The People's Bank of China (PBOC) announced it would raise the reserve requirement ratio by 0.5% effective March 25th and is the third time since the start of 2011 the government has used this measure to help control inflation. Conditions at the Japanese nuclear power plant have improved, but global crude oil prices surged after coalition airstrikes in Libya. Turmoil in Bahrain, Yemen, and Syria may exacerbate unrest in the Middle East, pushing up oil prices even further. Inflationary pressure will increase, but will drive up base metal prices.
Copper: Spot copper prices rallied above RMB 72,000/mt, following higher SHFE copper prices and smaller spot discounts. Downstream producers reduced purchases due to rising prices and price volatility, causing trading sentiment to wane. (Page 3)
Aluminum: Recent market rumors report the Henan provincial government will increase electricity prices, but the scope and timing of any increase are unknown. Most aluminum producers in Henan province are currently near or at the break-even point, so higher costs will increase low-end aluminum prices, allowing speculators to turn more optimistic toward aluminum prices. Higher costs, however, may cause aluminum producers to delay commissioning of new capacity and restart of idled capacity, which will be favorable for aluminum prices. (Page 6)
Zinc: Raw material and energy shortages restrained zinc smelting operations. (Page 8)
Lead: Last week, LME lead prices held on to previous strong gains, hitting a record of USD 2,747/mt which was last seen prior to the 2008 global financial crisis. The SHFE lead futures market formally opened and reported strong gains. Domestic lead spot prices rose, but trading sentiment was soft. (Page 12)
Nickel: China's output of nickel in NPI during February exceeded 200 kt, up 11.14% MoM. (Page 15)