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Metals investors look for miners to cut supplies to lift prices

Published 03/07/2015, 11:33 pm
Metals investors look for miners to cut supplies to lift prices
BHP
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RIO
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BHPB
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VALE
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* Weak prices putting pressure on metals producers

* Focus on iron ore, aluminium and zinc

* Reporting season kicks off on July 8 with Alcoa

By Eric Onstad

LONDON, July 3 (Reuters) - Investors in industrial metals will keep a close watch on miners' results in coming weeks for possible announcements of production cutbacks that could bolster weak prices.

"What will be very important over the next few weeks is whether we start to see some supply responses emerging during the corporate results period," said Nicholas Snowdon, metals analyst at Standard Chartered in London.

Iron ore, aluminium and zinc will get the most attention after a slide in prices that is pressuring the bottom line of some mining groups.

Spot iron ore .IO62-CNI=SI shed more than half of its value in the 12 months to April, but has since rebounded by about 15 percent to $54.10 a tonne.

"Over the past six months Vale, BHP and Rio have independently suggested either cuts to existing production, holding back sales and/or the slower ramp up of growth volumes," Citi analyst Heath Jansen said in a note.

"Stronger guidance from the companies on volumes could potentially drive lower volatility in the iron ore price."

On April 30, Brazil's Vale VALE5.SA , the world's top iron ore producer, said it was considering reducing forecast iron ore production by up to 30 million tonnes over the next two years.

Rio Tinto RIO.AX RIO.L is the second-biggest producer of the raw material for making steel while BHP Billiton BHP.AX BLT.L is number three.

Among base metals, the main focus will be on aluminium and zinc, analysts said.

"Aluminium tops the list in terms of potential and much needed production cuts in the Western world. Also in the zinc market, we're seeing zinc mine production growing at the fastest pace in several years," Snowdon said.

"Given the positioning in base metals, which have swung firmly to short side, if you do see some significant production cut announcements, that could be a trigger for some short covering," he added.

Top producer Rusal 0486.HK of Russia said in April it might idle 200,000 tonnes of capacity while U.S. group Alcoa AA.N said the month before it was reviewing 500,000 tonnes of smelting capacity. ID:nL4N0W840V ID:nL5N0XJ031

On Tuesday, Alcoa said it would permanently close its Pocos de Caldas smelter in Brazil, which has capacity of just below 100,000 tonnes per year. ID:nL2N0SB1UE

The plant, however, has been idle since May 2014 so the move will not reduce current production levels.

Nickel is another candidate after prices on the London Metal Exchange CMNI3 slumped this week to a six-year low of $10,795 a tonne, down by nearly half from a peak last year.

"We are deep into the all-in cost curves for metals, with maybe the exception of copper," said Robin Bhar, head of metals research at Societe Generale in London.

"But no one wants to be the first to cut because that hands an advantage to the other producer. Everybody's looking over their shoulders looking to see who will cut."

The reporting season of major mining and metals groups kicks off on July 8 when Aloca posts second quarter earnings. Reporting dates are below:

Date

Company

Report July 8 Alcoa

Q2 Financial July 16 Anglo American Q2 Production July 16 Rio Tinto

Q2 Production July 22 BHP Billiton

Q4 Production (Apr-June)

July 24 Anglo American H1 Financial July 30 Vale

Q2 Financial

Aug 6

Rio Tinto

H1 Financial Aug 13 Glencore

H1 Production Aug 19 Glencore

H1 Financial

Aug 25 BHP Billiton

Annual Financial Aug 27 Rusal

Q2 Financial

(Editing by Mark Potter)

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