ANZ RESEARCH

COMMODITY CALL
12 JUNE 2013 INSIDE
Summary Macro Backdrop Charts of the Month Commodity Calls Feature Note Trade Ideas Technicals Commodity Prices CFTC Table Calendar Heatmap Forward Curves Moving Averages Forecasts Contacts Disclaimer 1 2 3 4 7 9 10 11 12 13 14 15 16 17 18

NO QUICK FIX FOR COMMODITIES We see little chance that the current negative sentiment towards commodities will change quickly. While a number of commodity markets are trading at fair value on fundamentals, too many broader trends remain at play to spark a recovery. Conflicting data on the state of the Chinese economy has left investors taking the approach of a healthy sceptic when it comes to Chinas outlook. Sentiment towards commodities is also weak from investors recently reducing the risk of a destabilising rise in inflation. Given these dynamics, we think sentiment is unlikely to change quickly for commodity markets, with a high likelihood that inconsistent data reads will continue to complicate the view on China. Rather, it would likely take a string of better Chinese data releases over the next quarter, before the market is convinced that a conservative approach to commodities is no longer warranted. FEATURE ARTICLES This month, we have two feature articles. The first is a review of a recent marketing trip to China, with focus on the domestic steel market: the second is a short analysis of Chinas proposed ban on low quality coal imports the winners, the losers, and the implication for prices. KEY TRADES Buy iron ore swaps looks oversold after heavy shorting in Chinese steel Buy Cotton Put periods of inactive buying will leave prices vulnerable

CONTRIBUTORS
Mark Pervan Global Head of Commodity Strategy +61 3 8655 9243 Mark.Pervan@anz.com Paul Deane Senior Agricultural Economist +613 8655 9078 Paul.Deane@anz.com Victor Thianpiriya Commodity Strategist +65 6681 8869 Victor.Thianpiriya@anz.com Natalie Rampono Commodity Strategist +613 8655 9258 Natalie.Rampono@anz.com

ANZ CHINA COMMODITY INDEX

FIGURE 1. FOUR CONSECUTIVE MONTHS OF DECLINE
Points 500 480 460 440 420 400 380 Dec

Feb -- 2012 -->

Apr

Jun

Aug

Oct

Dec

Feb -- 2013 -->

Apr

Jun

ANZ CCI
Source: ANZ Commodity Strategy

Period in Reference

ANZ Commodity Call / 12 June 2013 / 2 of 20

MACRO BACKDROP
CHINA CAUTION TRAPPING SENTIMENT ! ! ! Our proprietary China Commodity Index (ANZCCI) declined 2.6% in May, the 4th monthly fall Focus is still squarely on weak China data, with commodities underperforming US equities Its likely to take a string of better China data before sentiment improves materially view this slowdown as being largely complete by Q3 2013. This provides scope for a modest recovery in the second half, which would favour commodities as market participants look to restock from tight inventory levels. Commodity markets will continue to be buffeted by the speculation around the timing and pace of tapering to the current Federal Reserve asset purchase program. The broadening of US growth drivers to include US housing has resulted in market expectations moving forward the start of US Fed tapering to the latter part of 2013. The focus on economic indicators for the US in coming months will remain intense, particularly monthly US nonfarm payroll releases. Any sign that US momentum is easing, is likely to leave scope for periods of USD retracement and mild support for commodities. In China, indicators have been conflicting in recent months, with little clarity as to whether commodity import levels reflect underlying demand. The government also re-iterating no new major stimulus packages will be forthcoming, resulting in investors taking the approach of a healthy sceptic when it comes to Chinas outlook. However for commodities, we think a large degree of the adjustment to Chinas lower economic growth profile has now taken place. Combined with short investor positioning, this leaves some scope for commodity markets to react positively to a change in sentiment on China. But the current caution is unlikely to change quickly, with a high likelihood that inconsistent data reads will continue to complicate the view on China. It is likely to take a string of better data releases over the next few months - higher electricity production, a pick-up in base metal import volumes and better IP and PMIs - to convince the market that a conservative approach to commodities is no longer warranted.
FIGURE 2. PRICE MOVEMENTS IN MAY
Lead Soybean Palladium Palm Oil C opper Zinc Aluminium C orn Thermal C oal WTI Oil Brent Oil ANZ CCI CCI ANZ Platinum Wheat Nickel C oking C oal Sugar Gold C hina Hot Roll Silver C otton Iron ore (20) Hard/Energy Ags/Softs

Commodities were weaker in May, as the market continued to focus on the weak run of China economic data. Our proprietary ANZ-CCI declined 2.6%, making it the fourth consecutive monthly fall. Expectations were again revised lower for Chinas economic growth prospects, while financial flows continued to favour riskier developed market assets such as US equities rather than commodities. Also a near-uniform fall in global inflation indicators pointed to markets largely removing the risk of a destabilising rise in global inflation. Markets linked to Chinas steel industry were hardest hit, with iron ore and coking coal prices falling 18% and 6% respectively m/m. Precious metal markets also underperformed. But base metal prices benefited from a modest amount of short covering, after the extreme short positioning reached in April. Soybeans were the best performer in ags, rising 8%, as low US supplies forces domestic users to outbid export buyers. For June, we see little chance that the current negative sentiment towards commodities will change quickly. While a number of commodity markets are trading at fair value on fundamentals, too many broader trends remain at play to spark a recovery. On-going low inflation expectations, a strong USD, and a low chance of a run of positive catalysts from China should keep commodity prices capped near term. But the chance of further large price corrections in some markets is diminishing. Price levels in thermal and coking coal, nickel and aluminium are all hovering around 4 year lows, with a percentage of producers in all these markets no longer profitable. This is the first stage in helping to stabilise prices, as supply discipline starts to become a factor in the market. The aluminium market is a case in point, where three months of depressed prices has resulted in a large part of the global industry running at a continual loss. But it is only in recent months that key suppliers have started to talk about production cutbacks. The latest China PMIs highlight a seasonal improvement in demand is still lacking from China, and is unlikely to materialise based on our ANZs global lead indicators (ANZ-GLI). The ANZ-GLI for China was down slightly in May, with momentum favouring a further grind lower yet. The short term cycle also looks unfavourable in the US, with a modest destocking in inventory also underway. In part, this has been driven by a sharp loss of momentum in the US manufacturing sector, but we

M/M % (15) (10) (5) 0 5 10

Source: ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 3 of 20

CHARTS OF THE MONTH

FIGURE 3. GROWING MISMATCH BEWTEEN COMMODITY AND EQUITY MARKETS
Index points ANZ CCI & US EQUITIES Index points 600 500 400 300 200 100 05 06 07 08 09 10 11 12 13 ANZ-C C I S&P 500 (RHS) breakdown 1,600 1,400 1,200 1,000 800 600 400

FIGURE 4. CHINESE STEEL STOCKS FALLING OFF RECORD LEVELS, BUT STILL AT LAST YEARS PEAK
m tonnes 21 18 15 12 9 6 3 0 07 08 09 10 Trader stocks 11 12 13 Producer stocks CHINA STEEL STOCKS C hina Rebar Price (RHS) RMB/t 5,800 5,300 4,800 4,300 3,800 3,300 2,800

Sources: Bloomberg, CEIC, ANZ Commodity Strategy

Sources: Bloomberg, ANZ Commodity Strategy

FIGURE 5. WORLDS SECOND LARGEST COPPER MINE (GRASBERG) OFFLINE FOR 2-3 MONTHS
'000 tonnes GRASBERG MINE COPPER OUTPUT % 900 800 700 600 500 400 300 200 100 0 00 01 02 03 04 05 06 07 08 09 10 11 1213F Grasberg Output % Global Supplies (RHS) Potential outage 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

