China's National Bureau of Statistics (NBS) announced on February 15th that China's CPI for January rose 4.9% on a yearly basis. Although lower than expected, inflationary pressures still remain. With quantitative easing policies in the US continuing, emerging economies will continue to experience inflationary pressures. Political unrest in the Middle East will also add to volatility in financial markets, with base metal prices expected to fluctuate even more in the short term.
Copper: Very few downstream producers have made any purchases since the Chinese New Year holiday only recently ended and production has not yet returned to normal. (Page 3)
Aluminum: Aluminum processors have begun to resume production, but are again facing labor shortages. Fierce competition for workers is forcing aluminum processors to raise salaries, adding to production costs. In this context, key factors in whether or not low and medium-end producers can be profitable are the degree of automation and the ability to increase production efficiency. Processing fees for aluminum semis have been increasing slowly, so aluminum semis producers must reduce overall costs to remain competitive. (Page 6)
Zinc: Zinc smelters plan to expand capacity by nearly 1 million mt, but actual operating rates at the new plants will remain low for the foreseeable future. (Page 8)
Lead: Domestic producers in China were beginning to reopen last week, but production has not yet returned to normal, keeping buying interest low. (Page 10)
Nickel: NPI prices rallied, with low grade NPI prices rising the most. (Page 12)