jpmorgan metals

8/8/2019 JPMorgan Metals

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Asia Pacific Equity Research07 May 2010

The LodestoneNon-exchange traded commodities out-performexchange traded

Metal & Mining

Pinakin Parekh, CFAAC

(91-22) 6157-3588

[email protected]

Neha Manpuria(91-22) 6157-3589

[email protected]

J.P. Morgan India Private Limited

See page 23 for analyst certification and important disclosures, includi ng non-US analyst d isclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm mhave a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making thinvestment decision.

J.P. Morgan Metal Index

50%

150%

250%

350%

450%

Jan-06 Apr-07 Jul-08 Oct-09

Source: Bloomberg. Prices as of May 07, 2010.

Summary of Metal Coverage

Rs/share Rating TP Price

SAIL N 215 211Tata Steel N 605 576JSW Steel UW 880 1155

Sterlite OW 840 740Hindalco UW 138 164Nalco UW 260 402

Source: Bloomberg and J.P. Morgan estimates. Pric

as of 6 May 2010.

Equity correction sharply higher than under lying commodities:Commodity equities across the region declined by 10-15%, sharply ahead of

the underlying commodites. Our conversations with investors indicate no rush

to get back as of now, with most worried on the degree of FAI slowdown in

China over the next 2-4 quarters.

Non-exchange traded commodities out-perform exchange traded: Whilebase metals across the LME complex declined between 4-13% (Nickel saw

the biggest decline), non-exchange traded commodites like steel, iron ore and

coal had more muted price declines. Spot iron ore has inched down 1%, but so

far there has been no material impact from the easing of transportation in

Orissa. Spot steel export prices out of both Ukraine and China have seen

modest declines of $20/MT for commercial grade HRC, slipping below the

$700/MT mark, but importantly traded scrap prices have been stable(reflecting more the lack of volumes?). We believe Indian import HRC prices

have also declined and expect domestic integrated steel companies to offer

discounts/rebates on flat steel over the course of the month. Spot steel prices

(flat products) in China have moved up.

Xstrata highlights continued tight coking coal market with contracts inthe $200-270/MT range: J.P. Morgan Cazenove mining analyst Amos

Fletcher in his update on Xstrata (dated 4th May 2010) highlighted that

Xstrata has secured Q2 coking coal contracts prices at the upper end of a

$200-270/MT range, achieving a premium to BHPB. Spot coking coal (an

illiquid market) has moved up to $250/MT. J.P. Morgan global coal team

expects Q2 coking coal settlement at $240/MT with prices falling to $220/MT

in Q4 CY10E (driven more by seasonal weakness). Vale gives a peak into the quaterly iron ore settlement dynamics : J.P.

Morgan Latam analyst Rodolfo De Angele in the update on Vale (dated 5th

May, 2010) highligted Vales new pricing mechanism. As per Rodolfo, all of

its (Vale) clients have agreed on a permanent or provisional basis to move

from contract to index-based pricing. Prices will be based on a three-month

average of index prices for the period ending one month before the new

quarter. This should translate into a hike of ~90% in prices compared to last

years contract and ~65% to 1Q10 realized prices.

Domestic demand in India going through a soft patch: Cement salesnumbers for the month of April have showed a higher than normal m/m

decline. This ties in what we have been hearing from our channel checks of

some slowdown seen across steel and cement since April (and has continuedso far into May). We believe steel is also seeing some de-stocking in the

domestic markets, as apparent demand was very strong in Feb-March (buyers

likely rushed before the new raw material contracts came into force) and with

spot steel prices softening we see buyers possibly staying away from large

ordering.


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Pinakin Parekh, CFA(91-22) [email protected]

Table 2: Key raw material prices and percentage change (Weekly, monthly and annuall y)

Costs 06-May-10 % WoW % MoM % YoY

China Iron Ore Fines ($/MT) - CFR 185 -1.1% 8.8% 189.1%China Domestic Iron Ore (Rmb/MT) 1202 -3.1% 23.1% 122.6%China Iron Ore Inventories 6807 -0.9% -4.9% -1.1%China Steel Inventories 795 0.0% -7.2% 64.0%

Ferro-Chrome China Spot (Rmb/MT) 9700 0.0% 7.8% 56.5%Ferro-Chrome 1.5% Si European Destination ($/LB) 1.40 0.0% 7.7% 100.0%

Newcastle (6700kcal) Thermal Coal ($/MT) 108 1.5% 10.7% 56.7%Richards Bay (6000kcal) Coal Price ($/MT) 96 5.5% 14.2% 63.7%Qinhuangdao (6800kcal) Coal Price ($/MT) 108 2.1% 3.2% 17.0%China Coke Export Prices ($/MT) 360 0.0% 2.9% 63.6%China Domestic Coking Coal 1610 -4.7% -4.7% 49.8%

Europe Domestic Shredded Scrap (Euro/MT) 304 -3.6% 19.1% 109.5%East Asia Import HMS 1/2 80/20 ($/MT) 440 -5.4% -3.3% 67.6%N. America Domestic Shredded Scrap ($/long ton) 395 0.0% 0.0% 137.6%

China H Scrap (RMB/T) 3375 2.3% 17.4% 47.1%Tokyo H2 Scrap (Yen/T) 39500 1.3% 25.4% 132.4%HMS 1 & 2 Scrap Rotterdam Export ($/tonne) 367 0.0% -8.3% 59.6%

Baltic Dry Index 3468 3.2% 15.9% 82.8%Alumina ($/MT) 335 0.0% 0.0% 55.8%

Source: Bloomberg, J.P. Morgan.

Figure 2: Iron Ore Pric es for Variou s Grades ($/MT)

40

90

140

190

Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10

63% Fe Content 62% Fe Content 58% Fe Content

Source: Steel Business Briefing, Metal Bulletin, J.P. Morgan Estimates.

Table 3: ChinaNet export (impo rt) of iro n ore (MT)

Mar-09 Mar-10 % Chang e YTD 2009 YTD 2010 % Chang eChine net import 49.4 59.0 19.5% 131.6 155.0 17.8%China Import Breakup

Mar-09 Mar-10 % Chang e YTD 2009 YTD 2010 % Change

Australia 19.6 24.0 22.3% 53.6 64.6 20.5%Brazil 9.8 11.8 19.7% 22.3 31.0 39.2%India 12.9 13.5 4.1% 34.2 33.3 -2.6%South Africa 3.1 2.1 -32.3% 6.3 6.1 -2.2%Others 6.5 7.6 16.7% 15.3 20.1 31.2%

Source: China Customs.

Iron ore prices declined during theweek after the recent high of $192.Coal price remained above the

$100 levels, increasing nearly 1.5%

w/w.

Scrap prices declined in the last

week in most regions. The BDIindex also increased 3% from last

week.

Prices of lower grade iron oredeclined during the week, after

weeks of sharp increases.

However, prices of higher gradeore had modest increase.


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Figure 3: Implied Iron Ore Prices fo r Chinese Import From Various Regions ($/MT)

40.0

90.0

140.0

190.0

Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09

India Australia Brazil

Source: Bloomberg and J.P. Morgan calculations.

