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Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
Andrew shaw   outlook & review - asian commodities market
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Andrew shaw outlook & review - asian commodities market

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  • 1. The Best of Times …The Worst of TimesCommodities OutlookAsian Mining IndabaSingapore – 29 October 2012Andrew ShawHead of Base Metals & Bulks Research, Credit Suisse+65 6212 4244 andrew.shaw@credit-suisse.comANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES ARE IN THE DISCLOSURE APPENDIX. FOR OTHER IMPORTANTDISCLOSURES, PLEASE REFER TO https://firesearchdisclosure.credit-suisse.com.
  • 2. OverviewMacro risks aboundPhotos: Andrew Shaw / Credit Suisse 1
  • 3. The key driver for commodity prices remains growth 8.0% Global GDP, real ann trend qoq GDP avg (1972-2012) CCI Index, real trend qoq (rhs) CCI avg (1972-2012, rhs) 9.5% 7.0% 7.5% 6.0% 5.5% 5.0% 3.5% 4.0% 1.5% -0.5% 3.0% -2.5% 2.0% -4.5% 1.0% -6.5% 0.0% -8.5% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 2
  • 4. In Q3 commodities bounced? But will it last? 5.0% Global GDP, ann qoq Current estimate/forecast Real CCI, qoq (rhs) 20.0% 15.0% 4.5% Divergence in Q3-12 10.0% 4.0% 5.0% 3.5% 0.0% 3.0% -5.0% 2.5% -10.0% Q3 estimate: 2¾% 2.0% -15.0% 3Q-10 1Q-11 3Q-11 1Q-12 3Q-12Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 3
  • 5. The key will be whether the Ben and Mario show translates to growth10% Global IP, ann trend mom CSCB Ind metals, trend mom (right axis) 6% S&P500 trend mom (right axis) 9% Aug-27-10: Dec-21-11: Sept- LTRO1 Jul-26-12: 4% 8% Jackson 13-12: Hole Draghi QE3 Speech "Whatever it 7% Takes" 2% 6% 5% 0% 4% -2% 3% Nov-3-10: 2% QE2 -4% 1% 0% -6% Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 4
  • 6. Global IP volatile, but CS Basic Materials Index suggests recovery is starting 15.0% Global IP, ann 3MMA of mom change forecast 2.5 long run average CSBMI, 3mma (right axis) 1.5 10.0% 0.5 5.0% -0.5 0.0% -1.5 -5.0% -2.5 -10.0% -3.5 2000 2002 2004 2006 2008 2010 2012Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 6
  • 7. China has been soft – with growth expected to remain in the 7-8% range (though some signs of a trough)14% QoQ annualized YoY 1977 to Present Average13%12%11% Assuming10% Q3 at 7.4% saar 9% 8% 7% 6% 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: the BLOOMBERG PROFESSIONALTM service, NBS, Credit Suisse 7
  • 8. Chinese stimulus – a story for 2013 Infrastructure project approvals Real estate market improving Infrastructure FAI, log (RMB Million), real, seasonally QoQ, seasonally adjusted, trended adjusted Monetary easing Social housing program YoY real growth in social financing ahead of schedule May June July Aug YTD Target % Starts (M) 1.2 1.2 1.1 0.7 6.5 7.0 93 Completions (M) 0.6 0.5 1.0 0.6 4.2 5.0 84 Investment (RMB B) 143 118 153 160 820 - -Source: NBS, CEIC, the BLOOMBERG PROFESSIONALTM service, Credit Suisse 8
  • 9. For now, we are still waiting for an IP bounce 65.0 Average PMI New Orders Chinese IP ann mom trend sa (right axis) 30% 25% 60.0 20% 55.0 15% 10% 50.0 5% 45.0 0% 40.0 -5% 2006 2007 2008 2009 2010 2011 2012Source: the BLOOMBERG PROFESSIONALTM service, Markit, Credit Suisse 9
  • 10. And infrastructure growth has actually slowed … Chinese infrastructure FAI* 100% QoQ SAAR YoY (right axis) 50.0% 45.0% 80% 40.0% 60% 35.0% 30.0% 40% 25.0% 20% 20.0% 0% 15.0% 10.0% -20% 5.0% -40% 0.0% 2005 2006 2007 2008 2009 2010 2011 2012Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse *Note: Q3 estimated on 2 months 10
  • 11. We think commodity prices have overshot – with a correction unfolding in Q4 5.0% Global GDP, ann qoq Current estimate/forecast 20.0% Real CCI, qoq (rhs) CCI estimate based on forecasts 15.0% 4.5% 10.0% 4.0% Divergence in Q3-12 5.0% 3.5% 0.0% 3.0% -5.0% 2.5% -10.0% Q3 estimate: 2¾% 2.0% -15.0% 3Q-10 1Q-11 3Q-11 1Q-12 3Q-12 1Q-13Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 11
  • 12. Most prices should pick up next year, but with considerable divergence among commodities 25% Q4-13 forecast vs Q4-13 forward 20% 15% 10% 5% 0% -5%-10%-15%-20%-25% Palladium Gold Zinc Aluminium Tin UK Nat Gas Copper Silver Corn WTI Crude Brent Crude Lead Platinum Nickel Soybeans Thermal Coal Wheat U.S. Nat Gas Iron Ore (China)Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse *forwards based on Oct 10 data 13
  • 13. The “commodity super-cycle” has been well and truly relegated to history … 1100 CSCB Excess Return (real) Forecast 1000 Oil bubble 900 800 Back to the future 700 600 Bull market 500 400 300 Post-Lehman prices 200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 14
  • 14. Iron OreEnd of an era 15
  • 15. Short term price bounce driven by restock Average mills’ inventory cover from imported ore (lhs), US$/t (rhs) 48 Avg Stock Days TSI Price (rhs) 200 43 56% restock 180 38 160 ??% restock, 35% 33 price increase 140 22% price increase 28 120 23 100 18 80 Mar-11 Jun-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12Source: Credit Suisse, the BLOOMBERG PROFESSIONALTM service, MySteel 16
  • 16. Iron ore price boom is fading Iron ore prices returning to long-run mean? Major revisions to CS IO price forecasts Real 2010 US$ log US$/t, CFR China (TSI 62% Fe)6.1 price hptrend average $210 Iron Ore (62% Fe CFR Tianjin spot) Quarterly avg forecasts Overshoot? $1905.6 $170 $1505.1 $130 Return4.6 ing to $110 Stable prices long run $904.1 around long run Historical outlier $703.6 $50 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 2009 2010 2011 2012 2013 Forecast iron ore prices Units as indicated below, long term prices based on 2011 real prices 2011 1Q-12 2Q-12 3Q-12 4Q-12 2012 1Q-13f 2Q-13f 3Q-13f 4Q-13f 2013f 2014f 2015 LT Iron ore fines – 62% (China CFR) US$/t, dry 168 142 140 112 110 126 120 115 110 100 111 95 90 90 Iron ore fines - (China CFR) US$/dmtu 271 229 225 181 177 203 194 185 177 161 179 153 145 145 Source: Credit SuisseSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 17
