China's Central Bank announced on December 10th it would raise the reserve requirement ratio by 50 basis points, effective December 20th, the sixth increase this year. China's CPI for November rose 5.1% YoY, a 28-month high, and the continued use of the reserve ratio is considered the best way to control inflation. However, Inflationary pressure in China will likely remain high in the short term, and base metal prices will be negatively affected if additional control measures are taken.
Copper: According to the NBS, China's output of refined copper was 443 kt in November, up 10.8% MoM, and up 4.5% YoY. YTD output from January to November reached 4.374 million mt, up 12.6% YoY, exceeding the 4.2519 million mt during the same period of 2009. (Page 3)
Aluminum: With coal prices high and the onset of cold winter, thermal-coal inventories in Hunan, Hubei, Shanxi and Henan provinces are low, and with electric power shortages possible. In this context, the return to normal production at aluminum producers in Central China will likely be delayed. Despite the arrival of a low demand period, supply will not improve in the short term and this will help keep aluminum prices relatively stable. (Page 7)
Zinc: China will continue to restrict exports of resources, zinc export taxes will remain unchanged during 2011.(Page 9)
Lead: Last week, LME lead prices fell from an early week mark of USD 2,450/mt to below USD 2,400/mt over the weekend. In China's domestic lead markets, trading sentiment was muted, with traded prices between RMB 17,000-17,300/mt. (Page 11)
Nickel: China's NPI metal output in November was down 11.53% MoM. (Page 13)