Metal News Tracker

Steel

ArcelorMittal sees debt threat on steel demand in EuropeA senior executive of ArcelorMittal told a Metal Bulletin iron ore conference that

steel demand in Europe could be hit by the debt problems in the Euro zone, but

would not have a huge impact on the overall growth forecasts. Mr Bill Scotting head

of strategy of ArcelorMittal said This thing could impact Europe a little on the

downside. But it will not have a huge impact on the forecasts out there. He added

that The concerns of debt, both government and consumer, this is what's behind our

expectations of relatively low growth in these developed world countries. (Reuters)

Raw Material Steel

Iron Ore Quarterly Accords Are Here to Stay, ArcelorMittal SaysArcelorMittal, the largest steelmaker, said quarterly iron-ore supply contracts, which

replaced four-decade-old annual benchmark prices, are here to stay. Never say

never, but it seems that well see quarterly contracts from now on, Bill Scotting,

head of strategy at ArcelorMittal, said in an interview. In a separate report, Vale said

all its iron-ore customers have acceded to a new pricing system and that the new

contracts will create greater transparency in the market. The company has reached

either permanent or provisional agreements to move existing annual contracts to a

quarterly index-based system for 100 percent of the sales volumes under contracts,

Vale said. Contracts will now be based on a three-month average of price indexes for

the period ending one month before the onset of the new quarter, Vale said. State

owned Chinese raw materials buyer Sinosteel sees iron ore imports to China rising

by 5% in 2010 to 660 million tonnes. (Bloomberg)

Orissa lifts ban on mineral transportation by railThe Orissa government on Saturday lifted prohibitory orders on three railway sidings

and allowed minerals movement by rail to restart. At least five rakes from the sidings

in mineral rich Keonjhar district left for their destination on Sunday. Movement of

minerals had come to a halt since March 5, 2010 as the Keonjhar district

administration promulgated Section 144 of the CrPC in and around the premise of

three railway sidingsBarbil, Bansapani and Jhurudi. The government action came

after detection of large-scale illegal movement of minerals from the mines by railway

rakes from these sidings. Joda deputy director mines (DDM) Umesh Jena said the

Iron ore imports from Indiacontinued to increase despite tight

supply in the eastern and southern

mining regions.


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five detained rakes have been released and left for West Bengal and Paradip port.

The illegally mined mineral has been seized by the mines department, he said,

adding, permissions are being given for the remaining 1.98 lakh tonne fortransporation by railway rakes. The state government and railways have recently

arrived at an agreement to go in for joint verification of ore transportation from

railway sidings. As per the new mechanism, the railway rakes would be allotted to

the consignee only on the recommendation of the DDM. Moreover, the railway

authorities would receive the minerals at the sidings only after verification of the

transit permit. (Financial Express)

Supply of coking coal remains fragile - CentennialAustralian producer of coal Centennial Coal Co said that global supply remains

fragile and predicted contract prices will rise in the second quarter. Mr Tony Macko

GM corporate affairs of Centennial said that demand for steelmaking coal is rising as

the global industry recovers a presentation filed to the Australian stock exchange.

Supplies of thermal coal, burned by power stations, remain tight. (Bloomberg)

Base Metal

Physical aluminium premiums pick up a touch in AsiaPlatts reports that the Korean Public Procurement Service has issued a tender seeking

to buy non-Western grade primary aluminium Thursday and awarded it to MetalPark

which had offered $123/mt plus London Metal Exchange cash CIF Incheon, the

agency said. The premiums were higher than the recent PPS tender for non-Western

aluminium on March 4 that settled at $94/mt plus LME cash CIF. (Platts)

Table 4: Base Metal Product ion in Chin a

Mar-10 Feb-10 Mar-09 % M/M % Y/Y YTD 2010 YTD 2009 % Y/Y

Copper 358,000 358,000 319,000 0% 12% 1,060,000 925,000 15%Aluminum 1,364,000 1,308,000 902,000 4% 51% 3,934,000 2,683,000 47%Lead 309,000 238,000 335,000 30% -8% 831,000 717,000 16%Zinc 421,000 363,000 344,000 16% 22% 1,160,000 844,000 37%Tin 12,100 9,700 10,600 25% 14% 32,400 20,300 60%Nickel 16,300 13,700 16,100 19% 1% 44,500 51,500 -14%Alumina 2,522,000 2,358,000 1,674,000 7% 51% 7,387,000 4,904,000 51%CONCENTRATECopper 93,000 90,000 79,900 3% 16% 263,000 207,400 27%Lead 163,000 90,000 107,600 81% 51% 358,000 222,900 61%Zinc 294,000 192,000 217,800 53% 35% 710,000 459,800 54%PRODUCTSCopper 888,000 593,000 815,000 50% 9% 2,218,000 1,909,000 16%Aluminum 1,655,000 1,563,000 1,362,000 6% 22% 4,636,000 3,379,000 37%

Source: Bloomberg.

Table 5: China's Iron Ore and Coal Production and Trade Summary (in Mn tonn e)Mar-09 Mar-10 % chang e YTD 2009 YTD 2010 % chang e

Iron OreImport 52.1 59.0 13.3% 131.6 155.0 17.8%Export 0.0 0.0 -86.1% 0.0 0.0 -75.1%Production 61.7 61.5 -0.3% 167.1 185.9 11.2%CoalImport 3.0 16.1 437.9% 40.8 126.6 210.1%Export 3.7 1.8 -50.4% 45.4 22.4 -50.7%Production 172.3 256.1 48.6% 2,585.7 2,984.0 15.4%

Source: Bloomberg.


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Table 6: LMEPrices and inventory ch anges

US$/MT, %

LME $/MT 6-May-10 % WoW % MoM % YoYAluminum 2,072 -4% -11% 37%Copper 6,912 -6% -12% 53%Lead 1,970 -11% -10% 41%Nickel 21,985 -13% -12% 84%Zinc 2,081 -7% -12% 38%LME Inventor ies 6-May-10 % WoW % MoM % YoYAluminum 4,511,675 -1% -2% 19%Copper 492,700 -2% -4% 25%Lead 182,725 1% 4% 153%Nickel 145,446 0% -7% 28%Zinc 572,475 5% 5% 74%


Table 7: SHFEPrices and in ventory changes

US$/MT, %

SHFE 6-May-10 % WoW % MoM % YoYAluminum 15,580 -2% -5% 22%Copper 56,550 -3% -8% 44%Zinc 17,200 -5% -9% 34%Aluminum (In USD) 2,282 -2% -5% 21%Copper (In USD) 8,284 -3% -8% 44%Zinc (In USD) 2,520 -5% -9% 34%SHFE Inventor ies 6-May-10 % WoW % MoM % YoYAluminum 390,980 0% 12% 1070%Copper 79,232 -6% 52% 1147%Zinc 242,622 0% 14% 784%


Figure 4: Gap b etween LME and SFE pricesPremium /(discount ) of L ME over SHFE (US$/MT)

Aluminum Copper Zinc

(800)

(600)

(400)

(200)

-

200

400

600

Jan-05 Mar-06 May-07 Jul-08 Sep-09

(2,500)

(2,000)

(1,500)

(1,000)

(500)

-

500

Jan-05 Apr-06 Jul-07 Oct-08 Jan-10

(1,200)

(1,000)

(800)

(600)

(400)

(200)

-

200

Mar-07Nov-07 Jul-08 Mar-09Nov-09

Source: Bloomberg.


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Figure 5: LMEAluminum inventories and prices$/MT, 000MT

1,000

1,500

2,000

2,500

3,000

Jan-06 Oct-06 Aug-07 Jun-08 Apr-09 Feb-10

Prices

(($/MT)

500

1,100

1,700

2,300

2,900

3,500

4,100

4,700

Inventor

ies

Aluminium Inventories ('000) Aluminium Prices

Source: Bloomberg.