  • 17. Key market characteristics  Global steel overcapacity  Moderating steel demand growth  Recovery from recent flat rates  Imports displacing China IO supply  …But new Chinese mines too  Wall of seaborne supply looming 18
  • 18. World steel production growth rates moderating: Output forecast to grow at 4% p.a. China’s steel production has … tracking sideways in 2012 moderated since 2007 … Mt, Monthly, annualized (sa) Natural log11.5 China World Ex-China 75011.0 700 Raw Annualised SAAR CAGR = 2.5% 65010.5 CAGR = 7.4% 60010.0 550 CAGR = 21.8% 500 9.5 450 9.0 400 350 8.5 CAGR = 8.5% 300 8.0 250 1990 1993 1996 1999 2002 2005 2008 2011 2005 2006 2007 2008 2009 2010 2011 2012Source: World Steel Association, China NBS, the BLOOMBERG PROFESSIONALTM service, Credit Suisse 19
  • 19. Iron ore supply growth running ahead of underlying demand Australia the main contributor to this surge … plenty of planned new supply … “Firmly committed supply” and forecast IO demand Seaborne supply, natural log (sa) Mt18.0 Australia World Ex-Australia CAGR = 5.7%17.8 Seaborne Supply Growth Chinese + Seaborne ex-China Demand Growth17.6 120 CAGR = 15.6%17.4 10017.2 8017.0 6016.8 CAGR = 12.2% 4016.616.4 2016.2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f * Base case assumes 4.1% p.a. world steel production in 2013-16Source: Customs data, the BLOOMBERG PROFESSIONALTM service, Credit Suisse 20
  • 20. Assumes displacement of higher-cost China and other mine supply Change in IO supply on 2011 production level (Mt) 400 Australia 300 Brazil China (Domestic Supply) 200 100 0 -100 -200 -300 2012 2013 2014 2015 2016Source: Credit Suisse forecasts 21
  • 21. But Chinese supply may not shrink back as readily as many expectUS$/t delivered to mill Peak production @ approx. 415 Mt/y  40% of China’s domestic IO supply is “loss making” at prices below US$100/t Forecast 2012 domestic demand (340 Mt)  New mines targeted to come into production under current 5Yr Plan  25% of supply today is “captive”  Further displacement by imports Cumulative Supply (%) will require lower prices  Major players have cash costs below US$55/t CFR China  Committed expansions running far ahead of demand  Recipe for a price war beyond 2013-14?Source: CMMA, Steelease, Credit Suisse 22
  • 22. Thermal CoalRange-bound 23
  • 23. A depressed physical market has led to range-bound paper trading The market has been trapped at a low level With paper trading three distinct ranges US$/t, Spot US$/t, Front calendar swap 150 140 Newc RBCT ARA API#2 Y1 Swap API#4 Y1 Swap Newc Y1 Swap 135 140 130 130 125 120 120 115 110 110 100 105 100 90 95 80 90 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12Source: Credit Suisse, the BLOOMBERG PROFESSIONALTM service, McCloskey 24
  • 24. A surfeit of supply means more than just Chinese production cuts are required to balance the market US thermal coal exports Chinese raw coal production Mt, monthly SA Mt, monthly SA 400 7 6 350 5 300 4 250 3 200 2 1 150 0 100 2005 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012Source: Credit Suisse, Customs Data, SxCoal 25
  • 25. And with the China arb a mid-term cap, we also need stronger Chinese IP growth China thermal coal import arb Soft Chinese IP in 2012 US$/t (lhs), % (rhs) % Seaborne South China CFR QHD South China CFR Discount (rhs) MoM Annualized YoY (lhs) Jan 02 - Dec 07 Avg 150 16% 25% 140 14% 20% 12% 130 10% 15% 120 8% 110 10% 6% 100 4% 5% 90 2% 80 0% 0% Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 2006 2007 2008 2009 2010 2011 2012Source: Credit Suisse, McCloskey, China NBS 26
  • 26. Only then can prices recover and volatility return to the market (US$/t) Coal unmoved by QE3 But should be back in balance by 2014 Index, 13/09/12 = 100 Mt 120 Copper 3-Month API2 Front Cal Iron Ore Front Q 115 2012 2013 2014 2015 World Import Demand 828 867 930 984 110 % change 5.6% 4.7% 7.3% 5.8% World Export Supply 845 883 933 984 105 % change 7.8% 4.5% 5.7% 5.5% Surplus/ Deficit 17 16 3 0 100 As a % of Exports 2.0% 1.8% 0.3% 0.0% 95 13/ 09/ 2012 20/ 09/ 2012 27/ 09/ 2012Source: Credit Suisse, the BLOOMBERG PROFESSIONALTM service, Customs Data, Company Data 27
  • 27. LME CommoditiesFundamental variationPhotos: Andrew Shaw / Credit Suisse 28
  • 28. LME Metals Price Forecasts 2012 2013 LT Q1 Q2 Q3 Q4 Yr Avg Q1 Q2 Q3 Q4 Yr Avg 2014 2015 (2012$)Copper 8,329 7,860 7,720 7,800 7,927 8,000 8,300 8,000 7,700 8,000 7,500 7,000 5,500Aluminium 2,188 1,987 1,929 2,020 2,031 2,100 2,150 2,200 2,250 2,175 2,350 2,400 2,250Nickel 19,654 17,157 16,354 18,000 17,791 18,500 19,000 19,000 19,000 18,875 20,000 21,000 20,000Lead 2,097 1,979 1,983 2,130 2,047 2,200 2,300 2,350 2,450 2,325 2,625 3,000 2,000Zinc 2,031 1,930 1,892 2,000 1,963 2,100 2,150 2,200 2,250 2,175 2,425 2,800 1,900Tin 22,953 20,550 19,287 20,000 20,698 21,000 21,000 21,500 22,500 21,500 23,000 24,000 20,000Source: Credit Suisse forecasts 29
  • 29. Copper prices – best is behind us US$/t $11,000 Copper 3M Quarterly Avg Forecast $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 30
  • 30. Aluminium prices – steady, but unexciting, gains US$/t $3,700 Aluminum 3M Quarterly Avg Forecast $3,200 $2,700 $2,200 $1,700 $1,200 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 31
  • 31. Supply dynamics impacts price outlook for Ni, Zn & Pb Zinc prices and forecast (US$/t) $4,800 Nickel prices and forecast (US$/t) Zinc 3M Quarterly Avg Forecast $4,300$55,000 $3,800 Nickel 3M Quarterly Avg Forecast $3,300$50,000 $2,800$45,000 $2,300 $1,800$40,000 $1,300$35,000 $800 2005 2006 2007 2008 2009 2010 2011 2012 2013$30,000 Lead prices and forecast (US$/t) $4,000 Lead 3M Quarterly Avg Forecast$25,000 $3,500$20,000 $3,000$15,000 $2,500 $2,000$10,000 $1,500 $5,000 $1,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 $500 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 32
  • 32. CopperVulnerable without real demand improvement 33
  • 33. Copper market moving into surplus ktSource: Brook Hunt forecasts, Credit Suisse forecasts 34
  • 34. Large increase in mine supply expected … but risk of further delays kt CuSource: Brook Hunt forecasts, Credit Suisse forecasts 35
  • 35. South America remains the mainstay of production, but mine supply has grown in China and Africa Kt CuSource: Wood Mackenzie, Credit Suisse 36