FIGURE 6. ALCOA CUTS HIGH COST CAPACITY POTENTIALLY MORE TO COME FOR OTHER PRODUCERS
USD/tonne ALUMINIUM GLOBAL COST CURVE 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 0 14,000 23,000 36,000 44,000 52,000 cumulative production (kt)
Sources: Wood Mackenzie, ANZ Commodity Strategy

C ash costs (C 1)

USD1,928/t

Sources: Wood Mackenzie, ANZ Commodity Strategy

FIGURE 7. CHINESE GOLD IMPORTS IN MAY DROP AS ATTRACTIVE ENTRY POINTS DIMINISH
USD 12.0 10.0 8.0 6.0 4.0 2.0 0.0 07 08 09 10 11 12 13 Imports from HK
CHINA GOLD IMPORTS

FIGURE 8. BRAZILIAN SOYBEAN EXPORTS A SLOW START BUT RECORDS SET IN APRIL & MAY
m tonnes 10.0 8.0 6.0 BRAZIL SOYBEAN EXPORTS

USD/oz 1,800 1,600 1,400 1,200 1,000 800 600

4.0 2.0 0.0 Jan 2011 Feb Mar 2012 Apr May 2013

SGE Gold Price (RHS)

Sources: Bloomberg, CEIC, ANZ Commodity Strategy

Sources: CEIC, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 4 of 20

COMMODITY CALLS
COMMODITY COMMENTS ENERGY
Oil markets could remain choppy in June, as mixed data in the US and negative data from China generates fluctuations in market sentiment. The US dollar appears to be less of a headwind, but speculation around the easing of US stimulus could remain a drag. Funds appear to be pricing in better seasonal demand from top consumers, US and China, but they could be disappointed. Although the traditional seasonal demand catalyst should be mildly supportive, we believe growing non-OECD supplies and pick-up in Saudi Arabian exports will cap the upside. The US crude oil contract continues to outperform Brent, and this should remain a feature in June. The Brent/WTI spread hit a low of USD7.7/bbl in May and we think the spread could remain within the current USD8-10.0/bbl range in June should US economic data and seasonal demand remain supportive. However, US crude prices are at risk from rising oil inventories, with supplies expanding faster than demand. Recent local refinery outages in the Gulf Coast halted stockpile declines in Cushing and Houston (further south), despite a mild pick-up in demand. We expect the impact to be temporary and pipelines to begin diverting crude to the Gulf Coast as the driving season continues, but gains in WTI could be limited by increased pipeline costs. With more domestic supplies reaching the Gulf Coast we would expect imports of sweet crudes to be cut back, keeping the Brent/WTI spread under pressure this month. Brent prices could temporarily break higher than the recent USD100-105/bbl trade range with a lot of the downside already priced-in, but we expect conditions to remain soft. After a strong correlation with Chinese equity markets in the first quarter, Brent prices have disconnected against the stronger performing Shanghai Composite. We think Brent might be oversold compared to Chinese equities and could experience short-covering rallies. However, with the focus on slowing industrial activity, we believe bearish sentiment will prevail and dent expectations for stronger seasonal demand which was flat in March and April. China has also been exporting crude products, constraining Asian refinery margins elsewhere. Although, we think Asian (ex-China) refinery margins could recover in June as Chinese refiners grapple with export quotas and difficulties obtaining VAT tax refunds. Supply-side losses from increasing Middle East tensions could surprise on the upside, but rising Saudi Arabian output should negate some of these outages.
Bearish Neutral Bullish

BULKS
Bulk markets look oversold, but face the headwinds of the passing in stronger seasonal demand. Chinese manufacturing activity tends to dip in June/July and destocking of bulk inventories starts to kick-in. That said, the downside risks may have already been factored-in, with heavy shorting of Chinese steel prices in late May. The supply-side looks mixed, with a tighter backdrop for iron ore (particularly inventories) contrasting with more ample supply in coal. Iron ore is a trade off between weak China data flow and bottom fishing by Chinese consumers. The sharp 14% decline in April was a precautionary reaction to heavy shorting in Chinese steel prices over the same period but the moves looks exaggerated. The risk is any positive Chinese data should squeeze steel shorts and trigger a relief rally in iron ore. A mild pick-up in Baltic Capesize rates since the start of June may also be suggesting that Chinese traders like the iron ore price entry level. That said, we think we import activity could be muted, with traders unable to access sufficient credit lines from overly cautious domestic banks. Like iron ore, coking coal looks oversold, but needs stronger Chinese steel prices to get it out of its funk. The supply dynamic looks less favourable and is unlikely to improve while higher availability of Chinese coal output and inflated coal stockpiles prevail. The closure of high-cost Australian supply would help, although most producers appear hesitant to curtail output, while stringent (take-or-pay) access fees to port and rail infrastructure apply. Seaborne thermal coal will continue to be dogged by weak Chinese coal prices. A combination of soft domestic demand and high domestic coal supply means Chinese coal consumers have become very price sensitive. The recent reports of a proposed Chinese ban on low quality thermal coal imports is unlikely to prop-up prices in the near term, with still low visibility on the actual ban and ample back-up supply. Like coking coal, an inelastic supply response from Australian coal producers is not helping a price recovery.

ANZ Commodity Call / 12 June 2013 / 5 of 20

COMMODITY CALLS
COMMODITY COMMENTS BASE METALS
Base metals should improve mildly in June, but the volatility experienced last month may continue. A greater focus on supply, particularly for copper and aluminium, should influence prices, but ultimately Chinese demand is what the market will watch out for. Increasingly we think Chinese inventory levels could be a better guide for real demand, with the end of local speculative financing deals in the first quarter. Although the market will probably look to headline economic data for a better view on manufacturing activity, which could slightly disappoint after holding steady in May. Global LME inventory flows are providing little guidance for demand, with the ongoing influence of inventory financing deals keeping levels inflated. In contrast, the end of speculative financing deals in China has cut bonded copper warehouse stocks by half since the beginning of the year to about 500-550kt and will possibly be a truer reflection of demand. Traders appear to be selling into the domestic market rather than shipping the material overseas, confirmed by trade data showing refined copper exports in April of only 29kt. Shanghai warehouse stocks are also pointing to rising demand, with a 28% decline to 179kt over the past two months. With Chinese stocks reaching lower levels, restocking demand could start to rise in the coming months. However, the Shanghai/LME arbitrage is now looking less favourable and could dampen appetite for imports. Supply disruptions have been growing steadily in the background over the last two months, but the impact on prices should be relatively short-lived. A 2-3 month production outage at Indonesias Grasberg copper mine has garnered the most attention, but stoppages at smelters in India and the absence of scrap in China has also pushed regional premias higher. The long-awaited start-up of production and exports from Mongolias Oyu Tolgoi (Rio Tinto) could also be a drag on the market. There could be greater upside in aluminium after Chinas top aluminium producer, Chalco, cut to 380kt of its capacity. We estimate the floor price for the industry is about USD2,000/t and have been waiting for cuts from China with current prices trading below this level over the last two months. Nickel might also experience relief rallies, with low nickel prices pressuring marginal operations. However, NPI producers are still operating at full tilt. We think there will be little support for base metal prices until global stocks start to decline.
Bearish Neutral Bullish

PRECIOUS METALS
The spot gold price fell 6.0% in May, accentuating the 7.6% decline in April. The short term outlook remains highly contingent on the US data flow, which continues to dictate market expectations of Fed QE tapering. Speculative positioning in precious metals remains mostly negative. In gold, the net long CFTC position (as a share of open interest) remains at a record low 8.4% and outflows from gold exchange-traded products are still occurring. Sentiment towards silver has not changed as speculative net longs are at a record low 4% of open interest. However, platinum prices outperformed in May as ETFs saw record monthly inflows of 453.28koz, nearly four times as much as the increase in palladium holdings. Physical gold demand remains strong, particularly to China. However, the onshore-offshore arbitrage has significantly reduced in the last few weeks, from over $20 - $25/oz to closer to $10 -$18/oz. This is still a healthy premium for Chinese arbitrage activity, but could signal that prompt demand is starting to wane. Hong Kong trade figures also showed a sharp drop in gold exports to China in April, though this was reportedly due to slow quota approvals. We expect the decline is temporary. India should see a significant decline in import volumes as the market works through the details of the Reserve Bank of India (RBI) import restrictions. In a further move, the RBI raised the import tax on gold to 8%, from an earlier 6%. Their intention to combat the current account deficit by targeting gold is clear, and this will continue to act as another headwind for the market. We expect price gains in gold will be difficult to hold in the near term as the financial markets price in Fed tapering (higher treasury yields and higher USD) and amid signs that physical demand could be slowing. We are cautious of being bullish in the near term and expect to see gold find a bottom around USD1,320/oz in the near term.

