming for production of 45,000-

48,000 tonnes and 9,000 tonnes respectively, but supply

from the private sector which accounts for around half of

the national total now looks set to finish the year below

expectations.

LME cash and 3-month tin price


Monthly change to LME tin stocks vs. cash price


Month-end LME tin stocks vs. cash price


6,000

11,000

16,000

21,000

26,000


3-month Cash

USD/tonne

-5

-3

0

3

5


0

300

600

900

1200



0

3

6

9

12

0 2 4 6 8 10

October 09

January 96

USD/lb

Weeks consumption


15/16


15


The fundamentals have tightened

Data released by Indonesia's trade ministry for tin exports in

September showed a fall of 29.5% year-on-year and 8.2%

month-on-month, to just 7,755 tonnes. This is also the low-est monthly total since April and it clearly reflects the impact

that the police clampdown is having on Indonesian supply.

Exports in October will possibly be even weaker, and we

expect November and December data to be negatively af-

fected too.

The topping out of the LME stock rise in October is likely to

be due in large part to the slowdown in supply from Indone-

sia, and given that tin demand in the fourth quarter is fairly

robust on the back of the seasonal peak in consumer elec-

tronics and a still-healthy tinplate sector, we think the tin

market is now edging into deficit.

The backwardation is starting to narrow

A prominent and unique feature of the tin market all this year

has been the persistent backwardated structure of the for-

ward curve, despite the large and persistent gains in LMEstocks until now.

However, in recent weeks the backwardation has gradually

eased. Cash to three-months averaged $87/tonne in the first

week of November versus $500/tonne a month ago, while

cash to 15-months averaged $332/tonne compared to more

than $1,000/tonne in late September and early October.

LME data has shown that a dominant position holder has

been present in this market most of the year, but the flatten-

ing out of the forward curve suggests that it may finally be

relinquishing its grip.

Annual Global Supply/Demand Balance for Tin, 2001-2011


Mine production

Total 248 248 255 286 342 335 350 318 305 309 321

Year-on-year % change 1.3% 0.2% 2.9% 11.9% 19.7% (2.0%) 4.5% (9.1%) (4.1%) 1.3% 3.9%

Refined production

Latin America 46 54 59 66 63 65 58 61 63 65 69

Asia (ex. China) 103 114 104 112 153 142 131 134 132 133 140

China 106 84 98 117 122 132 149 129 134 132 138

Europe 14 17 14 15 11 11 11 12 9 10 11

Others 2 2 2 3 3 3 2 2 1 1 1

Total 269 269 278 313 352 353 351 338 339 341 359

Year-on-year % change 2.1% 0.1% 3.1% 12.8% 12.6% 0.2% (0.6%) (3.7%) 0.3% 0.6% 5.3%

Refined consumption

North America 53 51 50 59 48 54 40 33 31 32 33

Latin America 12 12 14 16 10 11 9 10 10 11 12

Asia (ex. China) 75 86 90 97 102 109 100 98 85 87 96

China 62 53 72 93 116 115 134 128 136 148 162

Europe 75 69 72 69 65 71 69 66 59 61 65

Others 7 6 5 6 6 5 6 5 4 5 6

Total 283 277 303 341 347 365 358 340 325 344 374

Year-on-year % change 2.3% (2.1%) 9.3% 12.4% 1.8% 5.2% (1.9%) (5.1%) (4.4%) 5.8% 8.7%

Implied surplus (deficit) (6) 1 (16) (19) 13 (3) (2) 2 14 (2) (13)

Stocks analysis

LME 30.6 25.6 14.5 8.1 16.7 13.0 12.1 7.8

USA 7.7 7.3 6.5 6.1 5.4 5.7 9.1 7.9

Indonesia 4.3 6.7 6.7 3.8 5.3 5.2 4.6 7.2

Brazil 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6

Others 6.1 5.5 6.7 6.4 7.3 6.1 6.0 5.9

Total 52.3 48.7 38.0 28.0 38.3 33.6 35.4 32.4 46.4 44.4 31.4


LME cash prices


Historical & base case (cents/lb) 203.3c 184.2c 222.1c 386.1c 334.3c 397.5c 659.3c 840.9c 615.1c 763.2c 916.3c

Sources: WBMS; LME; Standard CIB Research


16/16


16


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in this research report accurately reflect the research analyst's(s') personal views about the subject investment(s) and issuer(s) and (ii) no partof the analysts(s) compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed by theanalyst(s) in this research report.

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addition research analysts reporting lines are structured so as to avoid any conflict of interests. For example, research analysts cannot be

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This research report is based on information from sources that Standard CIB Research believes to be reliable. Whilst every care has beentaken in preparing this document, no research analyst or member of the Standard CIB Research gives any representation, warranty or under-taking and accepts no responsibility or liability as to the accuracy or completeness of the information set out in this document (except withrespect to any disclosures relative to members of the Standard CIB Research and the research analysts involvement with any issuer referredto above). All views, opinions and estimates contained in this document may be changed after publication at any time without notice. Pastperformance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors or any par-ticular class of investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in priceor value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer orsolicitation for the purchase or sale of any financial instrument. Members of Standard CIB Research may act as placement agent, advisor orlender, make a market in, or may have been a manager or a co-manager of, the most recent public offering in respect of any investments orissuers referenced in this report. Members of the Standard CIB Research and/or their respective directors and employees may own the invest-ments of any of the issuers discussed herein and may sell them to or buy them from customers on a principal basis. This report is intendedsolely for clients and prospective clients of members of the Standard CIB Research and is not intended for, and may not be relied on by, retail

customers or persons to whom this report may not be provided by law. This report is for information purposes only and may not be reproducedor distributed to any other person without the prior consent of a member of the Standard CIB Research. Unauthorised use or disclosure of thisdocument is strictly prohibited. By accepting this document, you agree to be bound by the foregoing limitations. Copyright 2009 Standard CIBResearch. All rights reserved.

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standard bank base metals monthly oct 2009

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