  • 36. China’s copper demand has stagnated and stocks are ampleSource: the BLOOMBERG PROFESSIONALTM service, Brook Hunt, Credit Suisse 37
  • 37. Western markets are much tighter Inventories are ample in China, but not in the Leading to a tight market in the West, West vulnerable to squeezes kt Premiums, US$/t Little accessible LME metal ktSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 38
  • 38. Capex intensity is rising alarmingly: Mid-term incentive price now US$6,500/tSource: Brook Hunt, Credit Suisse 39
  • 39. AluminiumHigh premiums, vulnerable prices 40
  • 40. Aluminium smelters no longer under pressure Ex-China smelters cushioned by record Chinese smelters protected by higher premiums domestic prices, subsidies, integration US$/t US$/tSource: Brook Hunt, Credit Suisse 41
  • 41. Inventories increasingly difficult to access Financing yields remain attractive, Financing deals and warehouse queues although they have declined prevent access to most inventories Annualized yield, rolling 12-month to 3-month LME inventories, kt contractsSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 42
  • 42. Lengthy queues on LME have led to record premiums Long queues have effectively made Premiums are at record highs, diminishing metal in large warehouses unavailable smelter cutbacks from low prices (US$/t)Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 43
  • 43. Growing Chinese production leading to higher net exports and rising stocks Chinese aluminium production Aluminium and product exports remain expanding on the back of large new strong despite an unfavourable arb … smelters (Mt) 2004 2005 Arbitrage (lhs, US$/t) 2008 2006 2007 2009 product exports (rhs,2012 Al & 2010 2011 kt) -1000 400 LME Expensive -800 350 -600 300 -400 250 -200 200 0 150 200 100 400 50 LME Cheap 600 0 …Rising SHFE stocks (kt) 500 450 400 350 300 250 200 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: CEIC, the BLOOMBERG PROFESSIONALTM service, Credit Suisse 44
  • 44. NickelShort window for higher prices 45
  • 45. Nickel ramp-ups have hit road-blocks CapacityProject Country Operator Type (kt) Start-up CommentsBarro Alto Brazil Anglo FeNi 40 Mar-2011 Full capacity targeted by end of 2012. Maintenance on line 2 scheduled for H2; 5.4 kt produced in Q2 after mainenance on line 1 in June; 6.6 kt produced in Q1Onca Puma Brazil Vale FeNi 53 Mar-2011 Production halted following breakdowns in 2 furnaces; 2nd line began production in January; 2 kt produced in Q2 after 4 kt in Q1; legal troublesTaguang Myanmar Taguang FeNi 22 Apr-2011 Refinery difficulties Taung NickelRavensthorpe Australia First Quantum HPAL 39 Oct-2011 First Quantum forecasting 33-36 kt in 2012; 8.1 kt produced in Q2, 8.6 kt in Q1Ramu Papua New MCC HPAL 31 Mar-2012 First production achieved in early March; full capacity Guinea targeted in mid-2013VNC (Goro) New Caledonia Vale HPAL 60 Q1 2012 Force majeure with acid plant repairs expected to take months; 1.1 kt nickel oxide and 2.3 kt nickel hydroxide cake in Q1Ambatovy Madagascar Sherritt HPAL 60 Sep-2012 Obtained 6 month operating permit in September; commercial production targeted for H1 2013Koniambo New Caledonia Xstrata FeNi 60 H2 2012 Full capacity targeted by 2014Source: Credit Suisse, Company reports 46
  • 46. NPI likely to rebound with higher prices Chinese nickel production fell in But prices have rebounded and NPI is response to low prices (kt) once again attractive vs. refined nickel (RMB/t)Source: CEIC, Zijin Steel, the BLOOMBERG PROFESSIONALTM service, Credit Suisse 47
  • 47. Demand for nickel has Been the weakest of any LME metal H1 stainless steel production, YoY growthSource: International Stainless Steel Forum, Credit Suisse 48
  • 48. Nickel market is moving into growing supply surplus Forecast production from eight major Nickel market balance (kt) projects (kt)Source: Brook Hunt, Credit Suisse 49
  • 49. ZincSqueezed today, but more surpluses tomorrow 50
  • 50. Zinc is increasingly resembling aluminium Attractiveness of zinc financing relative LME metal availability is very poor to aluminium has improved kt Annualized yield, rolling 12-month to 3-month contracts 1,200 Johor 1,000 Cancelled Johor On Warrant Vlissingen 800 Cancelled Vlissingen On Warrant Detroit 600 Cancelled Detroit On Warrant 400 New Orleans Cancelled New Orleans On Warrant 200 ROW Cancelled ROW On Warrant 0 2009 2010 2011 2012Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 51
  • 51. The Chinese market has been tighter than expected Chinese smelter production has been Chinese imports are likewise likely to fall weak, but should rebound with prices back with less positive import arbitrage ktSource: CEIC, the BLOOMBERG PROFESSIONALTM service, Credit Suisse 52
  • 52. Mine closures have been delayed, pushing back prospect of annual market deficits ktSource: Brook Hunt, Credit Suisse 53
  • 53. LeadMoving into the spotlight 54
  • 54. Lead market has been squeezed • Mild winter and fall in battery scrap prices leads to less scrap in 1 the US • 400 kt/y of new US secondary capacity added, pushing up 2 scrap prices • Improving end-use demand and fire at 130 kt/y Herculaneum 3 smelter tightens US refined market • US premiums rise, far above those in the rest of the world, 4 compensating smelters for scrap prices • Consumers and traders look to source lead from the rest of the 5 world to supply tight US market • Major traders lock up more LME metal and limit access to LME 6 stocksSource: Credit Suisse 55
  • 55. Tight physical market, particularly in the US US scrap prices bounced strongly from The tight US market has dragged up Q4 2011 decline premiums in the rest of the world US used battery prices; USc/lb US$/tSource: Metal Bulletin, Reuters, the BLOOMBERG PROFESSIONALTM service, Credit Suisse 56
  • 56. LME stocks have fallen, and little of the remainder is accessible LME on warrant inventory, ktSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 57
  • 57. Lead demand has been the strongest among LME metals Chinese lead battery production very strong 2012 demand growth outpacing other KVAH, seasonally adjusted LME metals YoYSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 58
