Commodities markets rallied sharply in mid-June, hitting their highest level in a month as investors rediscovered some risk appetite and the dollar fell. The gains came as the Eurozone industrial production rose 9.5% in April from a year earlier, the biggest increase since the data series began in 1991, easing fears that the Eurozone debt crisis would hit the manufacturing sector and so knock demand for base metals and bulk minerals. 
      However problems in the debt-laden Eurozone and other vulnerable countries in Eastern Europe, such as Hungary and Romania somehow clouded such positive macro data. Compounding a febrile atmosphere was a warning from Fitch Ratings that the UK faced a "formidable" challenge in reducing its budget deficit and would need to speed up cuts to retain its triple-A credit rating.
    The other ongoing concern dogging commodity markets, that Chinese demand growth may slow on the back of monetary policy tightening, also appears to have receded. In fact, China’s surprise decision to allow greater flexibility for its currency spurred LME base metals and most precious metals prices to rise substantially. On June 19, the People’s Bank of China announced its decision “to proceed further with reform of the renminbi exchange rate regime and to enhance its exchange rate flexibility”. The announcement effectively ends the renminbi’s de facto peg to the US dollar and paves the way for its appreciation against the greenback, as demanded by the US and other major partners. The central bank cited economic developments in China and abroad as playing an important role in the decision to revert to a managed float against a basket of currencies. A more valuable renminbi would boost Chinese purchasing power for commodities, but it would also make Chinese exports of manufactured goods less competitive, reducing overall raw materials demand. China is the world’s largest importer of a range of commodities. Its growing appetite for raw materials has transformed the commodities markets over the past decade, pushing prices up to record levels.
    In addition, China will also scrap export the 5% export tax rebate on some copper, lead, nickel and tin products from mid-July. The rebates, introduced last year to help exporters struggling with a downturn in demand, will be cancelled from July 15, according to the ministry of finance. The affected products include some semi-finished or fabricated products made from copper, lead or zinc, such as rods, bars, profiles, and wires. The move is intended to avert any trade friction, and is line with Beijing's attempts to streamline some key energy-intensive industries and to reorient the economy away from reliance on exports.
    In parallel, the home appliance scrappage scheme will be extended up to the end of 2011. It may also cover the whole country instead of just the ten pilot cities. The home appliance scheme is one of the most effective stimulus policies to drive domestic consumption since the global recession began. It includes televisions, refrigerators, washing machines, air conditioners and computers. Of course, given the use of many copper components by the sector, this is good news for copper consumption.
    In Australia, mining deals have hit a 5-years low after the controversial Rudd tax plan. There have been 47 announced deals valued at $914 million this quarter compared with 89 deals worth 9-11 billion in the quarter ended June 30 a year ago. With a 40% tax on mine profits, Australia will have the highest tax rate in the world for mining companies and risks losing its relevance as a market for investment in global mining companies.

    In London, the Lead cash settlement price rose to US$ 1,690 per ton while the Zinc cash settlement price decreased US$ 1,730 per ton on the 30th of June 2010.
    In China, refined lead output fell by 12% from April to 273,000 tons in May, for the first time in three months as weak prices push more smelters to bring forward maintenance plans. Meanwhile, China's refined zinc output was up 4.6% from April to 452,000 tons. However, many zinc smelters are also cutting production or conducting unit maintenance since zinc prices have fallen significantly since May.
    In Chile, regulatory officials have given their approval for Breakwater Resources to reopen the Estatuas mine at its El Toqui operation. Operations at Estatuas were suspended on 1st May following a fatality. Mining elsewhere and mill throughput were maintained throughout the suspension, and Breakwater has not altered its production guidance for 2010.
    In Mexico, Goldcorp has announced the mechanical completion of the second sulphide processing line at its Peñasquito mine ahead of schedule. Peñasquito should reach its full production capacity of 130,000 tpd by early 2011, once the high pressure grinding roll circuit is completed. Over its mine life, Peñasquito is expected to produce an annual average of 500,000 ounces of gold, 28 million ounces of silver, 450 million pounds of zinc, and 200 million pounds of lead after reaching full design capacity.
    In Australia, Kagara Zinc said its zinc output will rise by 52% to 70,000 tons in the next fiscal year, after it agreed with Guangdong Foreign Trade Group to develop the Vomacka deposit. Concentrate output from Vomacka will be sold through off-take arrangement with Guangdong Foreign Trade Group and Transamine. Vomacka contains a probable reserve of 743,000 tons grading 4.7% zinc, 1.4% lead, 1.8% copper, 46g per tonne silver and 0.5g per tonne gold.
    LME lead stocks still stand at a seven year high of 188,800 tons while LME zinc stocks slightly dropped to 616,550 tons.

