Superb piece on copper by Andy Home of Reuters today

Reuters dude Andy Home is a must-read on copper and today he adds several degrees of intelligence to the current debate on China demand levels. Get the note here, meanwhile below one of the charts lifted from the note.

click to enlarge

Uranium in China, dumbasses in Canada

Just so you know, here's a chunk from Scotia's Mining Scoop e-mail this morning (IKN puts the fun bit in bold type):

"More on Uranium Sector - These recent events are likely to lead developed nations to take a more cautious view regarding nuclear power, the governments of China , Russia and South Korea have all stated that the events in Japan will not affect those country's long term nuclear programs. However, China has suspended approvals for proposed nuclear power plants and is making a comprehensive safety check of atomic plants following Japan 's nuclear crisis, the State Council said overnight.  ‪The Council meeting chaired by Premier Wen Jiabao declared through a Statement that: “We will temporarily suspend approval of nuclear power projects, including those in the preliminary stages of development, pending the ratification of a new Nuclear Safety Plan and the revision/improvement of the Medium to Long-Term Nuclear Energy Development Plan… We must fully grasp the importance and urgency of nuclear safety, and development of nuclear power must make safety the top priority. We will use the most advanced standards to proceed with a safety assessment of all nuclear plants under construction.  Any hazards must be thoroughly dealt with, and those that do not conform to safety standards must immediately cease construction.” China Strategist to Scotia Capital notes that the drafting and approval of a new Nuclear Safety Plan will likley take close to one year.  Germany plans to shut down 7 nuclear reactors for a period of 3 months, pending a safety review would, in our estimates remove up to 1.0 Mlb of uranium demand in the context of a global market of roughly 195 Mlb. Remember that Asia (specifically China) and Eastern Europe (specifically Russia) represent 95% of the expected growth in reactor units between 2010 and 2015, and 86% of the expected growth between 2010 and 2020."

Nice quote, yeah? But afterwards Scotia goes and messes it all up by laying on the Kool-aid for its worried U longs and saying:

"And although Chinese approvals may be delayed, Scotia Mining Sales does not think this will materially change the long term goal of increasing reliance on nuclear power vs. coal."

Yeah, right. Move along now, nothing to see here, all the world's gonna love having a nuke plant built next door in the future because the designs they use are infallible, aren't they? So here's a link that only those working at Scotia Mining Sales are allowed to click...nobody else (apart from Lobito and Marin, anyway). Oh, and by the way spot U prices are now at $55/lb, from $60 yesterday and $69/lb this time last week. But who's counting, right?

UPDATE: My stars, a lot of people work at Scotia Mining Sales, don't they?. Just 30 minutes after the post went up and 73 clicks registered on that link already. Mind you, two of them must be my resident Casey Research staff member readers, so that explains a bit I suppose......

UPDATE 2: I wonder what sort of ridiculous BS spin the dumbasses trying to sow Hope™ from their comfy desks in Vancouver and Toronto are going to put on this NR?:

VANCOUVER, BRITISH COLUMBIA AND JOHANNESBURG, SOUTH AFRICA, March 16 /CNW/ - Uranium One Inc. ("Uranium One") today announced that JSC Atomredmetzoloto ("ARMZ") has notified Mantra Resources Limited ("Mantra") that ARMZ believes that the recent serious events at the nuclear power plant in Fukushima, Japan are likely to have a material adverse effect on the business, results of operations, assets or liabilities, financial position or prospects of Mantra.  As such, ARMZ considers that the condition precedent in the Scheme Implementation Agreement dated December 15, 2010 between ARMZ and Mantra relating to a material adverse change is not capable of being satisfied.

ARMZ has indicated to Mantra that it intends to continue discussions with Mantra in an effort to explore how the transaction between two companies may proceed by way of an alternative approach.

Uranium One will provide further updates as additional information becomes available.

Is the message about U getting through yet? DYODD and don't believe a word that comes out of the mouths of liars who rely on your money for their salary. And hey dudettes and dudes, I was calling on this theme Friday morning before the word 'meltdown' had even started trending. It's called straight talk, a old fashioned concept that's good for your bank account.