  • 58. Supply-side issues are key swing variables Chinese closures could tighten market Large mine closures expected to shift in short run market into deficit in mid-term kt ktSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 59
  • 59. TinSqueezed, but supply returning 60
  • 60. Supply declined in response to low prices Global refined tin production, ktSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 61
  • 61. LME inventories have plummeted On warrant LME inventories, ktSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 62
  • 62. And the front of the LME curve has been squeezed LME cash – 3 month, US$/tSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 63
  • 63. Bulk CommoditiesMixed fortunesPhotos: Andrew Shaw / Credit Suisse 64
  • 64. Other CommoditiesPrecious Metals 65
  • 65. Gold: Stronger for longer US$/oz $2,100 Gold (Spot) Quarterly Avg Forecast $1,900 $1,700 $1,500 $1,300 $1,100 $900 $700 $500 $300 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 66
  • 66. Gold: Bounce back towards LT trend line US$/oz $2,000 Gold Price Expected Value $1,750 Upper 3 Std Dev. $1,500 Lower 3 Std Dev. $1,250 $1,000 $750 $500 $250 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 67
  • 67. But short-term rally in yields likely $2,000 -2.0 Gold, $/oz (LHS) $1,750 US 5 year TIPS, % (scale inverted) -1.0 $1,500 0.0 $1,250 1.0 $1,000 2.0 $750 Daily correlation 3.0 $500 : -0.945 $250 4.0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 68
  • 68. Longer term, still bullish US Treasuries  Fed not finished: QE 3.5 possibly as soon as December – Ongoing purchases of Treasuries after Twist expires – $45bn/month baseline expectation – Balances MBS purchases in middle of curve, still adequate liquidity for Fed to buy more at back end  Further adjustments to guidance: More explicit linking of rates to unemployment + inflation – Shift in view of former hawk, Kotcherlakota, notable (unemployment target of 5.5% as long as 2-year forward inflation forecast <2.25%)  Fed appears prepared to accept political risks of further balance sheet expansionSee: Credit Suisse Global Week ly Snapshot, 28 September 2012 69
  • 69. Silver outperformance should reverse if markets correct 90 3.0 80 2.0 1.0 70 Silver outperforming Conditions improving 0.0 60 -1.0 50 -2.0 40 -3.0 30 Gold: silver ratio (lhs) -4.0 Financial Conditions Index 20 -5.0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 70
  • 70. PGMs – Correction before recovery US$/oz$900 Palladium (Spot) Quarterly Avg Forecast $2,500 Platinum (Spot) Quarterly Avg Forecast $2,250$700 $2,000 $1,750$500 $1,500 $1,250$300 $1,000 $750$100 $500 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 71
  • 71. South Africa / positioning, not demand, driving price South Africa = 75% of platinum mine supply Labour relations at a nadir, complicated by inter-union rivalry, politics, and recent deaths Tensions likely to remain high through Q4 Estimated production losses to date = 460,000 oz and growing Knock-on effect on palladium output 72
  • 72. More closures required to balance the market  At current metal prices, further closure of capacity is inevitable in our view, and necessary  Recent rand relief likely to be short-lived; the industry needs to be restructured for the long termSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 73
  • 73. Auto industry rebound losing momentum and largely a gasoline (Pd) storySource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 74
  • 74. Still no clear arbitrage opportunity between Pt & PdSource: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 75
  • 75. Other CommoditiesOil & Gas 76
  • 76. Brent and WTI forecast decksProposed new CS Base Case --Range of $100-120. No high conviction fundam entals direction dow n or up from that. Avg annual price rises one m ore year, 2013 and com pletes 11-year uptrend; then sets in decline 2012 2013 2014 2015 Long term Oil Actuals & Forecasts ($US/b) 2010* 2011* Q1* Q2* Q3* Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Yr Avg (f) (real)Brent 83.13 109.97 118.28 108.95 109.62 105.00 110.46 110.00 115.00 115.00 120.00 115.00 115.00 110.00 110.00 105.00 110.00 100.00 90.0 previous 95.00 95.00 104.35 100.00 100.00 105.00 105.00 102.50 110.00 115.00 115.00 120.00 115.00 100.00 90.00 Net Change 14.60 10.00 6 .10 10.00 15.00 10.00 15.00 12 .5 0 5.00 -5.00 -5.00 -15.00 - 5 .0 0 0 .0 0 0.00 % Change 15% 1% 1 6% 10% 15% 10% 14% 12 % 5% -4% -4% -13% -4% 0% 0% Consensus* 108.30 111.3 109.60 108.00 110.40 109.30 110.20 113.2 111.00 Net Difference -3.30 - 0 .8 0 0.40 7.00 4.60 10.70 4 .8 - 3 .2 - 11.0 % Difference -3% - 1% 0% 6% 4% 10% 4% -3% - 10 % Fw d Curve* 112.63 112.37 105.12 109.67 108.10 106.52 107.35 99.74 103.61 102.24 100.90 101.62 96.98 Net Difference -7.60 - 1.9 0 4.90 5.30 6.90 13.50 7 .6 0 15.30 6.40 7.80 4.10 8 .4 0 3 .0 0 % Difference -7% -2% 5% 5% 6% 13% 7% 15% 6% 8% 4% 8% 3%WTI 79.61 90.70 102.91 93.43 92.51 89.00 94.46 97.00 106.00 108.00 113.00 106.00 107.00 102.00 102.00 97.00 102.00 93.50 83.5 previous 84.00 82.00 90.58 91.00 95.00 101.00 101.00 97.00 106.00 111.00 111.00 1 6.00 1 111.00 94.00 84.0 Net Change 8.50 7.00 3 .9 0 6.00 1 .00 1 7.00 12.00 9 .0 0 1.00 -9.00 -9.00 -19.00 - 9 .0 0 - 0 .5 0 -0.50 % Change 10% 9% 4% 7% 12% 7% 12% 9% 1 % -8% -8% -16% -8% - 1% -1% Consensus* 93.80 95.66 97.70 97.80 101.00 100.80 101.50 102.80 104.50 Net Difference 1 .20 1 - 1.2 0 -0.70 8.20 7.00 12.20 4 .5 0 - 0 .8 0 - 11.0 0 % Difference 12% - 1% -1% 8% 7% 12% 4% - 1% - 11% Fw d Curve* 95.33 96.04 94.72 96.83 96.46 95.58 95.90 99.74 93.73 92.80 97.86 96.03 97.19 Net Difference -6.30 - 1.6 0 2.30 9.20 1 .50 1 17.40 10 .10 7.30 8.30 9.20 -0.90 6 .0 0 - 3 .7 0 % Difference -7% -2% 2% 10% 12% 18% 11% 7% 9% 10% -1% 6% -4%WTI - Brent Spread -3.52 -19.27 -15.37 -15.51 -17.11 -16.00 -16.00 -13.00 -9.00 -7.00 -7.00 -9.00 -8.00 -8.00 -8.00 -8.00 -8.00 -6.50 -6.50Disaster scenario. Big assum ption: Policy error and/or other catalysts m elt dow n confidence. A true credit crunch ratchets activity dow n fast. Dem and plum m ets. Also, next recovery takes longer to achieve. 