      In London, the Copper settlement price dropped to US$ 6,515 a ton with a contango of US$ 26.5 on the 30th of June 2010.
    China's refined copper output continued to rise in May to a 2010 high of 398,000 tons, up 18% YoY. So far this year, China produced nearly 1.88 million tons of refined copper, up 16% YoY. 
    Meanwhile imports of copper and copper products by China, the world’s largest consumer, showed a second monthly decline in May, falling by 9.1% MoM and 6.1% YoY to 396,712 tons, amid ample domestic supplies and on prospects of weakening seasonal demand.
    In Australia, under a plan to halt expansion work due to Canberra's proposed new mining tax, Xstrata has decided to halve to 25,000 tons per year copper output from Australia's Ernest Henry mine.
    In Zambia, most copper mines have resumed normal operations following a power outage on June 18. However, Vedanta's Konkola Copper Mines have not yet returned to full production. Zambia produced 691,000 tons of copper-in-concentrate in 2009, equal to 4.3% of world output.
    In Mexico, Grupo Mexico has retaken control of its Cananea mine in Mexico where workers have been on strike for three years. The company has said that the mine could be back in production by the end of 2010. The strike is estimated to have cost the company over 500,000 tons of lost copper production. In 2006, the last full year of production, Cananea produced 111,000 tons of copper-in-concentrate.
    China’s GD Copper recently shut down its phase 2 copper tube project in Mexico. This follows the US Commerce Dept’s decision to impose preliminary antidumping duties on imports of certain seamless refined copper pipe and tube from both China and Mexico. The GD group’s current annual production capacity is 220,000 tons, including 150,000 tons of grooved tubes . China’s Ministry of Finance has decided as from 15 July to scrap the 5% export tax rebates introduced last year on some base metal products, including copper tubes and wires, which will reduce exporters’ margins and could affect refined consumption.
    In Japan, the output of copper and copper-alloy fabricated products, including sheets and tubes, jumped 50% YoY in May to 72,990 tons, the seventh straight month of YoY increases as the country’s export-led economy grew.

    In London, the tin settlement price stands at US$ 17,750 per ton with a contango of US$ 60 on the 29th of June 2010.
    The government of Indonesia's main tin-producing Bangka-Belitung province plans to stop small traditional miners within the next four years to slow destruction of the island's environment. The restriction on traditional tin mining may not affect tin production from Indonesia, as production from bigger miners such as PT Timah and PT Koba Tin would remain. No details of planned restrictions on small-scale mining have been made known, although observers note that there is a continuing natural decline in production from this sector due to the exhaustion of easily accessible mining areas.
    Indonesia’s tin exports have continued to disappoint due partly to ongoing supply bottlenecks brought about by the ban on illegal tin ore mining. May exports fell 26% YoY to 7,332 tons.
    In Russia, indebted Novosibirsk Integrated Tin Works, Russia's sole producer of the metal, is seeking to be declared bankrupt, according to a regional arbitration court's website. In the whole of 2008 Novosibirsk produced 1,405 tons of tin, down from 2,480 tons in 2007, due in part to a shortage of tin concentrate. The company's refined tin production has steadily declined to very low levels in recent years, as most tin mines in Russia have gone out of business. According to the World Bureau of Metal Statistics, Russia's refined tin production in 2009 was only 1,022 tons, while mine production of tin-in-concentrates was just 611 tons. Local ore supply is believed to have been supplemented by material sourced from DRC.
    Yunnan Tin Group, the world's largest tin producer, aims to at least double tin ore throughput from its Laochang ore field to 3,000t/d over the next nine years. The Laochang mine, located in Yunnan province, is the company's largest and oldest mine. The three-stage process for the expansion should bring the mine to reach the “strategic goal” of 3,000 tons per day by 2019. Meanwhile it also plans to boost its mine production by the development of the Wuchangping project in Hunan province. Yunnan Tin produced 55,898 tons of refined tin in 2009, but more than half of its production came from purchased raw materials.
    LME tin stocks are still on a downward trend, declining by 7% this month to 18,725 tons.