ANZ Commodity Call / 12 June 2013 / 6 of 20

COMMODITY CALLS
COMMODITY COMMENTS GRAINS
The last month has seen Brazil cement itself as a key grain exporter, with weather risks passing for Brazils second crop of corn. Brazils 2013 corn production is expected to reach close to 80 million tonnes for the first time, putting the first key pillar in place to potentially pressure corn prices below USD5/bu in Q4 2013. The rising prominence of Brazil has created a corn exporter the equivalent size of the US in the November/December trade window increasing the risk that the seasonal low in global grain prices in Q4 could be more pronounced this year. However, enough near term weather-related concerns are evident across a number of countries to keep price risks skewed to the upside through June and July. Persistent wet weather in parts of the US has left the market concerned that areas too wet to plant will miss the window for seeding, leading to a reduction in area planted to corn and spring wheat. While rainfall over the past few weeks in parts of central and eastern Europe have raised concerns that as much as 5 million tonnes of wheat could be lost or damaged and that wet weather will remain a problem through harvest. Equally, dryness in parts of the Ukraine and Russia will keep grain markets on edge. The ability of the Black Sea region to once again be a significant wheat export in the second half of 2013 will depend on temperature and rainfall over the next two months. While the existing Russian winter wheat crop is deemed to be better than average, Russian wheat export availability will depend on spring wheat production in the country a notoriously volatile crop with a highly variable yield. Demand should also be supportive for near term prices. Corn consumption is likely to be strong through June, with US corn based ethanol production margins the highest in 12 months. Also, demand from the feed sector should be robust, with US poultry, pork and beef cut-out values all rising through May. US chicken breast prices are for the first time since 2004 trading above USD2/lb. US pork belly prices have also surged and are currently 70% higher than year ago levels. The rise in pork bellies has pushed overall pork production returns higher, with cash margins the highest since August 2012.
Bearish Neutral Bullish

SOFTS
There is likely to be little reprieve in coming months from the existing downward pressure on sugar prices. Prices reached close to 16USc/lb in late May, earlier than anticipated given peak global export supply has yet to even hit the market. A more rapid start-up for Brazils centre south cane mills and favourable weather conditions through May, squashed any risk that Brazils early season sugar exports would be limited. By mid-May Brazils centre south mills had crushed more than double the volume of cane compared with the same period last year. Compounding this higher volume, the percentage of raw sugar retrieved from every tonne of cane is higher, running at 117kg versus 110kg last year. With sugar availability from Brazil only set to increase in the months ahead, sugar prices are likely to remain under pressure seasonally through to at least November. However we are cautious in extrapolating price action in May as an indication that prices will continue to erode at the same pace in the months ahead. Speculative funds aggressively shorted ICE sugar in May, but this is likely to have run its course. Also a significant component of weaker prices was the depreciation in the Brazilian Real, rather than any change to sugar fundamentals. The cotton market is caught between two opposing forces - with the high and low points over the last quarter as likely to define the trading range for the rest of the year. We expect ICE cotton futures to be capped above 90USc/lb. Above this level, profitability for Chinese spinning mills importing cotton becomes marginal relative to buying domestically. Also if prices persist above these levels for any notable length of time, cotton risks losing market share to synthetic fibres in select countries. This would increase the risk of downgrades to global cotton demand for 2013-14, pushing ending stocks higher. Equally prices should find support at 78USc/lb. At this level, the price differential between imported cotton and domestic prices in China is attractive for mills to import out-of-quota. Support below 80USc/lb has been evident in recent weeks, with active buying from spinners on the latest pullback. This opportunistic, handto-mouth activity is likely to be a feature of the cotton market in the second half. Leaving periods where prices hover at or below 80USc/lb, but then rally on periods of active trading where spinners buy to cover near term requirements.

Commodity Insight / 12 June 2013 / 7 of 20

FEATURE NOTE

CHINA STEEL TRIP NOTE

! ! ! Mood more cautious than we thought Weaker steel output expected in second half But traders will buy more Australian iron ore

Weve just returned from China and the mood on the ground appears cautious. Participants are still unsure on the direction of the new government and are operating on very short term just-in-time basis. Most would have expected a more proactive stimulatory response, but the new administration appears set on reigning in over-supply. This is keeping inventories low and is slowing the normal seasonal uptick in demand. Tight credit conditions and/or banking restrictions is also making it difficult for traders and consumers to rebuild stocks. Were therefore not too surprised by the recent run of flat to weak economic reports. Our main focus was on the China steel market, which year to date has been running at record high levels. This appears to conflict with the cautious demand backdrop and feedback was that it was more a production rather than consumption based dynamic. This is evident in record high steel inventories being built in the first quarter. The view was that the faster than expected first quarter steel make would see annual steel production growth surprise on the upside somewhere close to 7.0%, but that the second half would slow from a much stronger first half. Strangely, the upshot for iron ore demand (not necessarily price) is mildly positive. Imported iron ore demand should see stronger growth than domestic iron ore demand. Feedback was that iron ore prices would have to rise back over $150/tonne to prompt development of new iron ore mines in China and that the only domestic supply response near term would come from existing mines. The view was that with seaborne iron ore supply set to increase materially in 2013, particularly from Australia, steel mills and traders would take advantage of the larger seaborne market. The steel demand backdrop looks mixed. On the strong side is automobile output and transport infrastructure. The pick-up in autos is a function of commissioning of large new assembly plants in China over the past 12 months which is spurring stronger production and sales output (figure 2). Construction of central and western highway and high-speed rail development is performing strongly. On the weaker side is manufacturing, particularly heavy machinery and export orientated steel goods. The ship-building industry also remains very weak. The key property market looks mixed with still strong public housing construction being offset by weaker private and commercial development.

On housing, the recent property investment curbs to control prices dont appear to be working (figure 9). In fact, its fuelling stronger demand. Housing sales look stronger than starts, with investors getting quickly ahead of further controls. The view was that if new controls were announced it could fuel even stronger investor interest. Perversely, property prices could ease back if the government were to drop the controls. The other interesting dynamic was rising demand in public housing, where investors were looking to exploit the price arbitrage, upgrading many of the properties to higher-priced private and commercial dwellings. Excess steel capacity continues to be an issue. Feedback suggests total annual steel capacity sits at about 1 billion tonnes (70% state owned), while consumption lies closer to 700 million tonnes. Most steel state-owned-enterprises (SOEs) are operating at a loss, but will remain open propped up for social stability and employment reasons (unemployed workers in China do not receive government assistance). Closure will come from the privately owned small-to-mediumsized enterprise (SME) capacity, but not at current steel prices while most remain profitable. If prices fall further, SME output should start to fall, but the steel price declines will have to be sustained. Inventory positions looked mixed. Steel stockpiles are declining, but only slowly off record high levels in April. On the flipside, iron ore stockpiles at steel mills are relatively low at around 20 days - normal levels are closer to 30 days. Stocks at mills near large northern iron ore ports are even tighter at 7 days (normal cover at 20 days). But while credit conditions are tight and banks shy away from trading activity, inventories will not be restored quickly to higher levels. Order books and production schedules are also being conducted on a very short term basis, so inventories are being run on a just-in-time basis.
FIGURE 9. CHINA PROPERTY PRICES