2012 2013 2014 2015 Long termOil Actuals & crisis bear-case ($US/b) 2010* 2011* Q1* Q2* Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Yr Avg (f) (real)Brent 83.13 109.97 118.28 108.95 109.62 55.00 98.00 55.00 70.00 70.00 80.00 69.00 80.00 80.00 90.00 90.00 85.00 90.00 90.00WTI 79.61 90.70 102.91 93.43 92.51 45.00 83.00 50.00 61.00 63.00 73.00 62.00 72.00 72.00 82.00 82.00 77.00 83.50 83.50WTI - Brent Spread -3.52 -19.27 -15.37 -15.51 -17.11 -10.00 -15.00 -5.00 -9.00 -7.00 -7.00 -7.00 -8.00 -8.00 -8.00 -8.00 -8.00 -6.50 -6.50Econom ic crisis is not averted entirely. Dem and grow th erodes further. Supply side grow th, m eanw hile, accelerates. Much like w ith US natgas, m arket underestim ates upstream efficiency gains and potential. 2012 2013 2014 2015 Long term Oil Actuals & Forecasts ($US/b) 2010* 2011* Q1* Q2* Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Yr Avg (f) (real)Brent 83.13 109.97 118.28 108.95 109.62 75.00 103.00 70.00 75.00 85.00 90.00 80.00 85.00 90.00 90.00 80.00 86.00 80.00 75.00Scarcity is not dead. Global grow th resum es a little quicker to a pace nearer that of 2002-2008. And on the supply side declines of the base keep upw ard pressure on the right side of the cost-curve. 2012 2013 2014 2015 Long term Oil Actuals & Forecasts ($US/b) 2010* 2011* Q1* Q2* Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Yr Avg (f) (real)Brent 83.13 109.97 118.28 108.95 109.62 115.00 113.00 115.00 120.00 120.00 120.00 119.00 125.00 125.00 125.00 125.00 125.00 140.00 110.00Mideast supply shock. Markets price for accute scarcity, as 2m b/d is offline for 2 m onths. SPR et al released m oderates prices. Dem and plunge does dam age too. Prices recover, only for intense supply respond to underm ine 2012 2013 2014 2015 Long term Oil Actuals & Forecasts ($US/b) 2010* 2011* Q1* Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Yr Avg (f) (real)Brent 83.13 109.97 118.28 108.95 109.62 150.00 122.00 130.00 100.00 90.00 90.00 103.00 110.00 125.00 125.00 120.00 120.00 100.00 90.00Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 77
  • 77. How we stand vs. the consensus Our 2012 oil demand and how we differ on the growth vs IEA (Mb/d) supply side (Mb/d) 1.7 Credit Suisse Consensus (IEA) 1.0 Credit Suisse Consensus (IEA) 0.8 1.2 0.6 0.7 0.4 0.2 0.2 0.0 (0.3) (0.2) (0.4) (0.8) Non-OPEC Call on OPEC Crude and Stocks 2013 Global OECD Non-OECD CSBMI vs. global PMI 2 CSBMI peaked Jan12 PMI peaked Apr12 62 1 57 0 52 -1 47 42 -2 CSBMI troughed Jun12 PMI troughed Aug12? 37 -3 CSBMI, 3m ma 32 Global PMI Mfg. New Orders, rhs -4 27 -5 22 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 01/08 01/09 01/10 01/11 01/12Source: the BLOOMBERG PROFESSIONALTM service, IEA, Credit Suisse 78
  • 78. 0 -400 -300 -200 -100 100 200 300 400 500 Japan India China Brazil Saudi Arabia Other ME Other Asia Other Africa South Korea Thailand Venezuela Australia Iran 2012 ytd Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse Argentina South Africa Mexico forecast for 2013 Chile France Egypt 2013E Canada Germany UK Other Europe Italy USA Oil demand yoy deltas: Data for 2012 through July,79
  • 79. Demand (Mb/d) Global Emerging Markets 92 monthly SA SA 3mth MA 45 monthly SA 3mth Avg SA 91 44 90 43 89 42 88 41 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 OECD China 48 monthly SA 3mth Avg SA 10.5 monthly SA 3mth Avg SA 47 10.0 46 9.5 45 44 9.0 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 80
  • 80. Supply (kb/d) North American flows have Monthly crude oil production grown fast, but declines from non-OPEC 43 elsewhere undermine totals 1800 1800 Non-OPEC ex. North America North America Non-Opec 42 1400 1400 41 1000 1000 40 600 600 39 200 200 38 -200 -200 -600 -600 37 -1000 -1000 36 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Total US oil production Shale rig count and total wells (excluding NGL) drilled 12,000 US Oil Production Oil Shale Rig Count 1400 18,000 1,400 10,000 1200 1,200 16,000 1000 1,000 8,000 14,000 800 800 6,000 12,000 600 600 4,000 Wells Drilled 400 10,000 US Shale Oil Rig 400 2,000 200 Count 8,000 200 0 0 2000 2004 2008 2012E 2016E 2020E 6,000 0 2011 2013 2015 2017 2019 2021Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 81
  • 81. Stocks (Mb) Crude oil Key products, such as middle inventories remain distillates, remain in short1060 adequate 5y Max Min 5yr avg 2012 2011 220 supply Surplus onland floating storage1030 1801000 140 100 970 60 940 20 910 -20 880 -60 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 82
  • 82. Iran’s currency collapses, what’s next? Rial/US$ 37,000 Riots in Tehran as Rial plunges Oct 2,3 33,000 Official Bank Rate Unofficial Market Rate 29,000 EU and US sanctions 25,000 fully implementated on July 1 EU import embargo 21,000 U.S. CBI Sanctions 17,000 13,000 9,000 Sep-11 Oct-11 Nov-11Dec-11 Jan-12 Feb-12Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 83
  • 83. Brent US$/b $160 Brent front month Quarterly avg forecasts $140 $120 $100 $80 $60 $40 $20 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 84
  • 84. Global LNG remains structurally tight Global Gas Benchmarks – APAC prices Summer downturn in Japanese LNG were weak in Q3 imports was partly to blame, but it shouldn’t US$/MMbtu last$20 14 Bcf/d$18 13$16 12$14 11$12 10$10 9 $8 8 $6 $4 7 $2 6 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec JKM HH Prompt NBP Prompt Jap LNG Imp Price 2009 2010 2011 2012 Source: the BLOOMBERG PROFESSIONALTM service, Platts, GTIS, Credit Suisse 85
  • 85. US natural gas – The good, the bad and the ugly Slowing US supply growth may turn to Coal-to-gas switching is moving lower declines in 2013 (Bcf/d vs. rigs) as prices approach US$3.501800 68 14 yoy change change vs 5-yr avg1600 66 12 No supply growth in 2012,1400 but no declines either 64 101200 621000 60 8800 58 6600 56 4400 54200 52 2 0 50 0 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Jan Mar May Jul Sep dry gas production Gas Rigs oil rigs 3,750 The current gas 3,250 surplus should improve in 2013, but 2,750 (In Bcf/d) Production CS Base Case -1.00 winter risks remain 2,250 Imports/ (Exports) LNG Canada -0.10 -0.30 large Mexico Demand -0.60 Power Gen 0.10 1,750 Industrial 0.10 "Residual" -2.20 1,250 Nov Dec Jan Jan Mar weather range 2012-2013 Fcst Source: EIA, Bentek Energy, NOAA, Credit Suisse 86