ICBC Corporate Banking, Interactive Mind Map and News

ICBC, one of the world's biggest banks by market value, asked Peru for permission to open a local unit.
Click the figure below to see the interactive mind map.

Zoom

Industrial and Commercial Bank of China (ICBC) Global Service

ICBC, one of the world's biggest banks by market value, asked Peru for permission to open a local unit.
Click the figure below to see the interactive mind map.

Zoom

Despite the USA's best efforts, Bolivia is still determined to combat its drugs traffickers

It's been two or three years now, the time Bolivia has been trying to get itself a decent flotilla of aircraft to combat the drugrunning out of the eastern wing of the country where cocaine manufacture and transport to Brazil and beyond is rife. But sadly, up to now at least every time they've tried to buy to right kind of aircraft to help them stop the drug runners the USA has stopped them by, and this one I really like,  refusing to give permission to other countries to sell Bolivia the machinery (yep seriously, for example The Czech Republic wanted to sell Bolivia the planes, but The USA told their Czech pals that they couldn't do that by invoking the ITAR military technology transfer laws for a plane that saw its first encarnation take off and fly in 1986!).

All the while, of course, The USA has accused Bolivia of not doing enough to combat its drug trafficking problem (while saying little or nothing against Colombia or Peru, the world's two biggest exporters of cocaine..funny dat innit). So anyhow, this English language report out of Straits Times shows what happens when you use a stick instead of a carrot and why it's a bad idea for The USA to continue with this "backyard" claptrap. Dudes, the Chinese aren't coming...they've arrived (and been down this way for quite some time). Here comes a chunk of the story, click through for the rest:

Jan 19, 2011

Bolivia to receive combat aircraft from China

LA PAZ - BOLIVIA is set to receive six Chinese-made combat aircraft to be used to fight drug trafficking, the head of the Bolivian Air Force said on Tuesday.
General Tito Gandarilla, the Air Force commander, told local journalists that the K-8 Karakorum jets are scheduled to be delivered in April, at a cost of US$58 million (S$74.5 million).
The aircraft, bought through a loan from China, will be the first of their kind for Bolivia, which currently has only training and freight aircraft.
Gen Gandarilla explained that the jets 'have a lifespan of 15 to 20 years' and have the ability to intercept illegal crafts that 'in Bolivian airspace without authorisation'. The aircraft will be used mainly around Cochabamba in central Bolivia, where there is heavy production of coca plants used to make cocaine.
The Bolivian government also plans CONTINUES

China's Rare Earth Quotas:

I'm not aware of too many things

I know what I know if you know what I mean

'What I know', Edie Brickell & the New Bohemians, 1988

I know nothing about Rare Earths, something made plain in the past on these pages and also in the subscription weekly. However, I do know when I'm being fed uninformed bullshit by a whole bunch of people that pretend they're now suddenly experts on REE and this week your humble scribe's NumericalBullshitGeigerCounter™ has been going haywire thanks to the announcement out of China for REE export quotas for the first half of 2011.

Typical BS is on this link from the WSJ, who start with "China Cuts Export Quota on Rare-Earth Metals" and then feed the fear with quotes from those who really, really want you to get worried about supplies and how that superduper US defense system or that superduper Japanese flatscreen is under threat. You can tell just by looking at the phonies The WSJ is getting for quotes that neither interviewee nor interviewer has the first clue about what's really going on. So let's go to the numbers and see a bit about what's been happening with China REE export quotas, starting with this chart.

This shows the six-monthly quotas for REEs since 2009, including the latest one for the first half of 2011. Put simply, they had a lot to ship out in 2009, cut that drastically in 2010 and have pitched for a similar sort of level (slightly lower) this year, but also a level that's much bigger than the second half of 2010 (the bit we're still in). However, dig a little deeper into the figures and you see that the dreaded and fearmongered supply crunch....well, that just isn't gonna happen, folks. Here's the 2009 quota total stacked with the actual amount of REE exported by China in 2009:

2009 quota limit	50,145mt
2009 quota used	26,770mt
2009 excess	23,375mt

Yup, there was a quota limit, but in the end the amount exported by China to feed that overwhelming world demand didn't even get close. So since then the Chinese have been working the demand to their favour without choking off supply to those who need these REEs (and before we continue, let's note that 45% of all REE exports out of China are of one REE, Lanthanum (La) a fact that skews any fearmonger's supply/demand idiocy even further out of shape) by keeping quota limits to where world demand is pitching itself...after all, if you own 97% of all the REE out there you're not going to let anyone else start hoarding it, are you?