% y/y 16 14 12 10 8 6 4 2 0 (2) 05 06 07 08 09 10 11 12 13
Source: Bloomberg, ANZ Commodity Strategy

controls not working

Commodity Insight / 12 June 2013 / 8 of 20

FEATURE NOTE

CHINAS PLANS TO BAN LOW QUALITY COAL

! ! ! Ban still needs to be quantified Indonesia exporters are the biggest losers High stocks means seaborne coal prices unlikely to benefit

pressure from imported coal an example being lowpriced coal from Mongolia, who are prepared to take price cuts to maintain market share. Domestic inventory levels are high, while sales volume and prices have both declined, resulting in a sharp fall in revenue. The low CV ban is unlikely to hurt domestic Chinese coal producers as much, because the ban has lower quality limits for domestic suppliers. We think about 1% or 36 million tonnes of Chinas 3.6 billion tonnes of annual output will be impacted. However, coal producers that are also trading companies could be hit by lower import volumes. China largest coal producer, Shenhua Coal is an example, whose share price has declined following the announcement. Under the proposed ban, as much as 60 million tonnes or 30% of Chinas thermal coal imports could be affected. Indonesia is the largest coal exporter to China, accounting for 95 million tonnes or 52% of Chinas 2012 thermal coal imports. On the initial target of banning imports below 4,544kcal NAR, Indonesia would have about 28 million tonnes or 8% of its total coal exports exposed to the ban. The exposure drops materially to 13 million tonnes or 3.5% of total exports if the ban is reduced to a rumoured sub 4,000kcal The impact on other countries should be lower. US coal exports with high sulphur content would be at risk. But the US has only recently become a meaningful coal exporter to China - 8 million tonnes or 0.8% of total US coal output. The large coal producer could swing into other export markets or shut down the unwanted supply. Vietnam looks more exposed off a low base, with about 10 million tonnes or 70% of its total exports potentially impacted. Overall, we think lower ranked seaborne coal prices will underperform higher ranked coal as the bigger buyer (China) restricts purchases. First published as a larger note on June 7 Chinas plans to ban low quality coal
FIGURE 10. CHINA IMPORT BAN PROPOSAL

Chinas proposal to restrict low calorific value (CV) coal consumption seems a first step in tackling a growing carbon emissions problem, but the timing and restriction level of a ban looks uncertain. The biggest negative impact would be on Indonesian coal producers, the largest exporters of low quality thermal coal to China. Higher quality Australian coal exporters could benefit, but we think Chinese utilities will likely consume a greater level of domestic supply. Some of the lower quality Chinese coal producers and domestic importers would be impacted. However, it could end up being a prop for the domestic producers, less affected by competitively priced coal imports. Pollution is a big problem in China and we believe the new government will be more hard-lined on this topic than the previous government. Ultimately, this means Chinas power supplies need to be cleaner and more efficient but we believe will still be significantly skewed towards coal (cheapest and most abundant energy source). We anticipate little change in the power mix over the next 4-5 years, with thermal coal still accounting for about 65% of power consumption by 2015, from about 70% currently. This is due to bottlenecks in renewable energy developments stemming from safety concerns surrounding nuclear power, post Fukishima in Japan and higher costs. Although the government should (or would like to) reconfigure to cleaner power output, a higher coal quality consumption target appears a quicker and easier method to manage emissions. This compares to other long term initiatives, such as carbon capture and power plant furnace upgrades. The timing looks strategic. A weak coal demand backdrop is giving the local power industry more flexibility on pricing and sourcing of supply. We note other recent structural changes in the China coal industry. In 2009, (also under a weak coal market) local authorities forced the closure or consolidation of many smaller private mines for safety concerns. This successful initiative ended up having little disruption on the domestic power industry. The softer demand conditions are also weighing on China coal producers, which we think is another motivation behind the proposed import ban. Shanxi coal industry profits fell almost 70% in the first four months of 2013. Coal companies are facing significant

Ash Imports Revised Imports Domestic (Sub-bit) Domestic (Lignite) 25% 20% 40% 40%

Sulphur Kcal/kg NAR 1% 1% 3% 3% 4,544 <4,000 3,584 2,870

Source: ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 9 of 20

TRADE IDEAS
IRON ORE Despite a cautious backdrop, we think too much downside has been priced into iron ore. We recommend a short term buy trade in a near term iron contract on the rising expectations of a relief rally in the underlying. Chinese steel prices have had a big influence, and the large (short) open interest position in this market now looks vulnerable to covering. A mild pick up Baltic Capesize shipping rates also suggests physical traders are starting to see value importing iron ore. We recommend waiting for Chinese investors to return tomorrow from a three day break - price in the downside in commodity markets over since the start of the week and enter the July iron swap contract $1.20/tonne below the current price level. Long July iron ore swap (TION3 Comdty) Entry: Buy @ USD108/t Target: USD115/t Stop Loss: USD104/t Timeframe: 2 months COTTON We maintain the view that the mid-March peak in cotton prices was the likely high for calendar year 2013. However despite retracing from these highs, physical cotton prices are at their least competitive level to polyester staple in 12 months. With implied option volatility for cotton historically low against both pre and post GFC periods we look to initiate a long put. We view the recent opportunistic, hand-to-mouth buying activity by spinning mills as an on-going feature of the cotton market in the second half. This will leave distinct periods of buying inactivity, where prices fall to the bottom of our forecast trading range of 78USc/lb. Long Dec 13 ICE Cotton Put Entry: Buy 82 strike @ 3.4 USc/lb Target: 6.0USc/lb Stop Loss: 1.0USc/lb Timeframe: 3 months FIGURE 12. ICE COTTON PRICE
USc/lb 8.0 7.0 6.0 5.0 4.0 3.0 Jan-13

FIGURE 11. CHINA REBAR OPEN INTEREST & IRON ORE PRICE
'000 contracts 3,000 2,500 2,000 1,500 1,000 500 0 Apr-09 Iron ore Price (RHS) US/tonne 200 Potential short covering 180 160 140 120 100 80 60 Apr-10 Apr-11 Apr-12 Apr-13 C hina Rebar C ontract (open interest)
Sources: Bloomberg, ANZ Commodity Strategy

Feb-13

Apr-13

May-13

Sources: Bloomberg, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 10 of 20

TECHNICAL PERSPECTIVES
THE DARK CLOUD TURNS TO A SILVER LINING ! ! ! A distinct basing structure has now developed A retest of USD20.70 cannot be denied, but the shift in trend suggests buying into dips Once a base is confirmed broad consolidation trading range should be defined during 2H13 break above USD23.00 could confirm the base and allow for a swift move to the relatively important USD24.00-80 zone. This would also test the channel which has contained the C-leg decline.
FIGURE 14. DAILY SILVER (LINEAR SCALE) WITH RSI & SLOW STOCHS.

Our last technical report focussed upon the risk of sharp falls should silver fail to regain levels above USD25.00. Rebounds in the first half of May duly faltered in the high USD24s and the subsequent slippage below the pivot of USD23.50 triggered a sharp flush to the top of the USD20.00-20.70 target zone. Momentum indicators in Figure 13 indicators now show that a potential base is developing. Although there is no classic divergence (when indicators display higher lows as the underlying instrument hits notable new lows), the spike off USD20.70 raises the possibility that the C-leg decline has been completed.
FIGURE 13. WEEKLY SILVER (LOGGED SCALE) WITH RSI & SLOW STOCHS.
Source: Bloomberg, ANZ Commodity Strategy

A break of the down channel may initiate calls for an impulsive rally, but the favoured profile is for a broad consolidation range to form under the USD26.25-30 retracement level, which (as previously noted) coincides with a series of lows seen since early 2011. DIVERGING PATH IN GOLD Gold faltered in front of USD1,500 and duly began to slide in May, but its fall was not as dynamic as that in silver. The failure to make a new low (despite the allure of USD1,300) as silver spiked below USD22.00 underscores the potential that the C-leg decline may be over.