Figure 6: LMEZinc inventories and prices$/MT, 000MT

900

1,900

2,900

3,900

4,900

Jan-06 Oct-06 Aug-07 Jun-08 Apr-09 Feb-10

Prices

(($/MT)

0

100

200

300

400

500

600

Inventor

ies

Zinc Inventories ('000) Zinc Prices

Source: Bloomberg.

Global metal and steel production

Table 8: Steel production and use in key regions of the world (MT)

Crude Steel Produ ctio n Mar-09 Feb-10 Mar-10 % m/m % y/y YTD 2009 YTD 2010 % y/yNetherlands 0.3 0.5 0.5 -2.8% 40.6% 0.9 1.5 63.3%UK 0.8 0.8 0.8 4.3% 1.4% 2.1 2.5 21.0%EU-27 (ex. UK and Netherlands) 9.2 12.1 13.9 15.4% 51.4% 27.2 38.0 40.0%Other Europe 2.1 2.2 2.5 17.4% 21.1% 6.2 7.1 14.3%C.I.S. 7.6 7.9 9.1 15.2% 18.9% 21.5 25.5 18.7%North America 5.9 8.7 9.6 10.5% 61.6% 16.9 26.9 59.1%

South America 2.6 3.4 3.9 16.3% 49.5% 7.6 11.0 44.8%Africa & Middle East 2.7 2.8 2.9 3.0% 5.9% 7.5 8.6 15.5%China 45.1 50.4 55.0 9.2% 21.9% 126.7 157.9 24.6%India 4.7 5.1 5.5 7.9% 16.8% 13.4 16.1 20.0%Asia (ex China), Australia & New Zealand 11.0 14.5 16.5 13.6% 50.5% 33.2 46.6 40.4%

Total World 92.1 108.2 120.2 11.1% 30.5% 263.0 341.9 30.0%ME BRIC 57.7 64.5 70.4 9.2% 22.0% 162.1 202.3 24.9%

Apparent Steel Consu mptio n 2003 2004 2005 2006 2007 2008 2009 % y/yUK 12.3 13.2 11.4 12.9 12.7 11.8 7.0 -40.7%EU-27 (ex. UK) 147.8 159.2 154.1 175.7 185.4 170.9 111.4 -34.8%Other Europe 19.9 22.6 25.1 28.9 31.6 27.3 23.9 -12.5%C.I.S. 37.0 38.1 41.5 48.9 56.6 49.9 35.8 -28.2%N.A.F.T.A. 131.3 150.8 138.3 155.7 141.3 129.2 80.9 -37.4%Central & South America 27.6 33.0 32.5 36.4 41.9 44.3 33.6 -24.1%Africa & Middle East 47.2 49.7 55.0 57.8 65.4 68.3 67.1 -1.8%

China 240.5 275.8 340.2 369.8 413.7 434.6 542.4 24.8%Asia (ex China), Australia & New Zealand 221.2 235.2 241.8 248.2 266.2 265.9 219.1 -17.6%

Total Worl d 884.7 977.6 1040.0 1134.4 1214.8 1201.7 1121.2 -6.7%ME BRIC 343.8 385.5 459.7 503.7 566.0 589.7 681.6 15.6%

Source: IISI.


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Table 9: IndiaSteel demand and suppl y

In million MT

Finish ed Steel Overall Mar-09 Mar-10 % y/y Apr-Mar 09 Apr -Mar 10 % y/yProduction 5.1 5.5 6.7% 57.2 59.6 4.2%Imports 0.4 0.6 35.7% 5.8 7.2 23.0%Exports 0.4 0.2 -45.5% 4.4 3.2 -28.7%Consumption (Adj. for double counting) 5.1 5.5 6.8% 52.3 56.3 7.6%

Source: JPC.

Steel consumption rose 7.6%y/y to 56.32MT during FY10 on account of rising

demand from sectors, including automobiles, white goods and construction. Imports

surged 23% during the period to meet the strong domestic demand for steel.

Table 10: Steel sales/production of Indian steel producers

Lakhs tonne, %

Mar-09 Mar-10

SalesTata Steel 7.0 6.3 -9%SAIL 13.0 14.0 8%ProductionTata Steel 5.8 5.4 -6%JSW Steel 3.6 4.6 28%

Source: Company reports.

Table 11: Global aluminum production

000MT

Mar-09 Feb-10 Mar-10 % M/M % Y/Y 2008 2009 % Y/YAfrica 139 136 145 6.6% 4.3% 1,715 1,680 -2.0%North America 415 362 403 11.3% -2.9% 5,783 4,759 -17.7%Latin America 219 177 195 10.2% -11.0% 2,660 2,508 -5.7%West Europe 329 283 316 11.7% -4.0% 4,618 3,721 -19.4%

East/Central Europe 360 313 357 14.1% -0.8% 4,658 4,117 -11.6%Oceania 186 172 191 11.0% 2.7% 2,297 2,211 -3.7%Asia (ex China) 371 373 438 17.4% 18.1% 3,923 4,401 12.2%China 883 1,303 1,394 7.0% 57.9% 13,105 12,964 -1.1%

Worl d 2,902 3,108 3,439 10.6% 18.5% 38,759 36,357 -6.2%Worl d (ex Chin a) 2,019 1,955 2,045 4.6% 1.3% 25,654 23,393 -8.8%

Source: IAI, JPMorgan.

Table 12: IndiaCompany-wise non-ferrous production

Tonnes

Jan-09 Jan-10 % y/y Apr-Jan 09 Apr-Jan 10 % y/yAluminumNALCO 31,226 37,152 19.0% 297,296 355,893 19.7%BALCO 30,366 21,793 -28.2% 303,118 220,662 -27.2%HINDALCO 45,717 47,550 4.0% 435,888 464,589 6.6%MALCO 0 0 - 23,224 - -VAL 15,919 27,367 NA 48892 207,803 NACopperHCL 1,465 1,738 18.6% 26,857 12,384 -53.9%HINDALCO 30,641 28,830 -5.9% 241,492 287,456 19.0%SIL 27,529 26,741 -2.9% 252,495 281,411 11.5%ZincHZL 51,085 51,408 0.6% 452,265 479,510 6.0%BZL 3,162 2,362 -25.3% 24,538 30,098 22.7%LeadHZL 5,927 6,370 7.5% 50,559 52,344 3.5%

Source: Ministry of Mines.


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Figure 7: Global and China Y/Y change in steel produc tion%

-35%

-15%

5%

25%

45%

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

Global China

Source: IISI.

Recovery in global steel productionhas been driven by the recovery in

the US and Europe. But China

production growth slowed.