  • 86. UK (NBP) Natural gas – anaemic demand, ample supply Secular trends and cyclical headwinds Meanwhile, generation economics have kept UK gas demand low favour coal the largest margin YTD Mcm GBp/MWh450 21 UK Clean Dark UK Clean Spark Coal favored400 18 15350 12300 9250 6200 3150 0100 Gas unfavored Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -3 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 5 yr range Avg 2011 2012Source: the BLOOMBERG PROFESSIONALTM service, National Grid, Credit Suisse 87
  • 87. Natural Gas US$/MMbtu $18 NYMEX Henry Hub Quarterly Avg Forecast $16 $14 $12 $10 $8 $6 $4 $2 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: the BLOOMBERG PROFESSIONALTM service, Credit Suisse 88
  • 88. Summary of Price Forecasts – 1 2011 2012 2013 2014 2015 LT Yr Avg (a) Q1 (a) Q2 (a) Q3 (a) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Yr Avg (f) Yr Avg (f) (real)Base MetalsCopper (US$/MT) ▲ 8,887 8,329 7,860 7,720 7,800 7,927 8,000 8,300 8,000 7,700 8,000 7,600 7,500 7,500 7,400 7,500 7,000 5,500 previous 8,887 8,329 7,860 7,300 7,500 7,747 7,800 8,300 8,000 7,700 7,950 7,500 7,500 7,500 7,000 5,500Aluminium (US$/MT) ▲ 2,424 2,188 1,987 1,929 2,020 2,031 2,100 2,150 2,200 2,250 2,175 2,300 2,350 2,350 2,400 2,350 2,400 2,250 previous 2,424 2,188 1,987 1,920 2,000 2,024 2,050 2,150 2,200 2,250 2,163 2,300 2,300 2,350 2,400 2,250Alumina spot (US$/MT) ▲ 378 317 317 316 330 320 350 350 375 375 363 400 400 400 400 400 415 400 previous 389 317 317 310 315 315 315 325 340 340 330 400 400 400 415 400Nickel (US$/MT) - 23,015 19,654 17,157 16,354 18,000 17,791 18,500 19,000 19,000 19,000 18,875 19,500 20,000 20,000 20,500 20,000 21,000 20,000 previous 23,015 19,654 17,157 17,000 18,000 17,953 18,500 19,000 19,000 19,000 18,875 20,000 20,000 20,000 21,000 20,000Lead (US$/MT) ▲ 2,405 2,097 1,979 1,983 2,130 2,047 2,200 2,300 2,350 2,450 2,325 2,550 2,600 2,650 2,700 2,625 3,000 2,000 previous 2,405 2,097 1,979 1,850 1,900 1,957 2,000 2,100 2,200 2,200 2,125 2,500 2,500 2,500 3,000 2,000Zinc (US$/MT) ▲ 2,220 2,031 1,930 1,892 2,000 1,963 2,100 2,150 2,200 2,250 2,175 2,350 2,400 2,450 2,500 2,425 2,800 1,900 previous 2,220 2,031 1,930 1,800 1,850 1,903 1,900 2,000 2,050 2,100 2,013 2,250 2,400 2,400 2,800 1,900Tin (US$/MT) ▲ 26,191 22,953 20,550 19,287 20,000 20,698 21,000 21,000 21,500 22,500 21,500 23,000 23,000 23,000 23,000 23,000 24,000 20,000 previous 26,191 22,953 20,550 18,500 19,500 20,376 20,500 21,000 21,500 22,500 21,375 23,000 23,000 23,000 24,000 20,000Precious MetalsGold (US$/oz) ▲ 1,571 1,689 1,612 1,653 1,760 1,680 1,790 1,820 1,870 1,880 1,840 1,820 1,750 1,730 1,690 1,750 1,500 1,300 previous 1,571 1,690 1,615 1,670 1,760 1,680 1,820 1,760 1,680 1,600 1,720 1,500 1,500 1,500 1,400 1,300Silver (US$/oz) ▲ 35.20 32.59 29.48 29.94 32.00 31.00 33.80 33.70 32.80 31.90 33.10 31.40 31.30 31.50 31.30 31.40 26.30 22.40 previous 35.20 32.70 29.60 28.80 30.90 30.50 32.50 30.30 28.00 25.80 29.20 25.40 25.40 25.40 23.30 21.70Palladium (US$/oz) ▼ 730 685 625 613 640 640 660 680 720 730 700 760 790 810 830 800 850 900 previous 730 685 625 610 650 640 690 710 720 750 720 800 800 800 840 900Platinum (US$/oz) ▲ 1,720 1610 1510 1500 1620 1,560 1660 1680 1730 1760 1710 1750 1800 1820 1840 1,800 1,850 1,900 previous 1,720 1,610 1,510 1,470 1,560 1,540 1,630 1,660 1,690 1,730 1,680 1,800 1,800 1,800 1,850 1,900Rhodium (US$/oz) ▼ 2,010 1460 1500 1175 1200 1,330 1400 1550 1750 1850 1640 1900 2000 2200 2500 2,150 2,500 3,000 previous 2,010 1,460 1,500 1,350 1,400 1,430 1,500 1,550 1,750 1,950 1,690 2,200 2,500 2,500 2,800 3,200MineralsZircon bulk (US$/t) ▼ 1,880 2500 2500 2500 2400 2,480 2300 2200 2200 2100 2,200 2,000 1,900 1,900 1,800 1,900 1,700 1,500 previous 1880 2,500 2,500 2,500 2,500 2500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 1,875 1,500Rutile bulk (US$/t) - 1,055 2400 2400 2400 2400 2,400 2000 2000 2000 2000 2,000 1,750 1,750 1,400 1,400 1,575 1,125 1,000 previous 1055 2,400 2,400 2,400 2,400 2400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 1,650 1,000Synthetic Rutile (US$/t) - 858 2050 2050 2050 2050 2,050 1850 1850 1850 1850 1,850 1,625 1,625 1,300 1,300 1,463 1,025 890 previous 858 2,050 2,050 2,050 2,050 2050 2,050 2,050 2,050 2,050 2,050 2,050 2,050 2,050 1,450 890Ilmentite - sulphate 54% (US$/t) - 209 325 325 300 300 313 300 300 300 300 300 250 250 250 250 250 225 200 previous 209 325 325 350 350 338 350 350 350 350 350 300 300 300 250 200Titanium Slag - SA Chlor 86% (US$/t) - 798 1750 1750 1750 1750 1,750 1700 1700 1700 1700 1,700 1,500 1,500 1,200 1,200 1,350 925 760 previous 798 1,750 1,750 1,750 1,750 1750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,225 760AgricultureWheat-CBOT (US¢/bu) ▲ 710 643 641 869 850 750 825 800 750 700 770 700 675 650 650 670 650 600 previous 710 643 641 800 750 710 750 725 700 700 720 650 650 650 600 600Corn-CBOT (US¢/bu) ▲ 680 641 618 781 725 690 700 625 550 550 610 550 525 500 500 520 500 500 previous 680 641 618 700 700 660 650 625 550 550 590 500 500 500 500 500Soybeans-CBOT (US¢/bu) ▲ 1,320 1,273 1,425 1,674 1,500 1,470 1,450 1,450 1,300 1,300 1,380 1,250 1,250 1,200 1,200 1,230 1,200 1,100 previous 1,320 1,273 1,425 1,550 1,500 1,440 1450 1400 1280 1220 1,340 1,200 1,200 1,200 1,200 1,100Source: Credit Suisse forecasts 89