Source: Bloomberg, ANZ Commodity Strategy

FIGURE 15. DAILY GOLD (LINEAR SCALE) WITH RSI & SLOW STOCHS.

Figure 13 also shows that a broad and deep, if violent, correction has been forming since the effective test of USD50.00 in mid-2011. Mays spiked low not only met an interim measured target, but also the top of the congestion range that developed into mid-2010, immediately prior to silvers near asymptotic acceleration towards USD50.00. Another slide to retest USD20.70 should not be denied, but this likely change in silvers trend suggests that the bias should now be to buying into dips, rather than the previous selling into rebounds. This also suggests that silver could form rebounds towards the USD26.00-50 area (which acted as such strong support) as a broad consolidation pattern develops during 2H13. The updated daily chart in Figure 14 highlights the single day spike below USD22.00. Once again, a slide below USD22.00-10 could still trigger a retest of the USD22.70 level (or even the deeper if now stale targets either side of USD20.00). However, as noted above, bias is now very much swinging to a base having already formed. Ideally dips should not break below USD22.20 now. A

Source: Bloomberg, ANZ Commodity Strategy

Rebounds may not be dynamic and a break of USD1,370 could still trigger a test of the USD1,245-1,300 area, but the bias would be to buy into further slippage as the bias is now for a USD1,370-1,500 trading range to develop. TIM RIDDELL

ANZ Commodity Call / 12 June 2013 / 11 of 20

COMMODITY PRICES (% CHANGE)

BASE METALS INVENTORIES

SPOT

1 MTH

3 MTH

6 MTH 12 MTH

YTD

SPOT

1 MTH

3 MTH

6 MTH 12 MTH

YTD

LONDON METALS EXCHANGE (UDS/lb, USD/t) Aluminium Copper Nickel Zinc Lead Tin SHANGHAI (RMB/t) Copper Aluminium Zinc Lead COMEX (USD/t) Copper 7,205 SPOT 1,383 1,456 21.7 1,502 758 SPOT (2.5) 1 MTH (4.5) 0.8 (9.3) 0.5 7.0 1 MTH (6.9) 3 MTH (12.4) (5.6) (25.3) (6.3) (3.2) 3 MTH (10.8) (0.5) (10.5) YTD (17.4) (8.6) (28.6) (2.4) 7.6 YTD 53,600 14,920 15,400 13,975 0.1 2.8 1.7 0.9 (4.7) 3.0 (0.7) (4.6) (6.0) (1.0) (1.3) (5.3) (2.8) (6.6) 1.5 (8.1) (5.9) (0.9) (1.9) (5.4) 0.86 3.27 6.79 0.85 0.98 9.52 1,903 7,198 14,978 1,869 2,154 20,990 3.3 (2.1) (2.0) 2.3 9.1 1.1 (1.0) (6.6) (10.2) (4.4) (1.8) (11.6) (8.8) (10.2) (12.7) (6.8) (2.1) (3.6) (2.3) (1.2) (11.2) 0.3 14.1 6.2 (6.7) (9.0) (11.9) (8.8) (7.0) (10.2)

LONDON METALS EXCHANGE (kt) Aluminium Copper Nickel Zinc Lead Tin SHANGHAI (kt) Copper Aluminium Zinc COMEX Copper OIL & GAS - US DOE (mbbls) Crude Gasoline Distillate Refinery utilisation (%) 391 219 123 88.4 SPOT (1.0) 1.3 6.5 4.7 1 MTH 3.7 (4.2) (0.7) 3.9 3 MTH 5.3 3.2 7.1 (2.4) 1.7 7.5 2.7 (2.9) 8.7 (3.1) (0.6) (2.2) YTD 77.7 (9.4) 3.2 19.2 34.3 9.9 181 426 288 (15.1) (8.8) (4.5) (19.8) (11.6) (11.9) (8.3) (7.9) (5.8) 37.0 33.1 (14.1) (11.4) (3.6) (7.3) 5,187 610 182 1,110 205 14 0.8 0.9 2.3 6.4 (16.4) 2.5 (0.0) 19.7 13.3 (7.1) (28.0) 6.8 0.0 139.0 31.6 (10.0) (42.5) 27.3 6.6 165.5 73.1 16.6 (40.6) 18.8 (0.5) 90.6 28.6 (8.9) (34.8) 13.9

PRECIOUS METALS
Gold (USD/oz) Gold (AUD/oz) Silver (USD/oz) Platinum (USD/oz) Palladium (USD/oz)

6 MTH 12 MTH (18.8) (10.4) (34.5) (6.5) 8.5 (13.2) (9.4) (24.0) 4.8 23.3

AGRICULTURE
CBOT (US/bu) Wheat

6 MTH 12 MTH

ENERGY
OIL & GAS (USD/bbl) WTI Cushing (US) Brent Crude (UK) Tapis (Asia) Gasoil 0.5% (Sing) Fuel Oil 180cst (Sing USD/t) THERMAL COAL (FOB USD/t) Newcastle Richards Bay Qinhuangdao

6 MTH 12 MTH

696 559 1,330 48.5 453 735 820 283 174 204 219 426 559 SPOT

(1.1) (12.2) (4.9) (1.4) 11.2 (3.1) 1.4 (1.6) (9.0) (2.4) 2.0 0.4 (13.8) 1 MTH

(0.1) (20.6) (9.6) (3.6) 4.0 0.1 3.5 8.4 (11.3) (11.5) (0.1) (1.3) (11.0) 3 MTH

(19.1) (24.2) (9.6) (5.1) 3.3 (19.2) (12.2) (7.5) (22.5) (24.1) (13.7) (3.8) (6.6)

10.5 (6.6) (0.2) (1.9) 5.3 12.0 7.8 34.5 1.5 (2.7) 4.2 1.9 (2.9)

(6.8) (17.9) (2.7) (2.7) 13.4 (8.6) (2.5) 1.8 (15.2) (16.3) (6.8) 0.2 (3.4) YTD

96.0 104.3 110.3 119.0 620.8 86.9 82.4 102.1 SPOT

(0.0) 0.9 1.0 0.8 0.2 (0.1) 0.9 1.0 1 MTH

4.4 (5.8) (6.0) (5.7) (3.5) (5.6) (1.4) (0.6) 3 MTH

11.8 (2.4) (0.7) (3.3) 3.0 (3.6) (6.4) (4.1)

14.2 4.7 1.1 5.5 4.2 (2.5) (1.7) (19.3)

4.6 (6.8) (3.8) (2.5) 1.5 (3.2) (8.5) (1.2) YTD

Corn Soybeans Soybean Oil (US/lb) Soybean Meal (USD/st) KCBOT (US/bu) HRW MGE (US/bu) HRS ASX (AUD/t) Wheat EURONEXT Liffe (/t) Wheat EURONEXT Paris (EUR/t) Wheat Corn Rapeseed ICE Winnipeg (CAD/t) Canola

OTHER
COKING COAL (USD/t) Australia FOB China CIF India CIF STEEL (USD/t) HRC US (Short ton) HRC Russia HRC China OTHER METALS Uranium (USD/lb) Alumina (USD/t) Cobalt (USD/lb) Molybdenum (USD/lb) Coke (USD/t) Iron Ore Spot (USDt)