    In London, the Gold P.M fixing surged at the end of the month and closed positive at US$ 1,261.00 per ounce on June 28th, 2010 (MTD: +4.43%, YTD: +15.95%), while Silver ended the month positive at US$ 19.11 per ounce (MTD: +3.13%, YTD: +12.48%).
    Year-to-date, the price of gold has gained more than 15%, hitting a nominal all-time high, while silver was up only 12% because of its heavy industrial application. However, adjusted for inflation, gold is still a long way from its record high above $2,300 an ounce in 1980.
    At mid-month, gold and silver raced up to a record level as investors continued to buy precious metals, mainly through exchange-traded funds (holdings at SPDR Gold Trust, the largest gold ETF hit a record high of 1,316.18 tons), as underlying fears over financial market stability and sovereign risk combine with the dollar weakness.
    On the supply side, in Russia, the world's No. 5 gold producer, total gold output fell 6% YoY in January-May of 2010 to 54.1 tons, due to lower gold content in ore at some deposits. The country raised gold production by 11.2% to 205.2 tons in 2009 and expects to increase output to 207 tons this year.
    In Mali, Africa's third largest gold producer, production rose to 14.9 tons during the first four months of the year as surging world prices encourage miners to raise output. On this base, 2010 production could hit 52 tons.
    According to an UBS’ poll, almost a quarter of central banks believe gold will become the most important reserve asset in the next 25 years. The reversal of the trend of central bank gold sales has boosted sentiment towards the metal while removing a significant source of supply. After two decades of selling their bullion, central banks could become net buyers of gold this year. 
    The new estimates released by the World Gold Council revealed that Saudi Arabia is actually sitting on gold reserves of 322.9 tons, which is more than twice the previous estimate of 143 tons.
    The WGC data also showed global central bank gold reserves rose 276.3 tons in Q1 2010 (including Saudi Arabia) to 30,462.8 tons. Russia added 26.6 tons to its reported reserves, which now stand at 668.6 tons, while the Philippines added 9.5 tons, bringing its holdings to 164.7 tons. The biggest seller was the IMF and the world's largest bullion holder is still the US with 8,133.5 tons.

     In London, Nickel tumbled to US$ 19,935 per ton per ton, with a contango of US$ 65, on the 29th of June 2010. On the same day, cobalt min. 99.8% traded at US$ 20.50 per pound and Cobalt min. 99.3% at US$ 17.675 per pound. 
    Sharp falls in LME nickel prices saw China's imports of refined nickel fall for a second month in May. China imported 10,719 tons of refined nickel in May, down 36% from April, mainly from Russia and Australia. 
    In Zambia, Jinchuan Group’s Munali mine has produced 3,600 tons of nickel concentrates since it restarted in March this year. At a nickel grade of 7.2%, the nickel content produced is approximately 260 tons. In addition to the 74,648 tons of nickel ore crushed during the quarter, there was also a 1,310 meter development in the form of a lateral decline. 
     In Colombia, BHP Billiton’s Cerro Matoso’s operation produced 11,600 tons of contained nickel in the first quarter of the year, down 10.8% from the previous quarter. The company has indicated that this was due to the upgrading of lower grade materials, lower recovery rates due to repair to the fines transport system and lower utilization. The operation is currently the world’s second largest ferronickel operation with an annual capacity of 57,000 tpy.
   In Tanzania, African Eagle Resources announced that its laterite nickel deposits are three times larger than previously estimated. A previous study indicated that the Dutwa project had resources of 31 million tons containing 1.1% nickel and 0.034% cobalt. The recent announcement pushes the resources up to 92.1 million tons at 0.92% nickel.
    In Australia, production at Minara Resources’s Murrin Murrin operation should resume after a pipeline failure on the 25th of May. During the failure, the company was operating solely from its 1,500 tpy heap leach operation, implying an estimated loss of 2,150 tons of contained nickel. Production for 2010 at the operation is expected to be 29,950 tons of nickel.
    In Venezuela, Anglo American’s Loma de Niquel mine, restarted production at it’s No 2 furnace that was left inoperative after an incident at the plant last year. However, the company has been experiencing power shortages due to the country’s power-savings plan which is expected to run until December this year. Production for 2010 is expected to be 11,500 tons.
     In Finland, Belvedere Resources Limited has announced that it is on schedule for the ramp up of its Hitura mine. The operation is expected to produce 2,100 tons of nickel in concentrate in its first 12 months of production.
    LME nickel stocks have decreased by 9% to 126,312 tons at the end of the month.