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Valuation and Stock performance

Table 13: Valuations of ferrous and non-ferrous companies across Asia

LC, x

Market Market Cap P/E EV/EBITDA P/BV

Comp any Ratin g Pric e (US$MM) FY11/CY10E FY12/CY11E FY11/CY10E FY12/CY11E FY11/CY10E FY12/CY11E

SteelIndiaJSW Steel UW 1154.9 4,767 12.5 10.6 8.1 6.5 2.0 1.7SAIL N 211.0 19,230 11.5 10.4 7.1 6.3 2.2 1.9Tata Steel N 575.9 11,277 8.3 6.4 6.6 6.6 2.2 1.7Asia ex. IndiaMaanshan UW 3.7 4,063 46.5 12.8 5.1 5.1 1.1 1.0Angang UW 11.3 9,401 34.2 16.3 8.1 6.0 1.5 1.4China Steel OW 31.6 13,045 15.3 10.4 15.1 10.9 1.6 1.4Nippon N 324.0 23,907 12.6 10.6 6.1 5.8 1.1 1.0JFE N 3185.0 21,214 9.9 8.4 5.0 4.9 1.1 1.0Kobe N 205.0 6,922 17.6 17.1 5.3 5.3 1.1 1.0Bluscope OW 2.5 4,106 41.3 14.3 9.0 5.8 0.8 0.8EuropeThyssenkrup OW 23.1 15,105 28.8 14.0 5.1 5.7 1.0 1.0Voestalpine N 24.9 5,329 124.7 13.5 7.9 5.8 1.0 0.9AmericasArcelor Mittal OW 34.5 53,820 12.4 5.9 6.2 3.9 0.8 0.7US Steel OW 52.3 7,499 14.3 5.2 5.3 2.9 1.4 1.1Nucor OW 44.7 14,085 25.5 10.3 9.0 5.1 1.9 1.7Usiminas UW 51.5 13,931 21.0 13.0 8.7 7.0 1.6 1.6RussiaEvraz OW 32.0 13,984 13.7 6.9 6.1 3.7 2.7 2.0MMK OW 1.0 11,230 12.4 8.1 7.1 4.3 1.0 1.0Severstal UW 12.2 12,294 13.3 9.6 6.7 5.4 1.2 1.1Non FerrousIndia

Hindalco UW 164.0 6,926 11.5 12.4 6.8 6.9 2.3 1.9Nalco UW 401.8 5,714 17.9 20.6 10.3 11.1 2.3 2.1Sesa Goa NR 392.6 7,276 8.4 7.5 4.9 3.7 2.9 2.1AmericasAloca N 11.9 12,191 14.9 21.3 5.5 5.7 0.9 0.8EuropeXstrata OW 994.3 43,682 8.0 5.9 5.2 3.9Antofagasta OW 878.5 12,946 11.4 9.1 6.9 4.9Kazakhmys Plc OW 1214.0 9,713 5.9 5.5 3.6 3.2Vedanta Resources OW 2343.0 9,526 6.1 4.3 4.1 3.0New World Resources N 789.5 3,120 12.4 9.6 6.4 5.2Ferrexpo Plc N 291.0 2,560 4.1 3.0 3.1 1.8Anglo American OW 2545.5 50,179 7.8 5.3 5.0 3.6ENRC Plc UW 1035.0 19,923 7.6 6.4 4.4 3.4Asia ex. IndiaBHP Billiton N 1872.5 174,589 8.3 6.3 5.3 4.0Rio Tinto OW 3106.5 106,448 5.1 3.9 3.2 1.9

Aluminum Corp of China NR 7.0 18,322 20.2 13.7 5.4 4.2 1.7 1.5CoalShenhua N 31.3 72,349 16.5 14.7 9.0 7.8 3.1 2.7Banpu OW 658.0 5,531 15.9 12.4 5.1 4.2 3.0 2.6

Source: Company reports, Bloomberg, J.P. Morgan estimates. Bloomberg consensus estimates used for NR stocks, prices are as of May 06, 2010.


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Figure 8: Performance of regional metal and steel stocks

% W/W change

6%1% 0%

-1% -1% -2%-4% -5% -5% -6% -6% -6% -6% -7% -7% -8% -8% -8% -9% -9% -10%-11% -12%-12%-13%-14% -16%-20%

-10%

0%

10%

Banpu

Bum

i

MMK

Baostee

l

NALCO

Nucor

Nippon

SAIL

Angang

Shenhua

JFE

China

Steel

JSW

Alum

iCoof

Thyssen

krup

Hyundai

Maans

han

USSteel

Tata

Steel

Hindalco

Sterli

te

Usim

inas

CSN

Voestalpine

Severstal

Arcelor

Mittal

Evraz

% M/M chan e

4% 2% 0%

-1% -1%-6% -6%

-9% -10% -11%-12% -12%-14% -15%-15% -17%-17% -17%-17% -18%-19% -20%-20% -21%-22% -24%-25%-40%

-20%

0%

20%

Banpu

Bum

i

MMK

Hyundai

NALCO

China

Steel

Nucor

Shenhua

JSW

Thyssen

krup

Nippon

Hindalco

Alum

iCoof

Sterli

te

Tata

Steel

Maans

han

Voestalpine

SAIL

JFE

Usim

inas

Evraz

Severstal

Baostee

l

CSN

Angang

USSteel

Arcelor

Mittal

% Y/Y chan e

189%187%181%163%

127%112%101%

78% 73% 70%56% 56% 55% 51% 40% 36% 34% 28% 26% 24% 14% 7% 7% 2% 0% -2%

-7%-50%

0%

50%

100%

150%

200%

JSW

MMK

Severs

tal

Hindalco

Banpu

Evraz

Tata

Steel

SAIL

NALCO

USSteel

Voesta

lpine

Hyundai

Sterli

te

Usim

inas

Bum

i

CSN

Thyssen

krup

Shenhua

China

Steel

Arcelor

Mitta

l

JFE

Alum

iCoof

Baostee

l

Nucor

Angang

Maans

han

Nippon

Source: Bloomberg.


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Table 14: Asian ferrous, non-ferrous and bulksStock performance

Company/Index Ticker 06-May-10 % WoW % MoM % YoY

IndiaJSW JSTL IN 1155 -6.3% -9.9% 189.3%SAIL SAIL IN 211 -4.8% -17.0% 77.8%Tata Steel TATA IN 576 -9.0% -15.1% 101.3%Hindalco Ind HNDL IN 164 -9.0% -12.4% 162.8%Sterlite STLT IN 740 -10.1% -14.7% 54.6%NALCO NACL IN 402 -1.4% -1.3% 72.7%

Asia Ex. IndiaAngang 347 HK 11 -5.4% -22.2% 0.2%Baosteel 600019 CH 6 -0.9% -20.0% 7.2%Maanshan 323 HK 4 -8.4% -16.8% -2.1%Alumni Co of China 2600 HK 7 -6.8% -13.5% 7.2%China Shenhua 1088 HK 31 -5.7% -9.3% 27.6%Hyundai Steel 004020 KS 88500 -7.9% -1.2% 55.5%China Steel 2002 TT 32 -6.1% -5.5% 26.1%Banpu BANPU TB 658 5.8% 3.8% 126.9%

AmericasArcelor Mittal MT US 34 -14.1% -25.4% 23.5%US Steel X US 52 -8.5% -24.2% 69.8%Nucor NUE US 45 -2.1% -6.0% 1.7%CSN CSNA3 BS 29 -12.1% -21.1% 35.6%Usiminas USIM5 BZ 51 -11.3% -18.4% 51.2%

EuropeThyssenkrup TKA GR 23 -7.2% -10.6% 34.2%Voestalpine VOE AV 25 -12.1% -16.9% 56.0%

RussiaEvraz EVR LI 32 -15.7% -19.3% 111.6%MMK MAGN RU 1.0 0.0% 0.0% 187.1%Severstal SVST LI 12 -12.6% -19.8% 181.1%

Source: Bloomberg.

Table 15: MSCI Asia and country index perfor mance

Index Performan ce 06-May-10 % WoW % MoM % YoYMSCI Asia 106 -3.0% -4.8% 25.4%MSCI India 692 -3.1% -5.4% 45.6%MSCI Japan 596 -2.2% -4.5% 12.8%MSCI China 60 -4.2% -8.5% 22.0%

Source: Bloomberg.