6 MTH 12 MTH

139.8 149.1 155.8 610 518 510 40.4 330 13.8 10.8 230 111 SPOT 812 1,352 764 SPOT 0.950 0.789 81.7 1.322 97.6

(5.0) (8.3) (4.9) 0.0 (4.2) (5.1) (0.3) 0.5 1.9 (3.4) (9.8) (14.4) 1 MTH (8.1) (2.2) (23.1) 1 MTH (5.3) (4.9) (1.8) 1.8 (4.0)

(16.4) (17.7) (14.6) 4.7 (10.8) (15.7) (3.8) (4.5) 11.1 (3.1) (17.9) (24.2) 3 MTH (3.7) 7.1 (32.0) 3 MTH (7.2) (4.0) (1.2) 1.6 1.6

(11.5) (13.3) (10.1) 3.4 (2.8) (5.6) (4.9) 0.4 19.8 (4.9) (30.3) (8.3)

(36.6) (35.5) (34.3) (3.9) (12.7) (16.4) (19.6) 3.7 (8.0) (19.7) (37.0) (16.2)

(12.3) (13.7) (11.2) 4.7 (2.8) (8.1) (10.2) (0.7) 19.8 (7.3) (30.3) (23.5) YTD (50.0) (54.2) (52.8) YTD (9.7) (5.2) 1.6 0.8 12.3

SOFTS/PALM
ICE NY (US/lb) Sugar #11 Coffee Cocoa Cotton EURONEXT Liffe (USD/t) Sugar Coffee Cocoa (/t) MDEX (MYR/t) Crude Palm Oil

6 MTH 12 MTH

16.4 127 2,368 85 481 1,848 1,555 2,457 SPOT 1,643 288 427 3,153 15

(5.7) (12.1) 3.0 (1.9) (1.6) (9.0) 1.8 6.0 1 MTH 0.6 (0.3) 0.5 (0.3) 20.3

(12.4) (11.9) 11.7 (2.3) (9.9) (15.3) 7.9 0.4 3 MTH 5.9 (2.3) (3.9) (5.7) 20.3

(14.5) (17.5) (1.8) 15.0 (6.6) (2.5) 0.6 7.0

(17.8) (19.3) 8.4 21.4 (16.6) (10.9) 1.6 (17.4)

(12.8) (13.8) 6.7 13.1 (5.7) (5.1) 9.4 0.5 YTD 12.1 (2.2) (2.7) (9.6) 9.5

FREIGHT
Baltic Freight Rate Baltic Capesize Baltic Panamax

6 MTH 12 MTH (15.9) (26.2) (18.4) (7.4) 10.5 (16.4)

KEY CURRENCIES
AUD/USD - Aussie NZD/USD - Kiwi DXY - USD trade weighted EUR/USD - Euro USD/JPY - Yen

6 MTH 12 MTH (9.4) (5.2) 1.6 2.3 18.3 (4.2) 2.5 (1.0) 5.6 22.7

KEY INDICES
S&P 500 CRB Index S&P GSCI Agri Index LME Metals Index Market Volatility Index (VIX

6 MTH 12 MTH 15.9 (2.4) (10.4) (9.0) (4.8) 24.0 5.4 6.1 (1.1) (28.7)

Note: Prices as of 7 June 2013 Sources: Bloomberg, globalCOAL, FIS, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 12 of 20

CFTC DATA
SPOT 1 WK 1 MTH 3 MTH 6 MTH 12 MTH SPOT 1 WK 1 MTH 3 MTH 6 MTH 12 MTH

METALS
GOLD (t) Long Short Net Position Open Interest SILVER (t) Long Short Net Position Open Interest COPPER (kt) Long Short Net Position Open Interest

ACTUAL
(USD/lb, USD/t)

ENERGY
WTI CRUDE OIL (mbbls)

ACTUAL

524 322 202 2,053

524 352 172 2,152

535 268 267 2,332

613 259 353 1,998

636 100 536 1,898

580 177 403 2,190

Long Short Net Position Open Interest

392 105 287 1,741

394 108 286 1,745

388 130 258 1,771

390 110 280 1,654

363 124 239 1,549

336 125 211 1,457

NATURAL GAS (1000 mmbtu) 5,271 4,628 643 31,709 5,111 4,652 459 31,236 5,201 3,395 1,805 30,228 5,662 2,366 3,297 27,687 7,908 969 6,938 26,927 4,500 2,437 2,063 25,016 Long Short Net Position Open Interest 3,463 4,083 (620) 14,993 3,464 4,081 (617) 15,331 3,726 4,226 (500) 16,037 2,507 3,834 (1,328) 12,286 2,423 3,633 (1,210) 11,867 2,525 3,509 (984) 12,394

RBOB GASOLINE (m gallons) 471 579 (108) 1,925 440 589 (149) 1,896 491 756 (265) 1,899 530 539 (8) 1,831 502 400 102 1,636 457 645 (189) 1,773 Long Short Net Position Open Interest 3,006 1,128 1,878 11,391 3,383 1,515 1,868 12,011 3,162 1,250 1,912 11,965 5,293 1,474 3,819 14,627 4,644 1,533 3,111 11,792 3,561 599 2,963 13,210

AGRICULTURE
CBOT WHEAT (m bu) Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest CBOT CORN (m bu) Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest CBOT SOYBEANS (m bu) Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest CBOT SOYBEAN OIL (kt) Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest

SPOT

1 WK

1 MTH

3 MTH

6 MTH 12 MTH

ACTUAL

SOFTS
ICE SUGAR (kt)

SPOT

1 WK

1 MTH

3 MTH

6 MTH 12 MTH

ACTUAL

579 640 (62) 930 179 751 2,733

549 669 (120) 949 180 769 2,686

588 591 (3) 926 165 761 2,675

536 702 (166) 866 139 727 2,719

598 457 141 1,049 141 908 2,543

548 590 (42) 1,209 215 994 2,753

Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest ICE COFFEE (kt)

11,643 12,724 (1,081) 17,186 1,432 15,754 55,830

11,399 12,476 (1,077) 16,951 1,180 15,771 53,049

10,647 11,015 (368) 16,570 833 15,736 47,735

9,809 10,090 (281) 17,006 792 16,214 44,720

8,309 6,370 1,939 15,130 1,258 13,872 45,279

9,276 5,750 3,525 14,048 2,016 12,032 49,217

1,815 1,126 688 2,215 303 1,912 8,785

1,870 1,109 761 2,195 294 1,900 8,833

1,636 1,089 546 2,262 290 1,972 8,472

1,627 1,070 556 2,127 215 1,911 8,168

1,999 391 1,609 1,981 162 1,818 7,657

1,300 850 450 2,405 413 1,992 8,482

Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest ICE COCOA (kt)

785 1,141 (356) 1,010 65 945 4,107

726 1,054 (328) 1,011 59 953 4,000

736 1,042 (306) 1,030 63 968 3,630

757 1,108 (351) 998 51 947 3,544

602 960 (358) 799 42 757 3,354

482 666 (184) 830 192 637 4,185

350 561 (211) 774 145 629 4,471

376 512 (136) 762 140 622 4,229

354 599 (245) 758 95 664 3,655

339 508 (169) 723 139 583 3,986

271 496 (225) 921 264 657 4,246

299 485 (186) 1,061 306 756 5,412

Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest ICE COTTON (k bales)

747 256 491 360 34 326 2,402

737 250 487 352 17 335 2,405

775 311 464 367 19 348 2,346

586 423 162 343 11 332 2,099

634 187 448 352 2 350 2,284

273 390 (117) 420 68 352 2,007

3,150 3,486 (336) 2,740 348 2,392 11,097

2,989 3,640 (651) 2,745 301 2,444 10,804

3,202 3,217 (15) 2,581 170 2,411 10,221

2,918 3,822 (903) 2,693 211 2,482 9,663

3,255 2,488 767 2,883 187 2,696 9,834

2,982 3,210 (228) 3,165 796 2,370 12,999

Non-Com Long Non-Com Short Net Non-Com Position Index Long Index Short Net Index Position Open Interest

