Commodities Comment:Short sharp shocks ahead of LME Week

LME Week is upon us once again and market players are flocking to Londonfor the annual get-together. The price shocks of the last couple of days will nodoubt be a key topic of debate, spicing up the usual conversations aboutChina growth expectations. On the metals-specific front, views are likely to beexchanged on the underlying strength and deficit stories in nickel, aluminiumand zinc, which have seen the most bullish price action this year despite theirrelatively high stock levels. On the other side, those concerned withunderperforming metals copper and tin will likely tend towards discussionsaround where price support lies. On the physical side, long-term supply dealsbetween producers, traders and consumers will be taking place, particularlyfor the European market. In this piece we review some of the key issuesahead of the week.

    Latest news。

    Indonesia’s incoming president, Joko Widodo, plans to raise the price ofsubsidised gasoline and diesel by around 50%. Quoting a Widodo adviser,Reuters reported that the policy will be implemented within two weeks of histaking office (i.e. in early November). Incrementally, this is likely to pushIndonesian mining costs higher, since many operations are thought to beillegally using subsidised fuel, either directly or indirectly. There have beenmany reports of illegal use of subsidised fuel by tin operations in Bangka,though the issue is thought to be widespread and the impact is likely to belargest on the coal industry, where prices are low and many producers areunder serious cost pressure. Indonesian thermal coal export growth ran at astaggering 17% CAGR over the past 10 years, but this year exports aremarginally down YoY, with a number of (mainly smaller) producers havingscaled back operations due to the low price environment.

    § Another market which is sitting at 2014 lows is Capesize freight