In essence, what China is doing is sticking to its own policy of keeping REEs inside China and promoting the construction of Rare Metals applications factories inside the country. It's using its near-monopoly on REEs to promote its own economy, but what it isn't doing is choking off world supply and harming other country economy; it's letting out enough REE for the rest of the world, but no more than that. when the 2h11 quota comes around, we'll see China adjusting its export quota, up or down, as a function of the actual exports and demand (and prices) seen in 1h11. So apologies to those who like to drum up hype and/or blame China for their own shortcomings, but you're talking out your butts....again.

Morgan Stanley on China growth and forecast 2011 demand for basic materials

A new report dated December 5th out of Morgan Stanley has a front page overview that looks like this:

LatAm Basic Materials
China’s Growth to Moderate;
Appetite for Materials to Continue
 
Our field trip to China led us to believe that while the country’s economic growth will slowdown, it is unlikely that the metal-intensity of its growth will change materially in the next few years.
 
What's new: We spent last week in China with a group of Latin American investors meeting companies and talking to consultants. We had the opportunity to see the contrasts of the rapidly developing nation during our field trip. On one end, the impressive build out of the last decade is still ongoing in both Shanghai and Beijing. On the other end, Zibo and Dongying (second tier cities), in Shandong province, where people's living standards are clear evidence of China's emerging economy status and offer potential future demand for natural resources.
 
Economy: Expected GDP growth of 8–9% in 2011 to decelerate from unsustainably high levels, but remain robust. Despite consumption gaining importance as the driver of GDP growth, investment will lead the economy over the next few years, with social housing offsetting most ─if not all─ of the decline in private construction.
 
Steel: Expect steel production growth of 5–10% in 2011 with capacity utilization of ~92%. Steel demand will continue to expand, but at a slower clip than during 2003–2007. Baosteel said that 50% of Chinese listed steel companies lost money in 3Q10, and yet Wuhan believes steel prices might come down before they rise.
 
Iron ore: Iron ore prices expected to decline to $120–$150/t in 2011, as Indian exports normalize. With cash cost for Chinese material ranging from $75–135/t, all iron ore producers are profitable at current ore prices.
 
Pulp: Chinese buyers will remain opportunistic. Local production costs ~US$600/t for hardwood; US$700/t for softwood. Softwood market is tighter than hardwood. Government is supporting local plantations in an effort to reduce imported fiber dependency.
 
Copper: Chinese copper demand to grow 8% in 2011. According to the 12th 5-year plan, the government plans to invest RMB400B per year on average into power grid.

Read it all by downloading from here. A good piece of macro.

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China Mining's foreign labour relations: Coming soon to a South American country near you

It seems Chinese mining executives take a different attitude towards workforce protests than, say, Codelco or Southern Copper or ANY FREAKIN CIVILIZED HUMAN BEING in fact. I mean, why talk to the proles when you can shoot them? This story from The Times of Zambia today (for the record, approximate forex in the note is, K4,500,000 = U$9600 , K3,500,000 = U$7500, K2,000,000 = U$4300).

MANAGEMENT of Collum Coal Mine and all the 13 workers who were shot at have agreed that the two Chinese senior officers who fired at them should not be prosecuted.

And the mine management has agreed to compensate victims of the shooting between K20 and K45 million and has also increased the minimum basic monthly salary for its workers from the statutory required K286,000 to K450,000 following the Government’s directive to management to improve the working conditions at the mine.

According to the compensation agreement obtained by the Times of Zambia, management of Collum Coal Mine and the victims of the shooting had a meeting on November 10 which was also attended by the labour commissioner where the two parties settled the matter by agreeing compensation and that the two directors who opened fire should be exempted from prosecution.

“All the 13 injured agreed that Xiao Lishan and Wu Jinhua be exempt from prosecution.
“After verification, there are 13 people who were injured. Among these, one person was severely injured and he will be paid K45 million including five years school fees anywhere within Maamba area.