Table 16: J.P. Morgan Asia and coun try st eel indexes

Index Performan ce 06-May-10 % WoW % MoM % YoYJPM Asia Steel Index 160 -6.0% -15.6% 28.6%JPM India Metal Index 62 -8.7% -15.5% 122.0%JPM China Steel Index 30 -2.8% -21.4% 0.6%

JPM Japan steel Index 21 -4.2% -15.3% 22.4%Source: Bloomberg.


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Figure 9: Long (rebar) steel prices in key regionsUS$/MT, Euro/MT for Europe

300

500

700

900

1100

1300

1500

Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10

CIS Europe Turkey Export

Source: Metal Bulletin.

Figure 10: Flat (HRC) steel pric es in key regio nsUS$/MT, Euro/MT for Europe

300

500

700

900

1100

1300

Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10

CIS Export Europe

N. America China Export

Source: Metal Bulletin.

Figure 11: Domestic prices to landed priceSteelRs/MT

21,000

24,000

27,000

30,000

33,000

36,000

Dec-

08

Feb-

09

Apr-

09

Jun-

09

Aug-

09

Oct-

09

Dec-

09

Feb-

10

Apr-

10Landed Price-CIS Domestic Price

Landed Price-China HRC

Source: Bloomberg.

Figure 12 Domestic prices to landed priceAluminumRs/MT

70,000

95,000

120,000

145,000

Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10

Landed Price (Rs/MT) Domestic Price (Rs/MT)

Source: Bloomberg.

Figure 13: LMEAlumina as a percentage of LME aluminum

%

0%

5%

10%

15%

20%

25%

30%

Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09

Source: Bloomberg.


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14



Figure 14: ChinaIron ore inventory versus iron ore prices

60

110

160

210

Apr-07 Aug-07 Nov-07 Mar-08 Jul-08 Oct-08 Feb-09 May-09 Sep-09 Dec-09 Apr-10

3500

4500

5500

6500

7500

China Inventory Iron Ore Prices ($/MT CFR)

Source: Metal Bulletin, Bloomberg.

Figure 15: China Net Export (Import) of Steel

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

Jan-02 Nov-02 Sep-03 Jul-04 May-05 Mar-06 Jan-07 Nov-07 Sep-08 Jul-09

Source: China Customs.

Table 17: Major currencies' performance

Percent change06-May-10 W/W M/M Y/Y

Euro/US$ 0.79 4.8% 6.8% 5.6%Pound/US$ 0.67 3.3% 3.1% 2.0%Yen/US$ 90.58 -3.7% -4.0% -7.9%

Chinese Remnibi/US$ 6.83 0.0% 0.0% 0.1%Russian Rouble/US$ 30.60 4.8% 4.8% -6.7%Ukranian Rouble/US$ 7.93 0.0% -0.3% -1.6%Kazakhi Tenega/US$ 146.96 0.2% 0.1% -2.4%

Rs/US$ 0.00 0.0% 0.0% 0.0%Brazilian Real/US$ 1.86 7.4% 5.3% -12.2%South African Rand/US$ 7.78 5.5% 7.6% -6.6%Australian Dollar/ US$ 1.13 4.8% 4.1% -15.5%

Source: Bloomberg.

Prices of iron ore declined during

the week after touching near high

of $192 last week. Inventory levelsalso increased during the week.

Chinas net steel exports increased

m/m to 1.62MT in Mar-10 (net

exports up 25% m/m).


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15



Figure 16: Dollar Index

70

75

80

85

90

Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10

Source: Bloomberg.

Table 18: J.P Morgan estimates for Real GDP growth data for major countries/regions

2008 2009E 2010E 2011EChina 9.0% 8.6% 10.8% 9.4%India 6.7% 7.2% 8.0% 8.3%Japan -1.2% -5.2% 3.2% 2.2%UK 0.6% -4.8% 1.4% 3.2%Euro Area 0.6% -4.0% 1.5% 2.1%US 0.4% -2.4% 3.5% 3.1%

Source: J.P. Morgan estimates. Note: For India, the data is for fiscal year ended Mar. Therefore CY2008 corresponds to FY09, CY2009 to FY10 and CY2010 to FY11.


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16



J.P. Morgan: Commodity fund flow

The following are excerpts from our Global Commodities Strategy teams

report titled, Commodity Fund Performance and Flows Mar 2010, published onApr 20, 2010. For further detail please contact Ruy Ribeiro (44-20- 7777-1390)

or Tobin Gorey (44-20-7777-3107).

Figure 17: Cumulative Inflow by YearUS$ billion

Source: J.P. Morgan and Bloomberg.

Figure 18: Cumulative Inflow by Commodity SectorUS$ billion


Table 19: Flow by Commod ity SectorUS$ million

Mar 10 3 Mos YTD

Specialty Funds 1,143 -4,140 -4,140Energy -187 -1,127 -1,127Precious Metals 1,408 -2,675 -2,675

Financial 70 -38 -38Physical 1,337 -2,637 -2,637

Industrial Metals -36 -80 -80Agriculture -50 -73 -73Livestock 1 0 0

Specialty ETPs 1,196 -4,038 -4,038Energy -180 -1,101 -1,101

Precious Metals 1,369 -2,754 -2,754Financial 93 -13 -13Physical 1,275 -2,741 -2,741

Industrial Metals -29 -67 -67Agriculture 12 47 47Livestock 1 0 0



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Inflation and industrial production

Figure 19: IndiaInflation (WPI)

%

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09

Source: Bloomberg.

Figure 20: IndiaIndex of Industrial Production (IIP)

%

-2.0

3.0

8.0

13.0

18.0

23.0

Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09

Source: Bloomberg.

Figure 21: ChinaInflation (CPI)

%

-4

-20

2

4

6

8

10

Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10

Source: Bloomberg.

Figure 22: ChinaIndustrial production

Index

-4.0

1.0

6.0

11.0

16.0

21.0

Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10

Source: Bloomberg.

Figure 23: J.P. Morgan global industrial production

-20%

-15%

-10%

-5%

0%

5%

10%

Jan-03 Sep-03 May-04 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09

Source: J.P. Morgan.

Global IP in Jan-10 was below the

peak seen in Jan-08, but well

above the 16.5% peak to trough

move seen through to Mar-09.


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18



J.P. Morgan: Forecasts

Table 20: Base and Precious Metals Forecast b y QuarterIn $/mt LME cash or $/oz 2008 2009 1Q10E 2Q10E 3Q10E 4Q10E 2010 1Q11E 2Q11E 3Q11E 4Q11E 2011 2012 2013

Aluminium 2,624 1,696 2,150 2,400 2,200 2,100 2,213 2,050 2,050 2,000 2,000 2,025 2,150 2,250Copper 6,902 5,157 7,250 8,000 7,150 6,750 7,288 6,500 6,500 6,750 7,000 6,688 7,250 7,750Nickel 21,327 15,363 19,930 26,500 24,000 21,000 22,858 19,000 18,000 18,000 18,000 18,250 19,000 19,500Zinc 1,908 1,669 2,300 2,500 2,400 2,350 2,388 2,200 2,100 2,100 2,100 2,125 2,100 2,400Lead 2,105 1,729 2,250 2,350 2,250 2,200 2,263 2,100 2,000 2,000 1,950 2,013 1,850 2,000Tin 18,395 13,314 17,220 18,500 18,000 16,000 17,430 17,000 18,000 18,000 18,000 17,750 18,000 18,500

Gold 872 976 1,110 1,150 1,250 1,200 1,178 1,175 1,175 1,175 1,175 1,175 1,100 1,000Platinum 1,575 1,205 1,550 1,675 1,675 1,700 1,650 1,750 1,800 1,800 1,800 1,788 1,800 1,800Palladium 349 262 440 500 550 600 523 650 675 675 700 675 742 775Silver 15.0 14.7 17.1 17.7 19.2 18.5 18.1 18.1 18.1 18.1 18.1 18.1 16.9 15.4

Source: J.P. Morgan Metals Strategy.

