Commodity comment - Macquarie

Dollar drives base metals down, Chinese
metals output softens in July
Feature article
We look at the impact of the US dollar on the recent fall in base metals prices
and also review that latest Chinese production data.
Latest news
Nickel rallied 3.3% over the past week, lead fell by an astounding 14.8%,
while most other metals ended the week unchanged. On Friday, the main falls
occurred across the precious metals space, with silver down by 13.7% to
$12.82/oz and platinum dropping 7.4% to $1,400/oz, their lowest levels since
late 2007.
The Chinese government seems to be taking domestic power shortages
seriously, implementing a number of tax increases for coal and aluminium
alloys. Coking coal export taxes are to rise from 5% to 10% from 20 August,
coke from 25% to 40%, and a temporary export tax of 10% will be
implemented on thermal coal. In addition, a 15% export tax will be placed on
aluminium alloys (previously zero), the trade in which has been increasing
significantly in recent months as producers seek to escape the duties on
primary aluminium.
Latest data from the International Nickel Study Group showed the global
nickel market moving further into surplus in June. The group reported refined
nickel production of 117,000t in June versus consumption of 109,000t. For the
first half of 2008, the INSG reported production of 719,100t and production of
983,300t; a surplus of 35,800t.
Rio Tinto has been forced to cut alumina production at its Yarwun refinery in
Australia because of a blocked pipeline. The 1.4mtpa refinery has been idled
since July 29 and the company expects it to continue to run at a reduced rate
until the end of August, spokesman Diane Collier said. The company has not
specified the extent of the disruption, but said that it expects to be able to
meet its alumina sales commitments by running down stockpiles, diverting
some material from its other refineries and buying alumina from outside
sources.
The Macquarie Group is acting as adviser to Rio Tinto Plc in relation to the
proposed acquisition of Rio Tinto Plc by BHP Billiton Plc as announced on 8
November 2007.