7,290 1,441 5,848 8,034 591 7,443 27,281

7,911 1,271 6,640 7,799 363 7,436 27,478

7,642 1,431 6,211 8,215 317 7,898 24,518

9,251 1,390 7,860 7,668 381 7,287 26,175

6,094 4,058 2,036 7,509 333 7,176 22,397

5,902 4,875 1,026 7,948 868 7,080 34,676

Note: Data as of 4 June 2013 Sources: Bloo Aprilg, globalCOAL, FIS, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 13 of 20

CALENDAR HEATMAP
CHINA Foreign Direct Investment (FDI) Leading Index PMI Manufacturing Exports Imports Producer Price Index (PPI) Consumer Price Index (CPI) New Yuan Loans Money Supply - M2 Fixed Asset Investment (FAI) Retail Sales Industrial Production US Factory Orders FOMC Rate Decision Retail Sales (Less Autos) Producer Price Index (PPI) NY Empire Manufacturing Industrial Production Consumer Price Index (CPI) Building Permits Housing Starts Philadelphia Fed Leading Indicators Durable Goods Orders New Home Sales Dallas Fed GDP Uni of Michigan Confidence Chicago PMI ISM Manufacturing Vehicle Sales (Total) Change in Nonfarm Payrolls EURO-ZONE Retail Sales Industrial Production Zew Survey (Econ Sentiment) GDP Economic Confidence Consumer Price Index (CPI) Unemployment Rate PMI Manufacturing ECB Refinancing Rate JAPAN BoJ Target Rate Tankan Lge Manufacturers Index Consumer Confidence Industrial Production Vehicle Sales Leading Index GDP Machine Tool Orders UNIT % YoY % MoM Points % YoY % YoY % YoY % YoY RMB bn % YoY % YTD YoY % YoY % YoY UNIT % YoY % % YoY % YoY % YoY % MoM % YoY '000s '000s % YoY % YoY % YoY '000s % YoY % YoY Points Points Points '000,000s '000s UNIT % YoY % YoY Points % YoY Points % YoY % YoY Points % UNIT % Points Points % YoY % YoY Points % QoQ % YoY PERIOD APR APR MAY MAY MAY MAY MAY MAY MAY MAY MAY MAY PERIOD MAR MAY APR APR MAY APR APR APR APR MAY APR APR APR MAY 1Q MAY MAY MAY MAY MAY PERIOD APR MAR MAY 1Q MAY MAY APR MAY MAY PERIOD APR 1Q APR APR MAY APR 1Q APR MARKET 6.2 50.0 7.4 6.6 -2.5 2.5 815 15.9 20.5 12.9 9.4 MARKET -2.9 0.25 -0.2 -0.6 4.0 -0.2 -0.3 941 970 2.0 0.2 1.5 425 -10.0 2.5 83.7 50.0 51.0 15.1 163 MARKET -0.8 -2.0 -0.1 89.4 1.1 12.2 47.8 0.50 MARKET 0.1 -7.0 45.5 -3.4 98.8 0.9 -4.3 ACTUAL 0.4 99.8 50.8 1.0 -0.3 -2.9 2.1 667 15.8 20.4 12.9 9.2 ACTUAL -4.0 0.25 -0.1 -0.7 -1.4 -0.5 -0.4 1017 853 -5.2 0.6 3.3 454 -10.5 2.4 84.5 58.7 49.0 15.2 175 ACTUAL -1.1 -1.7 27.6 -0.2 89.4 1.2 12.2 48.3 0.50 ACTUAL 0.1 -8.0 44.5 -2.3 -7.3 99.3 1.0 -1.1 PREVIOUS 5.7 100.0 50.6 14.7 16.8 -2.6 3.2 793 16.1 20.6 12.8 9.3 PREVIOUS 3.9 0.25 -0.3 -0.6 3.1 0.3 -0.2 890 1021 1.3 -0.2 -5.9 444 -15.6 2.5 83.7 49.0 50.7 14.9 149 PREVIOUS -2.2 -3.2 24.9 -0.6 88.6 1.0 12.1 47.8 0.50 PREVIOUS 0.1 -12.0 44.8 -6.7 2.0 98.0 0.9 2.4 DATE 16-May 28-May 1-Jun 8-Jun 8-Jun 9-Jun 9-Jun 9-Jun 9-Jun 9-Jun 9-Jun 9-Jun DATE 3-Apr 2-May 13-May 15-May 15-May 15-May 16-May 16-May 16-May 17-May 18-May 24-May 24-May 29-May 30-May 31-May 31-May 4-Jun 4-Jun 7-Jun DATE 6-May 14-May 14-May 15-May 30-May 31-May 31-May 3-Jun 6-Jun DATE 7-Mar 1-Apr 15-May 31-May 3-Jun 7-Jun 10-Jun 12-Jun

Note: Blue is stronger than expected (+5%), orange is weaker than expected release (-5%). Source: Bloomberg, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 14 of 20

FORWARD CURVES
USD/t 8,100 8,000 7,900 7,800 7,700 7,600 7,500 7,400 7,300 7,200 1M USD/t 2,350 2,300 2,250 2,200 2,150 2,100 2,050 2,000 1M 6M 1Y 2Y 3Y 6M 1Y 2Y 3Y

COPPER

USD/t 2,400 2,300 2,200 2,100 2,000 1,900 1,800 1M USD/oz 1,750 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 1M 6M 6M

ALUMINIUM

USD/t 18,000 17,500 17,000 16,500 16,000 15,500 15,000 14,500

NICKEL

USD/t 2,250 2,200 2,150 2,100 2,050 2,000 1,950 1,900 1,850

ZINC

1Y

2Y

3Y

1M USD/oz 34.0 32.0 30.0 28.0 26.0 24.0 22.0

6M

1Y

2Y

3Y

1M USD/oz 1,620 1,600 1,580 1,560 1,540 1,520 1,500

6M

1Y

2Y

3Y

LEAD

GOLD

SILVER

PLATINUM

1Y

2Y

3Y

1M 6M

1Y

2Y

3Y

1M

6M

1Y

USD/oz 770 760 750 740 730 720 710 700 1M CNY/t 1,250

PALLADIUM

USD/bbl 96 94 92 90 88 86 84

WTI

USD/bbl 106 104 102 100 98 96 94 92

BRENT

USD/t 104 102 100 98 96 94 92 90 88 86 84 82 3Y US/lb 20.5 20.0 19.5 19.0 18.5 18.0 17.5 17.0 16.5 16.0

NEWC THERMAL COAL

6M

1Y

1M USD/t 130 125

6M

1Y

2Y

3Y CNY/t 3,800 3,700 3,600

1M

6M

1Y

2Y

1M

6M

1Y

COKING COAL

IRON ORE

CHINA REBAR

RAW SUGAR

TBC

120 115 110 3,500 3,400 1M USD/t 2,460 2,440 2,420 2,400 2,380 2,360 2,340 6M 1Y US/lb 88 86 84 82 80 78 76 74 1M 6M 1Y 2Y 1M 6M 1Y 2Y 3Y 1M 6M 1Y

1,200 1M USD/lb 190 180 170 160 150 140 130 120 1M US/bu 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1M
CURRENT

105 6M

1M MYR/t 2,550 2,500 2,450 2,400 2,350 2,300 2,250

6M

1Y

2Y

3Y

COFFEE

COCOA

COTTON

PALM OIL

6M

1Y

2Y

3Y

1M

6M

1Y

2Y

SOYBEANS

US/bu 900 850 800 750 700 650

CHICAGO WHEAT

US/bu 750 700 650 600 550 500

CORN

Points 83.0 82.5 82.0 81.5 81.0 80.5 80.0

USD DXY

6M

1Y
LAST MONTH

2Y

1M

6M

1Y

2Y

1M

6M

1Y

2Y

3Y

1M

6M

LAST SIX MONTHS

Note: Prices as of 7 June 2013 Sources: Bloomberg, globalCOAL, FIS, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 15 of 20