Table 21: Forecasts in to the Lo nger Term

LT Real2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2010 $

Aluminium 1729 1,895 2593 2664 2624 1696 2213 2025 2150 2250 2350 2500 2200Copper 2889 3,506 6677 7106 6902 5157 7288 6688 7250 7750 8250 8500 5500Nickel 13921 14,563 23125 36268 21327 15363 22858 18250 19000 19500 20000 22000 16000Zinc 1055 1,394 3249 3251 1908 1669 2388 2125 2100 2400 2600 2700 2000Lead 890 946 1287 2572 2105 1729 2263 2013 1850 2000 2100 2200 1800Tin 8483 7,480 9234 14799 18395 13314 17430 17750 18000 18500 19000 19000 17500Gold 416 445 604 697 872 976 1178 1175 1100 1000 1000 1000 950Platinum 846 897 1139 1305 1575 1205 1650 1788 1800 1800 1800 1800 1600Palladium 236 202 320 355 349 262 523 675 742 775 800 800 700Silver 6.7 7.3 11.5 13.4 15.0 14.7 18.1 18.1 16.9 15.4 15.4 15.4 13.0

Alumina 397.0 445.0 492.0 300 400 254 332 304 323 338 353 375 280Source: J.P. Morgan, Brook Hunt.

Figure 24: Implied demand growth in the base metals, basis historical IP/consumption relativitiesand J.P. Morgan IP forecasts

-15

-10

-5

0

5

10

15

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

IP Copper Ally Zinc

Source: J.P. Morgan Economics Research, Brook Hunt


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19



Figure 25: Apparent demand for copper, aluminium and zinc in China annual percentagechange

-40%

-20%

0%

20%

40%

60%

80%

100%

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Zinc Copper Aluminium

Source: J.P. Morgan Commodities Research, WBMS

Figure 26: Base metal inventories in weeks of consumption

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

ALUMINIUM COPPER

NICKEL ZINC

Source: J.P. Morgan Commodities Research

Table 22: Base metals demand, annual ch ange1996-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Aluminium 4.50% 7.7% 10.8% -0.5% -7.1% 9.9% 7.5% 5.9% 5.6% 4.2%

Copper 3.40% 3.2% 3.1% -0.2% -4.0% 6.0% 4.8% 4.5% 3.9% 3.3%Nickel 2.60% 10.6% -1.1% -6.6% 1.3% 9.2% 5.2% 4.6% 3.5% 3.2%Zinc 3.30% 5.2% 2.5% -2.0% -9.1% 7.2% 5.8% 5.2% 5.1% 4.2%Lead 3.10% 5.7% 2.1% 2.6% -1.2% 6.8% 6.2% 5.7% 4.9% 4.4% Source: J.P. Morgan Commodity Research, Brook Hunt

Table 23: Base metals sup ply, annual ch ange1996-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Aluminium 4.90% 6.0% 12.5% 3.9% -6.4% 8.8% 5.2% 5.0% 5.2% 2.1%

Copper 3.90% 4.7% 4.0% 1.7% -0.1% 1.5% 4.6% 5.2% 2.8% -1.3%Nickel 3.40% 7.5% 8.2% -3.5% -10.6% 7.8% 8.8% 4.5% 3.2% -0.7%Zinc 3.70% 3.9% 6.0% 4.8% -1.0% 3.9% 1.3% 2.1% 2.3% 1.2%Lead 2.20% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% Source: J.P. Morgan Commodities Research, Brook Hunt


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Table 24: Copper Sup ply and Demand Data2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mine Prodn (Concentrate) 10953 11979 12298 12376 12586 12476 12653 12594 13231 13795 14315 14119 14227

Concentrate Used 11078 11387 12117 12494 12593 12477 12599 12666 13253 13817 14237 13891 13999Concentrate Stock Change -134 581 165 -136 -26 -18 33 -72 -22 -22 78 228 228

Minus: Smelting Losses -438 - 462 - 510 - 539 - 480 - 470 - 446 -425 - 440 - 450 - 460 - 470 - 485

Add: Scrap/Blister 1292 1552 1561 1668 1955 2188 1930 2025 2100 2145 2175 2300 2450Smelter Production 11932 12478 13168 13622 14068 14196 14083 14266 14913 15512 15952 15721 15964

- percentage change -0.5% 4.6% 5.5% 3.4% 3.3% 0.9% -0.8% 1.3% 4.5% 4.0% 2.8% -1.4% 1.5%

Minus: Blister Resmelt/Losses/Stock Change -173 -261 -326 -364 -444 -429 -400 -365 -429 -431 -451 -421 -441

Add: Scrap into Refinery 877 1094 1102 1343 1447 1491 1331 1400 1450 1500 1525 1600 1700Electro-Refined Copper Production 12636 13312 13944 14602 15072 15258 15014 15301 15934 16581 17026 16900 17223

Sx/Ew Production 2676 2658 2644 2763 2989 3107 3323 3318 3545 3917 4041 3901 3729

Refined Copper Production 15312 15970 16587 17365 18061 18364 18337 18619 19479 20499 21067 20802 20952

- percentage change -0.4% 4.3% 3.9% 4.7% 4.0% 1.7% -0.1% 1.5% 4.6% 5.2% 2.8% -1.3% 0.7%

Western Europe Consumption 3716 3797 3565 3923 3661 3425 2687 2768 2851 2922 2951 2981 3011- percentage change -0.6% 2.2% -6.1% 10.0% -6.7% -6.4% -21.5% 3.0% 3.0% 2.5% 1.0% 1.0% 1.0%

Americas Consumption 2497 2712 2549 2408 2395 2156 1705 1756 1809 1845 1863 1882 1882- percentage change -5.5% 8.6% -6.0% - 5.5% - 0.5% -10.0% -20.9% 3.0% 3.0% 2.0% 1.0% 1.0% 0.0%

China Consumption 3020 3565 3815 3967 4670 5100 6520 7074 7569 8099 8585 9014 9465- percentage change 24.5% 18.0% 7.0% 4.0% 17.7% 9.2% 27.8% 8.5% 7.0% 7.0% 6.0% 5.0% 5.0% Japan Consumption 1202 1279 1256 1307 1268 1199 885 929 957 967 976 986 996- percentage change 3.3% 6.3% -1.8% 4.1% -3.0% -5.4% -26.2% 5.0% 3.0% 1.0% 1.0% 1.0% 1.0%

Other Consumption 10435 11352 11185 11605 11994 11880 11797 12528 13186 13833 14376 14864 15354- percentage change 4.6% 8.8% -1.5% 3.8% 3.4% -1.0% -0.7% 6.2% 5.3% 4.9% 3.9% 3.4% 3.3%

Refined Copper Consumption 15579 17029 16959 17500 18047 18019 17302 18332 19208 20079 20855 21534 22222

- percentage change 4.6% 9.3% -0.4% 3.2% 3.1% -0.2% -4.0% 6.0% 4.8% 4.5% 3.9% 3.3% 3.2%

Refined Metal Balance -268 -1059 -372 -135 14 345 1035 287 271 420 212 -732 -1269

Total Stock 3559 2500 2128 1993 2007 2352 3388 3675 3946 4366 4578 3846 2577

- Exchange 806 124 156 253 237 390 689- Market 2753 2376 1972 1740 1770 1962 2699In weeks of consumption 11.9 7.6 6.5 5.9 5.8 6.8 10.2 10.4 10.7 11.3 11.4 9.3 6.0 Source: J.P. Morgan, Brook Hunt.