  • 89. Summary of Price Forecasts – 2 2011 2012 2013 2014 2015 LT Yr Avg (a) Q1 (a) Q2 (a) Q3 (a) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Q1 (f) Q2 (f) Q3 (f) Q4 (f) Yr Avg (f) Yr Avg (f) (real)EnergyBrent (US$/bbl) ▲ 109.97 118.28 108.95 109.62 105.00 110.00 110.00 115.00 115.00 120.00 115.00 115.00 110.00 110.00 105.00 110.00 100.00 90.00 previous 109.97 118.50 108.95 95.00 95.00 104.00 100.00 100.00 105.00 105.00 103.00 110.00 115.00 115.00 100 90.00WTI (US$/bbl) ▲ 90.70 102.91 93.43 92.51 89.00 94.00 97.00 106.00 108.00 113.00 106.00 107.00 102.00 102.00 97.00 102.00 93.50 83.50 previous 90.70 102.91 93.43 84.00 82.00 91.00 91.00 95.00 101.00 101.00 97.00 106.00 111.00 111.00 94 84.00U.S. Natural Gas (US$/MMBtu) 4.07 2.77 2.26 2.81 3.10 2.74 3.60 3.40 3.80 4.00 3.70 4.40 4.20 4.20 4.40 4.30 4.50 4.50 previous 4.07 2.77 2.26 2.50 3.10 2.66 3.60 3.40 3.80 4.00 3.70 4.40 4.20 4.30 4.50 4.50U. K. NBP (GBp/Therm) - 56.40 57.50 56.00 57.00 65.00 59.00 65.00 58.00 58.00 68.00 62.00 73.00 63.00 63.00 73.00 68.00 66.00 50.60 previous 56.40 57.50 56.00 53.00 65.00 58.00 65.00 58.00 58.00 68.00 62.00 73.00 63.00 68.00 66.00 50.60Iron OreIron ore fines - 62% (China CFR) US$/t ▼ 168 142 140 112 110 126 120 115 110 100 111 95 95 95 95 95 90 90 previous 168 142 140 135 140 139 145 150 145 140 145 135 130 128 115 90Iron ore fines - (China CFR) US¢/dmtu 271 229 225 181 177 203 194 185 177 161 179 153 153 153 153 153 145 145 previous 271 229 225 218 226 224 234 242 234 226 234 218 210 206 185 145Coking Coal (contract)Hard coking coal (US$/t) ▼ 289 235 210 225 170 210 170 170 175 175 173 180 180 185 185 183 190 170 previous 289 235 210 225 215 221 210 210 210 210 210 205 205 205 200 170Semi soft coal (US$/t) 212 157 141 141 117 139 119 119 123 123 121 126 126 130 130 128 133 130 previous 212 157 141 141 144 146 141 141 141 141 141 137 137 137 134 134PCI coal (US$/t) 223 172 153 164 125 154 125 125 128 128 127 131 131 135 135 133 139 130 previous 223 172 153 162 155 161 151 151 151 151 151 148 148 148 144 134Thermal CoalThermal Coal (Newcastle FOB) US$/t ▼ 123 113 95 86 90 96 95 95 100 100 98 105 105 110 110 108 118 110 previous 123 113 95 90 95 98 95 100 100 105 100 105 110 110 120 120Thermal Coal (ARA CIF) US$/t 122 100 90 91 90 93 95 95 100 100 98 105 105 110 110 108 118 110 previous 122 100 90 90 95 94 95 100 100 105 100 105 110 105 120 120Thermal Coal (RBCT FOB) US$/t 117 105 94 89 89 94 94 94 99 99 97 104 104 109 109 107 117 110 previous 117 105 94 89 94 96 94 99 99 104 99 104 109 109 119 120UraniumUranium spot (US$/t) ▼ 57 52 52 48 48 50 52 55 58 60 56 65 65 65 65 65 70 65 previous 57 52 52 52 54 53 55 55 60 65 59 65 65 65 70 65Source: Credit Suisse forecasts 90
  • 90. Disclosure AppendixAnalyst CertificationI, Andrew Shaw, certify that (1) the views expressed in this report accurately reflect my personal views about all of the sub companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this jectreport.Important DisclosuresCredit Suisses policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail, please refer to Credit Suisses Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.htmlCredit Suisse’s policy is to publish research reports as it deems appropriate, based on developments with the subject issuer, the sector or the market that may have a material impact on the research views or opinions stated herein.The analyst(s) involved in the preparation of this research report received compensation that is based upon various factors, including Credit Suisses total revenues, a portion of which are generated by Credit Suisses Investment Banking and Fixed Incom Divisions. eCredit Suisse may trade as principal in the securities or derivatives of the issuers that are the subject of this report.At any point in time, Credit Suisse is likely to have significant holdings in the securities mentioned in this report.As at the date of this report, Credit Suisse acts as a market maker or liquidity provider in the debt securities of the subject issuer(s) mentioned in this report.For important disclosure information on securities recommended in this report, please visit the website athttps://firesearchdisclosure.credit-suisse.com or call +1-212-538-7625.For the history of any relative value trade ideas suggested by the Fixed Income research departmentas well as fundamental recommendations provided by the Emerging Markets Sovereign Strategy Groupover the previous 12 months, please view the document at http://research-and-analytics.csfb.com/docpopup.asp?ctbdocid=330703_1_en. Credit Suisse clients with access to the Locus website may refer to http://www.credit-suisse.com/locus.For the history of recommendations provided by Technical Analysis, please visit the website at http://www.credit-suisse.com/techanalysis.Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.Emerging Markets Bond Recommendation DefinitionsBuy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate.Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.Corporate Bond Fundamental Recommendation DefinitionsBuy: Indicates a recommended buy on our expectation that the issue will be a top performer in its sector.Outperform: Indicates an above-average total return performer within its sector. Bonds in this category have stable or improving credit profiles and are undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expectedto outperform on a total-returnbasis. These bonds may possess price risk in a volatile environment.Market Perform: Indicates a bond that is expected to return average performance in its sector.Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or they may be stable credits that, we believe, are overvalued or rich relative to the sector.Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector.Restricted: In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisses engagement in an investment banking transaction and in certain othercircumstances.Not Rated: Credit Suisse Global Credit Research or Global Leveraged Finance Research covers the issuer but currently does not offer aninvestment view on the subject issue.Not Covered: Neither Credit Suisse Global Credit Research nor Global Leveraged Finance Research covers the issuer or offers an investment view on the issuer or any securities related to it. Any communication from Research on securities or companies that Credit Suisse does not cover isfactual or a reasonable, non-material deduction based on an analysis of publicly available information.Corporate Bond Risk Category DefinitionsIn addition to the recommendation, each issue may have a risk category indicating that it is an appropriate holding for an "average" high yield investor, designated as Market, or that it has a higher or lower risk profile, designated as Speculative and Conservative, respectively.Credit Suisse Credit Rating DefinitionsCredit