MOVING AVERAGES
USD/t 10,000 9,500 9,000 8,500 8,000 7,500 7,000 6,500 6,000 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/t 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/oz 900 800 700 600 500 400 300 Jan-10 USD/t 350 300 250 200 150 100 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/lb 300 260 220 180 140 100 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 US/bu 1,800 1,600 1,400 1,200 1,000 800 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 1,300 1,100 900 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/bbl 120 110 100 90 80 70 60 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/t 200 180 160 140 120 100 80 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/t 3,700 3,500 3,300 3,100 2,900 2,700 2,500 2,300 2,100 1,900 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 US/bu 1,000 900 800 700 600 500 400 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13

COPPER

USD/t 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 1,900

ALUMINIUM

USD/t 30,000 28,000 26,000 24,000 22,000 20,000 18,000 16,000

NICKEL

USD/t 2,600 2,400 2,200 2,000 1,800 1,600

ZINC

1,800 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/oz 1,900 1,700 1,500

14,000 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD$/oz 48 42 36 30 24 18 12 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/bbl 130 120 110 100 90 80 70 60 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/t 5,000 4,800 4,600 4,400 4,200 4,000 3,800 3,600 3,400 3,200 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 US/lb 220 200 180 160 140 120 100 80 60 40 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 US/bu 850 750 650 550 450 350 250 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13

1,400 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/oz 1,900 1,800 1,700 1,600 1,500 1,400 1,300 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 USD/t 140 130 120 110 100 90 80 70 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 US/lb 35 30 25 20 15 10 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 MYR/t 4,000 3,600 3,200 2,800 2,400 2,000 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Points 90 88 86 84 82 80 78 76 74 72 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13

LEAD

GOLD

SILVER

PLATINUM

PALLADIUM

WTI

BRENT

THERMAL COAL

Oct-10

Jul-11

Apr-12

COKING COAL

IRON ORE

HOT ROLLED STEEL

SUGAR

COFFEE

COCOA

COTTON

PALM OIL

SOYBEANS

WHEAT

CORN

USD DXY

Note: Prices as of 7 June 2013 Sources: Bloomberg, globalCOAL, FIS, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 16 of 20

ANZ PRICE FORECASTS

ANZ FORECAST TABLE
COMMODITY
BASE METALS Aluminium Copper Nickel Zinc Lead Tin Aluminium Copper Nickel Zinc Lead Tin PRECIOUS METALS Gold Platinum Palladium Silver ENERGY WTI NYMEX Dated Brent Uranium BULKS Iron ore Spot (CIF China, fines) Coking coal - Premium hard Coking coal - Hard Coking coal - Semi-soft Newc Thermal Coal (Spot) Newc Thermal Coal (JPY Contract) OTHER METALS Alumina Molybdenum Cobalt AGRICULTURE Corn Wheat Soybeans Cotton Sugar Palm Oil US/bu US/bu US/bu US/lb US/lb MYR/t 711 742 1,437 90 18 2,473 626 705 1,418 92 17 2,341 555 632 1,300 85 16 2,400 516 599 1,200 90 17 2,400 544 638 1,185 90 17 2,400 551 637 1,116 88 17 2,400 491 680 1,104 88 17 2,400 602 669 1,339 89 17 2,404 520 658 1,150 90 17 2,400 550 661 1,150 95 20 2,400 550 661 1,150 95 20 2,450 550 661 1,150 95 20 2,450 USD/t USD/lb USD/lb 234 10.8 12.0 240 11.3 13.0 248 11.8 13.5 253 12.2 14.0 262 13.0 14.5 264 13.5 14.8 267 14.0 15.0 253 12.2 14.0 273 14.0 15.2 281 14.5 15.6 284 14.8 15.8 289 15.0 15.0 USD/t USD/t USD/t USD/t USD/t USD/t 137 138 165 155 117 88 115 130 128 172 157 122 88 95 124 121 155 140 110 91 95 127 116 170 155 125 95 95 128 118 180 160 137 97 95 128 119 185 165 142 100 98 127 118 185 165 142 102 98 127 116 170 155 125 95 95 125 117 190 170 147 104 98 118 110 185 165 142 110 108 115 105 180 160 137 110 110 100 90 175 155 132 100 100 USD/bbl USD/bbl USD/lb 98 109 42 95 104 42 97 106 43 100 109 45 103 112 46 104 113 46 105 115 48 100 109 45 102 112 50 94 102 62 92 98 65 90 95 70 USD/oz USD/oz USD/oz USD/oz 1,599 1,572 772 28.5 1,360 1,510 710 22.5 1,320 1,560 740 22.2 1,350 1,620 780 23.2 1,420 1,660 800 24.5 1,460 1,700 825 25.2 1,520 1,720 830 26.5 1,350 1,620 780 23.2 1,560 1,730 835 27.6 1,535 1,690 810 27.5 1,480 1,630 765 27.0 1,450 1,480 700 26.5 USD/lb USD/lb USD/lb USD/lb USD/lb USD/lb USD/t USD/t USD/t USD/t USD/t USD/t 0.85 3.41 7.53 0.85 0.95 10.52 1,880 7,510 1,860 2,090 0.87 3.30 7.25 0.88 0.92 9.50 1,920 7,270 1,940 2,030 0.90 3.45 7.50 0.90 0.95 9.90 1,980 7,610 1,980 2,090 0.92 3.60 7.80 0.93 0.97 10.10 2,030 7,940 2,050 2,140 0.95 3.70 8.20 0.96 1.00 10.20 2,090 8,160 2,120 2,200 0.96 3.80 8.50 0.99 1.02 10.40 2,120 8,380 2,180 2,250 0.97 3.80 8.80 1.03 1.05 10.40 2,140 8,380 2,270 2,310 0.92 3.60 7.80 0.93 0.97 10.10 2,030 7,940 2,050 2,140 0.99 3.70 8.80 1.06 1.07 10.20 2,180 8,160 2,340 2,360 1.02 2.97 8.50 1.09 1.07 9.10 2,250 6,550 2,400 2,360 1.04 2.85 8.20 1.04 1.02 8.40 2,290 6,280 2,290 2,250 1.05 2.80 8.00 1.02 1.00 8.00 2,310 6,170 2,250 2,200 Unit Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 2013F 2014F 2015F 2016F LT

16,590 15,980 16,530 17,200 18,080 18,740 19,400

17,200 19,400 18,740 18,080 17,640

23,190 20,940 21,820 22,270 22,480 22,930 22,930

22,270 22,490 20,060 18,520 17,640

Iron ore Contract (FOB Aust, fines) USD/t

Note 1: Base/precious metals, energy and bulk forecasts are end of period prices; Agriculture forecasts are average prices Note 2: Historical data are actuals Sources: Bloomberg, ANZ Commodity Strategy

ANZ Commodity Call / 12 June 2013 / 17 of 20

ANZ CONTACTS

ANZ COMMODITY RESEARCH

Mark Pervan Paul Deane Natalie Rampono Victor Thianpiriya Global Head of Commodity Research Senior Agricultural Economist Commodity Strategist Commodity Strategist +61 3 8655 9243 +61 3 8655 9078 +61 3 8655 9258 +65 6681 8869 Mark.Pervan@anz.com Paul.Deane@anz.com Natalie.Rampono@anz.com Victor.Thianpiriya@anz.com

ANZ ASIA RESEARCH

Tim Riddell Head of Global Markets Research, Asia +65 6681 8718 TimothyJohn.Riddell@anz.com

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