“Those who are partially injured are six and these will be given K35 million each while the other six who are not severely injured will be paid K20 million each. When Collum Coal mines industries Limited pays the compensation, the officers from Ministry of Labour and Social Security and relevant witnesses should be in attendance,” reads part of the agreement.

The move was part of the process aimed at improving the working conditions at the mine where 13 workers were recently injured when they were shot at during a protest to press management for improved conditions. CONTINUES HERE

How, therefore, do you get round the subtle problem of attempted murder charges in Banana Republics? Easy, just pay 'em all off and the charges get dropped. So on second thoughts China's mining companies look like they'll fit quite nicely into the LatAm way of thinking. DYODD, dude.

Copper story stolen from Scotia Daily Mining Scoop

They stole from DJNW, IKN steals from them. Why? Because it's interesting stuff. so read on, kind lector:

- Interesting Article on China wanting to be 30% self-sufficient in copper production by 2015:  They are looking to consolidate the smelting business to 3 or 4 strong players and will encourage miners to step up mineral exploration in China especially around old mines and surrounding areas.  Beijing wants Chinese copper producers to “expedite investment and cooperation in overseas markets such as South America to ensure stabe supply from overseas”.  Scotia Mining sales believes Norsemont’s Constancia project in Peru (ticker NOM-CN, not covered) which is on the verge of getting fully permitted for construction and awaits an updated feasibility which management believes could double NAV to over $1B is the logical target for a Chinese producer.

Adventures in basic mathematics, Ecuador oil edition

Your humble scribe was surprised to see this report in his interwebnetpipes this morning:

BEIJING, Sep. 6, 2010 (Xinhua News Agency) -- Ecuador finance minister Patricio Rivera has said the country would sell 360,000 barrels/day of crude oil to PetroChina (601857.SH; PTR.NYSE) in the next four years, according to a Dow Jones Newswires report.

 The South American country's finance minister was quoted as saying that the crude oil will be sold at market prices. CONTINUES HERE

Why so? Time for the funmath!

1) According to home gov't and EIA figures (which unlike Venezuela largely agree) Ecuador currently produces 490,000 barrels of oil per day (bbl/d)

2) Ecuador's internal consumption of oil currently runs at 180,000bbl/d

3) This means that even in the very VERY unlikely event that Ecuador stops selling its wares to traditional partners (such as main customer USA or next door Peru) they still have another 50,000bbl/d to magic up from somewhere.

So tell me again how this greenheaven Yasuní ITT initiative will work? Meanwhile, today's pretzel math gives us a great chance to CUE THE MUSIC!

China does Mutún, Bolivia

Apparently, there is no foreign investment in Bolivia because of the normal type of scary EvoRedCommieAllGonnaDieRunAndHide etc etc stuff written in your northern propaganda rags (never mind that Bolivia was LatAm's fastest growing economy last year, as EngLang media learned long ago to wisely ignore facts when they don't fit prejudices).

However, the Chinese have not been informed of the all this. Today's hot story from Chinamining is that China wants in on the massive (really....it's very big wow massive) Mutún iron ore project in East Bolivia. Here we go with a straight paste:

The Chinese government has proposed to extend up to US$15 billion in loan to a large scale iron ore mining project in Bolivia, sources reported.

China also intends to set up a joint venture to jointly develop the mine, according to the report.

However, a spokesman at Bolivian government said that the talks with China are still in the preliminary stage. Bolivia is also considering the related proposals raised by enterprises from Korea, Russia and Venezuela, the spokesman added.

According to the spokesman, Sergio Alandia, president of Bolivia's state-owned steel firm ESM, will hold talks with a Korean delegation including Hyundai Steel Co this week.

Bolivia's local newspaper, La Razon, reported yesterday citing Alandia as saying that China is facilitating an iron ore supply agreement with Bolivia and suggests China Development Bank Corp to offer loans to the above iron ore.

Also right now there's a Bolivian delegation in South Korea, invited over by the Seoul brothers to talk about that very same Mutún thing (as featured in IKN55). Strange how you have to resort to blogs to find this out too, innit?

China's global investments: An excellent interactive map over at Forbes

Click here to go see a great interactive map put together by Jon Bruner of Forbes Mag. No image pasted here can do it justice so go over and find out for yourself, but to give you a taste here's the blurb that accompanies the visual.