Table 25: Aluminium Supply and Demand Data2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Alumina Production 55001 58246 61021 68183 75189 80767 73176 79772 83694 90053 93852 95671 100653Aluminina Consumption 54959 58625 62679 66479 75032 77515 72461 79062 83152 87348 91866 93795 98419Balance 42 -379 -1657 1704 156 3252 716 710 542 2705 1986 1876 2234

Aluminium Production 28034 29878 31948 33873 38118 39604 37055 40321 42407 44547 46852 47835 50194- of which China 5547 6689 7806 9349 12588 13177 12965 16551 18558 19457 19817 19977 20382Aluminium Smelting Capacity 30691 34126 36904 38595 42375 45820 47078 48800 51150 53250 55600 58500 59000

- Capacity Utilisation 91% 88% 87% 88% 90% 86% 79% 83% 83% 84% 84% 82% 85%Global Supply 28034 29878 31948 33873 38118 39604 37055 40321 42407 44547 46852 47835 50194

- percentage change 6.6% 6.9% 6.0% 12.5% 3.9% -6.4% 8.8% 5.2% 5.0% 5.2% 2.1% 4.9%

Western Europe Demand 6506 6614 6512 6796 7159 6882 5560 5838 6071 6193 6317 6380 6444

- percentage change 1.7% -1.5% 4.4% 5.3% -3.9% -19.2% 5.0% 4.0% 2.0% 2.0% 1.0% 1.0%

North America Demand 6535 7011 7175 7219 6698 6049 4705 5035 5286 5392 5500 5610 5722

- percentage change 7.3% 2.3% 0.6% -7.2% -9.7% -22.2% 7.0% 5.0% 2.0% 2.0% 2.0% 2.0%

China Demand 4994 5886 7083 8790 12347 12560 13879 16099 18031 19834 21620 22917 24292

- percentage change 17.9% 20.3% 24.1% 40.5% 1.7% 10.5% 16.0% 12.0% 10.0% 9.0% 6.0% 6.0% Japan Demand 2235 2139 2276 2323 2197 2250 1669 1870 1926 1945 1964 1984 2004

- percentage change -4.3% 6.4% 2.1% -5.4% 2.4% -25.8% 12.0% 3.0% 1.0% 1.0% 1.0% 1.0%

Global Consumption 27839 29968 31905 34349 38056 37853 35170 38643 41546 43995 46452 48386 50424

- percentage change 7.6% 6.5% 7.7% 10.8% -0.5% -7.1% 9.9% 7.5% 5.9% 5.6% 4.2% 4.2%

Global Balance 195 -90 43 -477 63 1752 1885 1678 862 552 399 -550 -230

China Balance 553 803 723 559 241 617 -914 452 526 -378 -1803 -2940 -3910

Stocks

- Total 5986 5934 5997 5555 5626 7355 9191 10869 11731 12284 12683 12133 11902- LME 1632 752 803 820 969 2373 4624- Producer (non-China) 1628 1786 1798 1621 1553 1676 1203- Other 2726 3396 3395 3113 3103 3306 3364Total in Weeks of Consumption 11.2 10.3 9.8 8.4 7.7 10.1 13.6 14.6 14.7 14.5 14.2 13.0 12.3 Source: J.P. Morgan, Brook Hunt.


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Table 26: Zinc Supply and Demand Data2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mine Production 9576 9568 9916 10306 10923 11452 11336 11781 11938 12189 12471 12626 13008

add Zinc in Residues & Secondaries 709 728 663 723 808 835 655 828 839 856 876 887 914less Smelter Processing Losses 577 591 573 603 634 645 624 686 695 710 726 735 758

add Zinc from Secondary Plants 88 87 85 68 60 60 60 60 60 60 60 60 60Zinc Concentrate Demand 9684 9916 9920 10287 10928 11240 11073 11316 11848 12194 12490 12888 13384

Zinc Concentrate Stock Change -108 -348 -4 18 -5 212 262 465 90 -5 -19 -262 -376

DLA Stock Sales 7 34 33 25 20 0 0 0 0 0 0 0 0Global Supply 9911 10174 10128 10500 11182 11491 11165 11518 12052 12400 12700 13100 13600

- percentage change 2.7% -0.5% 3.7% 6.5% 2.8% -2.8% 3.2% 4.6% 2.9% 2.4% 3.1% 3.8%

Western Europe Demand 2316 2344 2234 2323 2345 2153 1677 1727 1779 1815 1842 1861 1879

- percentage change 1.2% -4.7% 4.0% 1.0% -8.2% -22.1% 3.0% 3.0% 2.0% 1.5% 1.0% 1.0%

North America Demand 1337 1434 1365 1409 1276 1131 1028 1048 1069 1080 1091 1102 1113

- percentage change 7.2% -4.8% 3.2% -9.5% -11.3% -9.2% 2.0% 2.0% 1.0% 1.0% 1.0% 1.0%

China Demand 1982 2417 2853 3166 3531 3795 4061 4528 4936 5330 5757 6102 6407

- percentage change 22.0% 18.0% 11.0% 11.5% 7.5% 7.0% 11.5% 9.0% 8.0% 8.0% 6.0% 5.0%

Japan Demand 622 635 627 628 598 562 422 443 452 461 466 466 466


Global Consumption 9634 10289 10611 11159 11436 11209 10183 10916 11547 12146 12772 13310 13787

- percentage change 6.8% 3.1% 5.2% 2.5% -2.0% -9.1% 7.2% 5.8% 5.2% 5.1% 4.2% 3.6%

Global Balance 277 -114 -483 -659 -254 282 982 601 504 254 -72 -210 -187

Stocks

- Total 2663 2548 2066 1407 1152 1434 2416 3017 3522 3775 3704 3493 3307

- LME 740 629 394 90 88 253 489Total in Weeks of Consumption 14.4 12.9 10.1 6.6 5.2 6.7 12.3 14.4 15.9 16.2 15.1 13.6 12.5 Source: J.P. Morgan, Brook Hunt.