Suisse may assign rating opinions to investment-grade and crossover issuers. Ratings are based on our assessment of a companys creditworthiness and are not recommendations to buy or sell a security. The ratings scale (AAA, AA, A, BBB, BB, B) is dependent on our assessment of anissuers ability to meet its financial commitments in a timely manner. Within each category, creditworthiness is further deta with a scale of High, Mid, or Low – with High being the strongest sub-category rating: High AAA, Mid AAA, Low AAA – obligors capacity to meet its financial iledcommitments is extremely strong; High AA, Mid AA, Low AA – obligors capacity to meet its financial commitments is very strong; High A, Mid A, Low A – obligors capacity to meet its financial commitments is strong; High BBB, Mid BBB, Low BBB – obligors capacity to meet its financialcommitments is adequate, but adverse economic/operating/financial circumstances are more likely to lead to a weakened capacity to meet its obligations; High BB, Mid BB, Low BB – obligations have speculative characteristics and are subject to substantial credit risk; High B, Mid B, Low B –obligors capacity to meet financial commitments is very weak and highly vulnerable to adverse economic, operating, and financial circumstances; High CCC, Mid CCC, Low CCC – obligors capacity to meet its financial commitments is extremely weak and is dependent on favorable economic,operating, and financial circumstances. Credit Suisses rating opinions do not necessarily correlate with those of the ratingagencies.Credit Suisse’s Distribution of Global Credit Research Recommendations* (and Banking Clients) Global Recommendation Distribution**Buy 6% (of which 86% are banking clients)Outperform 25% (of which 76% are banking clients)Market Perform 49% (of which 72% are banking clients)Underperform 19% (of which 81% are banking clients)Sell <1% (of which 100% are banking clients)*Data are as at the end of the previous calendar quarter.**Percentages do not include securities on the firm’s Restricted List and might not total 100% as a result of rounding. 91
  • 91. Disclosure Appendix cont’dRefe renc es in this report t o Credit S uisse include all of the su bsidiaries a nd affiliates o f Credit Suisse o perating und er its investme nt ba nking division. For more informatio n on o ur st ructu re, please us e the f ollowing link: https://www.credit-suisse.com/who_we_ are /en/. This repo rt may con tain ma terial th at is not direct ed to , or inte nde d fo r distributio n to o r use by, a ny pers on or entity who is a citizen or reside nt of o r located in a ny locality, state, coun try or othe r jurisdiction whe re suchdistribution, publication, av ailability or use would b e co ntrary t o law or regulatio n o r which would s ubject Cre dit Suisse AG o r its affiliates ("CS") to any registration or licensing requireme nt within such jurisdiction. All mate rial p resen ted in this rep ort, unlessspecifically indicated othe rwise, is u nde r co pyrigh t t o CS. 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Th e investments and services co ntain ed or ref erred to in this repo rt may not be s uitable f or you and it is rec ommend edthat you consult an independent investme nt advisor if y ou are in d oubt a bout such investments o r invest men t se rvices. Nothin g in this re po rt c onstitut es investment, leg al, acco untin g or tax advice, o r a rep rese ntatio n t hat a ny investment o r st rat egy issuitable o r a pprop riate to yo ur in dividual circumst ances, or oth erwise constitu tes a pe rson al reco mme nda tion t o you. CS do es n ot a dvise on the tax consequ ences of invest ments and you are a dvised to cont act an inde pen den t tax adviser. Please not e inparticula r t hat the bases an d levels of tax ation may ch ang e. I nfo rma tion and opinio ns p rese nted in t his re port h ave b een o btaine d o r derive d f rom sou rces b elieved by CS to be reliable , b ut CS makes no rep rese ntatio n as to thei r accu racy o rcomplete ness. 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Th e valu e of securities an d financial inst ru ments is su bject t o ex change rate fluctu ation th at may have a p ositive o r adve rseeffect on the price o r inc ome of such securities or fina ncial instrume nts. I nvesto rs in s ecurities s uch as A DRs, t he v alues of which are influ enced by c urrency v olatility, effectively assume this risk. S truct ured s ecurities are co mplex instruments, typicallyinvolve a hig h de gree of risk a nd are inte nde d fo r sale only to sop histicated invest ors who are ca pable of und ersta nding an d assu ming t he risks involved. The ma rket v alue o f a ny struct ured sec urity may be aff ected by ch ang es in eco nomic, financial a ndpolitical factors (including, but not limited to , spot an d fo rward inte rest a nd ex change rates ), time to mat urity, marke t con ditions an d volatility, an d th e cre dit qu ality of a ny issuer or ref erence issue r. 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This re po rt does not constitu te inv estme nt a dvice by Credit Suisse to th e clients of the distribu ting financial institutio n, and neit her Cre dit SuisseAG, its affiliates, a nd t heir res pective of ficers, di recto rs an d e mploye es accept any liability whatsoev er f or any di rect or co nseq uential loss a rising f rom thei r use of t his re port o r its cont ent. Principal is n ot g ua rant eed. Commission is th e commission ra te o rthe amount agreed with a customer when setting up an account or at any time after that.Copyright © 2012 CREDIT SUISSE GROUP AG and/or its affiliates. All rights reserved.Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be erodeddue to changes in redemption amounts. Care is required when investing in such instruments.When you purc hase non-listed Japan ese fix ed income securities (Ja pan ese gov ern men t bon ds, Japa nese municipal bon ds, Japa nese gov ern men t gua ra ntee d bo nds, Jap anese co rp ora te bo nds) f rom CS as a seller, yo u will be requeste d to p ay thepurchase price only. 92

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