Commodities Comment:China’s huge November gold import

The Macquarie Commodities Research team would like to take thisopportunity to extend season’s greetings and our best wishes for 2015 to all ofour clients, colleagues and associates across the metals and mining industry.We thank you for your support over the past year.

    As of 24 December, the 28 global gold ETFs we track had seen anoutflow of 15t in December, bringing their full-year 2014 outflow to135t, far below both the 2013 outflow of 901t and our forecast foroutflows made at the start of 2014 of 500-600t. Sales were higher in 2Hthan 1H, however, at 109t to 26t. The 19 silver ETFs saw an outflow of488t in December, their worst performance since May 2013, but notsufficient (barring a huge sell-off in the next week) to prevent 2014 as awhole seeing an inflow of 250t, a remarkable performance given a 20%price decline this year. The 17 platinum ETFs suffered an outflow of 38koz in December but remained higher by 232 koz over the year as awhole. The 17 palladium ETFs enjoyed an inflow of 33 koz in December,bringing their full-year 2014 total to a huge 923 koz, something which wasentirely attributable to the launch of two South African listed palladiumETFs which in 2014 saw inflows of 1,221 koz.

    LMC Automotive, the research group, released an update to their global carand truck forecast earlier this week. They reduced their forecast growth ratefor 2014 “light vehicle” (car and light truck) output to 2.2%, from a forecast inSeptember of 3.4%, a difference of more than 1m vehicles. The largestreduction came in their forecast for China, where they now see growth of6.4% from an earlier forecast of 8.6%, a difference of 0.5m vehicles, andBrazil, where they forecast an 16% decline from their earlier estimate of a 9%decline, a reduction of nearly 0.25 Moz more. These trends are clearlynegative for PGMs, especially palladium demand. LMC did, however, keeptheir 2015 growth rate almost unchanged, at 3.8%.

    China’s bauxite imports in November totalled 2.57Mt, slightly higher thanthe previous month’s 2.56Mt. Imports from Malaysia remain notable, withNovember’s import figure rising to 8Mt on annualised basis. Chineseimports from Malaysia YTD totalled 2.6Mt. Since Indonesia bannedbauxite exports, China has sought alternative suppliers particularly fromcountries in the Atlantic Basin, resulting in increased import unit value dueto higher freight costs. The increased volume of imports from Malaysiaindicates that China may still get cheap raw materials for a while. Importunit value from Malaysia is $51/t compared with $61/t from India and $61/tfrom Australia. Malaysia became the second-largest bauxite exporter toChina after Australia in November and possibly remains in this positionthrough next year.