Table 27: Lead Suppl y and Demand Data2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mine Production 2896 2932 3336 3301 3365 3465 3582 3715 3799 4010 4007 4111 4082- percentage change 3.2% 1.2% 13.8% -1.1% 2.0% 3.0% 3.4% 3.7% 2.2% 5.6% -0.1% 2.6% -0.7%

Concentrate Stock Change -19 -1 42 -20 16 -77 60 47 86 266 -74 -8 -125Primary Refined Production 3741 3795 4179 4328 4331 4585 4505 4696 4936 5046 5486 5541 5616- percentage change -0.5% 1.4% 10.1% 3.6% 0.1% 5.9% -1.8% 4.2% 5.1% 2.2% 8.7% 1.0% 1.4%

Secondary Refined Production 3022 3178 3359 3618 3804 3857 4055 4354 4564 5055 5060 5310 5510

- percentage change 4.0% 5.2% 5.7% 7.7% 5.1% 1.4% 5.1% 7.4% 4.8% 10.8% 0.1% 4.9% 3.8% Total Refined Production 6764 6973 7538 7947 8135 8443 8560 9050 9500 10101 10546 10851 11126- percentage change 1.5% 3.1% 8.1% 5.4% 2.4% 3.8% 1.4% 5.7% 5.0% 6.3% 4.4% 2.9% 2.5%

DLA Supply 60 57 36 19 0 0 0 0 0 0 0 0 0Total Refined Supply 6824 7030 7574 7966 8135 8443 8560 9050 9500 10101 10546 10851 11126

- percentage change 2.3% 3.0% 7.7% 5.2% 2.1% 3.8% 1.4% 5.7% 5.0% 6.3% 4.4% 2.9% 2.5%

Western Europe Demand 1632 1693 1630 1652 1623 1505 1266 1266 1260 1247 1235 1223 1210- percentage change -4.7% 3.7% -3.7% 1.3% -1.8% -7.3% -15.9% 0.0% -0.5% -1.0% -1.0% -1.0% -1.0%North American Demand 1561 1556 1640 1646 1569 1551 1462 1434 1448 1449 1450 1436 1423- percentage change -2.1% -0.3% 5.4% 0.4% -4.7% -1.2% -5.7% -2.0% 1.0% 0.0% 0.1% -0.9% -0.9%China Demand 1175 1401 1850 2269 2650 3053 3501 4026 4509 5005 5456 5892 6305- percentage change 32.0% 19.2% 32.0% 22.6% 16.8% 15.2% 14.7% 15.0% 12.0% 11.0% 9.0% 8.0% 7.0%Other Demand 2468 2511 2505 2489 2382 2326 2105 2175 2238 2295 2345 2393 2437- percentage change 3.6% 1.7% -0.2% -0.6% -4.3% -2.4% -9.5% 3.3% 2.9% 2.5% 2.2% 2.0% 1.8%Total Refined Demand 6836 7161 7625 8056 8224 8435 8335 8901 9456 9996 10486 10944 11375

- percentage change 3.9% 4.7% 6.5% 5.7% 2.1% 2.6% -1.2% 6.8% 6.2% 5.7% 4.9% 4.4% 3.9%

Market Balance -13 -131 -50 -90 -89 8 225 149 44 105 60 -93 -249

Stocks

- Concentrate 263 262 303 283 300 222 282 329 415 681 608 599 474- Refined 1169 1039 988 898 809 818 1042 1191 1235 1340 1400 1307 1058- in weeks of Consumption 8.9 7.5 6.7 5.8 5.1 5.0 6.5 7.0 6.8 7.0 6.9 6.2 4.8

Source: J.P. Morgan, Brook Hunt.


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Table 28: Nickel Sup ply and Demand Data2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mine Production 1314 1353 1422 1529 1654 1596 1426 1537 1673 1747 1804 1791 1790

Refinery Capacity 1540 1597 1603 1679 1787 2013 2078 2104 2107 2160 2160 2160 2160

- Capacity utilisation 79.1% 79.5% 80.3% 81.2% 79.3% 68.7% 64.1% 67.9% 72.3% 73.6% 76.0% 75.4% 75.4%

Nickel in pig iron/Chinese FeNi output 0 0 3 33 71 70 97 120 120 95 75 70 70

Refined Nickel Supply 1218 1270 1286 1363 1418 1384 1331 1429 1522 1590 1641 1629 1629

- percentage change 4.2% 1.3% 6.0% 4.0% -2.4% -3.8% 7.4% 6.5% 4.5% 3.2% -0.7% 0.0%

Europe consumption 456 466 435 474 430 413 356 388 400 412 416 420 424


USA Consumption 116 129 135 151 148 142 131 140 149 153 155 156 158

- percentage change 11.6% 4.8% 12.1% -2.4% -3.7% -7.9% 7.0% 6.0% 3.0% 1.0% 1.0% 1.0%

China Consumption 136 161 195 243 318 286 393 440 480 518 555 588 623

- percentage change 18.5% 21.0% 24.7% 30.8% -10.0% 37.4% 12.0% 9.0% 8.0% 7.0% 6.0% 6.0%

Japan Consumption 197 194 185 201 189 179 155 166 171 176 179 183 187

- percentage change -1.6% -4.8% 8.8% -5.8% -5.7% -13.3% 7.0% 3.0% 3.0% 2.0% 2.0% 2.0%

Other Consumption 324 329 308 323 291 264 266 287 295 305 314 324 334

- percentage change 1.3% -6.2% 4.6% -9.8% -9.1% 0.8% 7.6% 3.1% 3.1% 3.1% 3.1% 3.1%

Refined Nickel Consumption 1229 1279 1258 1392 1377 1285 1302 1421 1495 1564 1619 1671 1726

- percentage change 4.1% -1.6% 10.6% -1.1% -6.6% 1.3% 9.2% 5.2% 4.6% 3.5% 3.2% 3.3%

Refined Metal Balance -11 -9 28 -29 41 98 30 8 28 26 23 -42 -96

Total Stock 243 234 263 236 277 376 405 414 441 468 491 449 353

- Exchange 24 21 36 7 48 78 158

- Non-exchange reported stocks 91 92 65 64 62 60 53

- Other 128 121 162 165 167 237 194

In weeks of consumption 10.3 9.5 10.8 8.8 10.5 15.2 16.2 15.1 15.4 15.6 15.8 14.0 10.6 Source: J.P. Morgan, Brook Hunt.

Table 29: Summary of international coal price forecast changes

US$ per metric tonnes

JFY 2009 JFY 2010E JFY 2011E JFY 2012E JFY 2013E JFY 2014E Long Term*Hard Coking new 300 129 200 200 170 170 110Hard Coking old 300 129 175 170 170 170 110

Semi-soft Coking 250 90 130 130 110 115 90Semi-soft Coking old 250 90 105 105 110 115 90Thermal new (Newcastle) 125 70 90 95 95 95 80Thermal old (Newcastle) 125 70 80 85 90 95 80

CY 2008 CY 2009E CY 2010E CY 2011E CY 2012E CY 2013E Lon g Term*Thermal new (API2) n/a 81.8 85 95 100 105 90Thermal old (API2) n/a 81.8 85 95 100 105 90

Source: J.P. Morgan Estimates. Note: *Long Term Real price in 2009 nominal dollars. Prices stated above are FOB Australia except API2, which is delivered prices into Europe. Coking and

Newcastle thermal pricing stated for Japanese financial year that starts April 1. API2 pricing stated for calendar year.

Table 30: Iron Ore Spot Price Forecasts

US$ per tonne (63% Fe) YoY2009 84 -45%2010E 135 61%2011E 122 -10%

2012E 120 -2%2013E 101 -16%2014E 85 -16%2015E 74 -13%Source: J.P. Morgan estimates.

Table 22: Iron Ore Spot Price Forecasts

US$ per tonne 1Q10 2Q10 3Q10 4Q10 2010 2011 2012 2013 2014 2015

Iron Ore Spot (China) 134 150 135 122 135 122 120 101 85 74

% change 12% -10% -10% -10% -1% -16% -16% -13%

Source: Bloomberg, J.P. Morgan estimates. Note: *China Import Indian Iron Ore 63% Fe (CFR China)


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