"Since 2005 Chinese firms and arms of the Chinese government have invested hundreds of billions of dollars in foreign companies and raw materials. Each dot on this map tracks one of those investments, with larger dots representing larger investments. Explore the map by rolling over and clicking on the dots and timeline."

Here's the link again, to make sure you visit. Kudos to Bruner for a job well done and thank you to reader 'AT' for the headsup.

Peru growth: It didn't take long for the Kool-Aid to start flowing

Just the other week in this post, your humble scribe rounded off a look at the state of Peru imports and exports (the lifeblood of the country's growth) by saying:

A recovery is on? Yes no doubts, with that steady climb in imports underlying the good news. Anything better than 2007 or 2008? Nope. So next time the headlines scream the Kool-Aid at you, remember the real context of the "growth" figures that you'll see out of Peru this year.

And yep, it's already started. The Goebbels method of "tell em enough times and they'll believe it" is spearheaded by the numbskulls at Northern Miner with this headline from yesterday:

Peru's Mining Growth And Pains

LIMA, PERU -- While much of the rest of the world struggles to put last year's economic slowdown behind it, Peru has been surging ahead with almost Chinese-levels of growth.

Sorry, no link because NM have the temerity to charge subscriptions and use firewalls for their uninformed pumpjobs. But don't worry, you're not missing anything by reading the heap of guff on offer there. I mean, even if we take the Northern Miner's moronic parameters and check actual facts.....
....Peru doesn't stack up, not even close. Have you ever wondered what an economic hard-landing looks like in chart form? Check that red line above. And the only time Peru has got near China in the last ten years was the overheated 2008 that led the country straight over the cliff.

So Northern Miner, you win this week's coveted award. Two choices for you fools in the future; either check facts before opening mouths or just take the advice and

Thufferin' Thuccotash

Totally OT. Not LatAm, not stocks, not politics and a tiny weeny sliver of economics I suppose. But hey, my blog and I'll do what I want with it. By the way, ten Yuan is a touch under U$1.50, so what with the lack of flesh on a typical moggy I'm guessing that it's a delicacy and not a cheap substitute (tastes like turkey, they say....enjoy lunch tomorrow!). From China Daily:

More than 800 cats, locked up in rows of iron cages in a store in Tianjin municipality, would have been transported to Guangzhou, Guangdong province, and slaughtered had it not been for about 30 residents who rallied for nearly 24 hours, negotiating with the trader and police, to free the animals on Tuesday.

Pet lovers and animal welfare volunteers started pouring into a neighborhood in Hongqiao district of the municipality, 120 km from Beijing, minutes after photographs of the caged cats were flashed on the Internet on Monday night.

The trader said the cats, which he bought for 10 yuan apiece, were to be sent to Guangzhou, slaughtered and served as food at restaurants in South China continues here

Copper inventories

Here's the 30 day chart...
...here's the long range chart for context....

...and rather than repeat myself til blue in face, here's someone talking to Reuters in the excerpt below that does the job for me today. But it's all scaremongering right? Things never go down in the market...they always go up...right?

"A rise of nearly 25 percent in copper stocks since early
July has been troubling investors, who are wary of a correction
in the price, which rose to an 11-month high at the end of
August. [ID:nL8550447]

 "When you break down the rises, most of them come from
warehouses in Asia. There's no demand and Chinese are not buying
and the open interest has completely tumbled at the end of
August," said Andrey Kryuchenkov, analyst at VTB Capital.

 In a sign demand remains sluggish, the premium for copper
ready for use is now around $32.50 a tonne versus the usual
premium of $80-$100, said a trader in Shanghai who expects
demand to pick up from November for the end-of-year surge.

What's going on with Lead (Pb)?

Lead (Pb) has really been on a tear recently, as this chart clearly shows.

Yet another sharp jump on the LME this morning moved it up to U$1.12 and bits per pound, this despite inventory levels that are now touching five year highs.

