Copper impact likely to be limited, but power outages pose a risk
A massive 8.8 magnitude earthquake hit Chile early Saturday morning,
February 27 striking 56 miles (90 km) northeast of the city of Concepcion.
Chile is the world’s largest copper producer, producing about 5300 KMT,
or 34% of global copper production of about 15,830 KMT in 2009. Most of
the major producing copper mines are located in the north of the country,
far from the quake which struck in central Chile. However, as of 9pm EST
on Saturday February 27, 5 major copper mines had been disrupted owing
to the quake, amounting to about 1100 KMT or 21% of Chilean copper
production and nearly 7% of global copper production. However, the
closures were forced by electricity/energy supply outages with no
structural damage reported. Thus, the duration of the disruptions will likely
depend on the ability to repair the power supply. At this time, the
electricity outages are expected to be short-lived, but the potential for
extended power outages poses downside risk to production and upside
risk to prices, especially as copper fundamentals have already begun to
show signs of tightening. Any sustained supply disruption would hasten
this tightening, reinforcing our constructive view on the metal.
Majority of Chilean pulp production is down due to Saturday's
earthquake
The 8.8-magnitude earthquake that hit the Chilean coast near the city of
Constitucion on Saturday morning had important but still not fully known
consequences for pulp operations in the country, as the totality of Chilean
production capacity is located at an average radius of 324 km from the
most affected city. Arauco and CMPC, Chilean pulp producers, have not
yet disclosed the impact on their mills and infrastructure. Arauco stated in
a press release yesterday that, according to its contingency plans, it
established production downtime at its plants to determine the damage to
each of its facilities, a task that only now seems to be possible to attempt.
The downtime will be for an indefinite period, the release stated. CMPC
declared force majeure for an initial period of 30 days, during which it is
going to assess the damages suffered.
Global pulp supply-demand will get tighter
Chilean pulp companies account for 8.8% of the world market’s pulp
production capacity, accounting for 9.4% of softwood, 7.5% of hardwood,
and 17.5% of unbleached kraft pulp. In the short term, the global shipmentto-
capacity ratio could reach 92%-95% from 86% in January (as reported by
PPPC); January shipments tend to be seasonally weak. We believe some of
the new, modern mills may have been constructed with the risk of
earthquakes in mind, but damage to infrastructure, communications, and the
energy supply could be the main barrier for fast ramp-up of production.
Chilean exports to China represent about 15% of Chinese pulp imports, and
there is no excess of capacity globally to fulfill this gap in the short term.
Pulp price curve could shift up on panic buying, lower inventories
The Chilean earthquake is the type of event that could shift upward the
forecast pulp price curve. Global pulp supply-demand was already very tight,
with producers’, consumers’, and ports’ inventories all well below
normalized levels. There is a significant number of new paper machines
expected to start up in China during 2010 that will require high-quality fiber
from South America, which may not be available. There is no large pulp
project starting up outside of China until the end of 2012 at the earliest. Pulp
prices should enjoy strong momentum and a ceiling could be a level of
demand destruction. The pulp-to-paper price ratio could reach historical
records. Fibria’s and Suzano’s shares should see strong momentum.
还是世界自营做的最牛的投行的文章，今天早上发的。
==============================================================
楼主
