Commodities Comment:Thermal (re)stockings unlikely to keep coal investors warm this winter

Thermal coal longs are hoping that Northern Hemisphere winter restockingcan give a boost, if only in the short term, to seaborne prices. Latest inventorydata suggests they should temper their expectations, particularly in light of therecent measures China has undertaken to protect its domestic coal industry.

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    All the base metals saw price gains on Thursday, with tin the best performer,up 1.7%, despite a 32% MoM increase in Indonesian refined tin exports inOctober. Nickel and aluminium rose 1.2% and 0.9%, respectively.

    The under-pressure PGMs can take some heart from October’s continuedslow recovery in the European car market. We estimate sales of new carsrose 5.8% YoY to 1.03m units, with 10 of the 17 markets covered gaining.

    That said the recovery continues to be fragile as most of the growth againcame from Spain (up 26% due to govt incentives) and the UK (up 14% YoYon cheap financing). Further tempering the bullishness for platinum inparticular is that diesel cars (where most platinum catalysts are found)continue to lose market share on a YoY basis, in October 52.6% to 54.1% onour calculations. The diesel share has fallen in most national markets due to acombination of more efficient and cheaper gasoline-powered cars, and alower fuel price discount. Industry forecasts are for it to continue decliningover the next decade, though LMC Automotive, a research group, recentlysaid the pace of decline would be slower than they had expected due to morecompetitive pricing of new diesel cars.

    China’s National Development and Reform Commission (NDRC) hasapproved construction plans for seven new rail projects. Total investment willbe nearly RMB200 billion ($33.3 billion). The biggest project is the Nanchang-Ganzhou railway, with investment worth RMB53.25 billion ($8.8billion). Investment spending on railway in the first three quarters this yeartotalled RMB400 billion ($66.6 billion), just half of the original annual target ofRMB800 billion ($ 133.3 billion). Although it appears unlikely the full target willbe reached this year, the latest approval of the seven new railway projectsshould provide decent support for metals demand from the rail sector.

    In line with the latest trend of corporate restructuring in China, ShandongSteel, currently the largest provincial level SOE in Shandong Province with asteel production capacity over 20mpta, plans to shift 10,000 workers (out of areported total over 80,000) in its steel business to non-steel operations in thenext three years, according to The Beijing News. The news quoted anotherreport saying the company has also substantially cut wages