So what's going on? Well, basically there's plenty of concentrate being mined but the problem for manufacturers that use the metal is getting pure metal, especially battery-grade lead, as there's a smelter supply squeeze happening. The combination of the smelter shutdown in China due to environmental pollution (the recent case of hundreds of children with lead poisoning has closed down a large smelting zone) and the ongoing strike at Peru's Doe Run (DRP) complex at La Oroya mean there's less lead out there, right at a time when real, end-user demand seems to be picking up.

The absolute amount of outage in China is difficult to gauge (and if the local China experts are guessing , that means your humble correspondent has zipsquat idea) but it's clearly larger than DRP, which in itself produces 3.1% of world mined lead per annum (using 2008 figures) and around 1.4% of total world supply (the big difference explained by the fact that a lot of lead is recycled).

So moving forward, word of smelters reopening in either place will move the market more than end demand numbers, at least in the short term. DYODD.

Must see video on China's economy

Via deserved and necessary hat tip to Edward Harrison at Credit Writedowns and to reader MR for sending the link (gracias che) check out this video of Hugh Hendry surveying rows upon rows of empty Chinese high-rised buildings and more being constructed. Amazing, compulsive viewing and 100% necessary knowledge for investors.

Harrison asks in his post "Who is going to pay for all this stuff?". Well that's easy enough to answer; if your salary comes in US dollars have a look in the mirror.

Good read on China and copper

Here's the link to the latest by John Maudlin as he tackles China, copper and one of the issues I've been talking about for a few weeks in the IKN Weekly (though not as eloquently as Maudlin). Well worth a read.

more copper

An interesting article from Platt's today that gets some Chinese copper expert dude on the record about the metal. By way of analysis, I'm going to tutn away from my usual cynical non-trusting self, make a leap of faith and assume what the anonymous source inside the subsidiary of a Chinese Copper giant says is true. If so;

• Copper consumption looks good for a 300,000MT rise this year
• The extra compared to 2008 has already been imported into China
• The summer doldrums are coming and you should be ready for them
  
• 2010 will be a good year to go long copper

Hong Kong (Platts)--3Jun2009

China's copper consumption is expected to top 5.8 million mt/year in
2010, up from a projected 5.2 million in 2009 and 4.9 million in 2008,
following heavy investment in the power sector by the government, a Jinrui
Futures Co. official said Tuesday.
   "The Chinese government is to spend Yuan 1.5 trillion [$189 billion] on
power networks and basic infrastructure construction [before end-2010], the
key copper consuming industries, which we think can stimulate copper demand in
China," a Jinrui official said. Jinrui is a subsidiary of copper giant Jiangxi
Copper.
   Analysts said the government's plans of completing the ultra high voltage
power network by 2015 would have positive impact on domestic copper
consumption by 2010.
   "Apart from growing demand for copper by the power industry, we are also
optimistic about future demand by the domestic automobile industry, given the
recent rise in car sales in China," the Jinrui source said.
   The power sector accounts for 40-50% of China's copper consumption,
according to state-run nonferrous metals research company Beijing Antaike.
   It predicted the sector would consume 2.6 million mt copper in 2010, up
from a projected 2.35 million mt in 2009 and 2.2 million  mt in 2008.
   Jinrui predicts China's refined copper imports in 2009 will exceed the
1.456 million mt imported in 2008.
   "Total refined copper imports by China during the first four months of
the year have already greatly exceeded half the total import volume last year,
so the import figure for 2009 will surely be higher, even if volumes decrease
in the next few months in the usual low summer buying season," the Jinrui
source said.
   High imports over January-April was due mainly to arbitrage opportunities
as well as State Reserve Bureau's copper purchases earlier this year, which
trimmed domestic supply.
   China imported 1.066 million mt refined copper during the first four
months of 2009, up 106% from the same period in 2008, customs figures showed.
--Joshua Leung, newsdesk@platts.com

China Demand

Here's a chart showing the latest figures for electricity demand in China the incorporates May numbers published by Bloomie today.

Also, a must-read on the subject is this post by Yves Smith at the evergood Naked Capitalism. Interesting comments section, too.

Yes, Virginia, I'm still bearish on copper.

OT: Posting will be light today at this humble corner of cyberspace. Something will get added this evening for sure, but this may well be the last article of the trading day. Otto got family things to do chez Otto starting in about 20 minutes time (now gotta go grab that shower).