Archive through June 10, 2004

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rederob

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Post Number: 57
Registered: 10-2002

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Wednesday, May 12, 2004 - 08:43 pm:

One might think that metals are non-grata in a portfolio, having jumped considerably in the past 6 months before succumbing to a massive selldown.
Worse, metals complexes are now being downplayed by China.

The weekly COMEX copper chart shows clearly that it had difficulty breaking above 80cents/lb until October last year.
Rocketing to $1.40 it has pulled back and today sits near $1.20/lb.
That's still about 50% higher than the average 2003 copper price, which makes copper stocks a very profitable hold.
The real story on metals is yet to unfold, and is based on the tightening supply situation.
LME warehouses presently have under 150,000tonnes of copper, but guess how much a year ago today?
If you guessed 800,000tonnes you win the car.
An 81% decline in a year, with little noticeable slowdown suggests stocks cannot last out the year.
The story is similar for nickel and aluminium.
Today, for example, over 10,000tonnes of aluminium was wiped off LME and New York futures stockpiles.
Tin, however, gets the first "hug" at current drawdown rates as it has only 4,000tonnes left in warehouses - maybe a month or two's stock at best.
Despite suppliers ramping up deliveries, they are prettymuch at full capacity.
And, increasing capacity literally takes years for most of the base metals.
I anticipate further consolidation of base metals prices and even allow for slight declines as RSIs give some room.
However, as more and more buyers scramble for physical delivery over the next quarter the inevitable turnaround is not far off.

rederob

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Post Number: 71
Registered: 10-2002

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Wednesday, May 19, 2004 - 11:29 pm:

Tomorrow will see our blue chip miners bulk up as China has announced that it will not be immediately increasing interest rates.
Copper supplies in US are tightening (warehouse drawdowns consistently over 1% of stock) and, with China giving a clear signal that its economic slowdown will be very gradual, LME prices should creep up a touch.
Tin has barely 3,000tonnes left in warehouses having lost 25% of stock over the last week or so and showing no letup.
Nickel warehouse stock is down to levels seen last in June 2001, although prices then were in a downturn from the techwreck followthrough to global markets at that time.
Base metal prices have steadied in the past fortnight suggesting a turnaround is not too far off now given the demand curve ramping upwards again.

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rederob

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Post Number: 78
Registered: 10-2002

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Tuesday, May 25, 2004 - 08:47 am:

Sorry that I can't post this in tabular form, but hopefully you will get the drift.
Bottom line is that base metal drawdowns are continuing at a startling rate at both LME and NY futures warehouses:

London Metal Exchange Warehouse Stocks
Metal Tonnes in Storage Change from
yesterday
Aluminum 1,083,875 -6075
Copper 139,750 -1700
Nickel 12,636 -240
Lead 62,050 -625
Zinc 735,125 -1100

New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
yesterday
Aluminum 151,228 -1185
Copper 139,284 -2167

Confirming that the tide on base metals has turned is the following index:

rederob

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Post Number: 86
Registered: 10-2002

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Thursday, May 27, 2004 - 09:49 pm:

Lots of action tonight in the metal complexes, with most up by 1.5% or more so far today.
Copper is looking strong with Chinese players back on board.
Stock drawdowns very heavy again, with tin collapsing to only 3,000tonnes at LME warehouses - 20% of stock wiped off this week!
Backwardation of nickel and copper continues to rise, while aluminium contango is now at single digit dollars.
Markets were factoring in increases to copper stocks over coming months. But at present drawdowns the net results may still be a continuing reduction at the warehouses.
The base metals index has risen from its 10 May low of 127 to a healthy 140 at yesterday's close. Another few points should be added overnight.

rederob

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Post Number: 88
Registered: 10-2002

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Thursday, May 27, 2004 - 11:50 pm:

For those that wonder about some of the terminology, contango is not a greek dancer.
Contango is the price difference between spot and forward delivery - typically 3 month delivery - where the spot price is lower.
Warehouse merchants make money on the contango because of this price difference. It implies two things: first that the warehouse has ample forward stocks, and second that there is a cost for storage.
Neither is Backwardation a variation of Michael Jackson's moondance step.
Backwardation is the opposite of contango.
That is, when stocks dwindle the rush to buy on spot places pressure on the warehouse such that spot becomes more expensive than 3 month futures.
This is best demonstrated at present with LME tin, as noted above, and should be observed over the coming month to see what damage an empty warehouse can do to the market price.

scalper

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Post Number: 91
Registered: 03-2003

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Friday, May 28, 2004 - 12:07 am:

Rederob

Once again thanks for your posts.

Very informative and gives me confidence in some of my trading ideas.

Cheers

Scalper

rederob

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Post Number: 90
Registered: 10-2002

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Votes: 0


Friday, May 28, 2004 - 12:15 am:

Last post for the night, which sees the metals on a bolter over the past few hours.
Let's see if it copper can hold up - it will certainly set the commodity stocks alight tomorrow if it does:

rederob

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Post Number: 95
Registered: 10-2002

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Votes: 1


Tuesday, June 01, 2004 - 10:20 pm:

Seven compelling reasons why base metal prices MUST continue to rise:
London stocks keep going down, going down...

Meanwhile the US is ripping through ali and copper:

rederob

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Post Number: 96
Registered: 10-2002

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Tuesday, June 01, 2004 - 11:46 pm:

Not only is oil technically bullish, it has the "fear" factor inflating its price considerably at present.

Oil was the subject of another thread and there was conjecture on its deflationary/inflationary powers at this point in time.
The pervading impact of rising energy prices - namely through oil - is inflation.
Deflation is generally a consequence of monetary policy and equity markets acting adversely.
If rising oil prices were "deflationary", it implies that the buyers of oil could not pass on their higher costs, as the price of goods and services MUST have declined.
A contaction in money supply would be deflationary, but in the US the printing presses are running so hot that hyperinflation is a greater probability!

I also note some interesting comments on gold - that it does not pay dividends? I guess physical metals cannot pay dividends, but I certainly do receive them from some of the better quality Oz gold mining companies.

hilarius

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Post Number: 81
Registered: 04-2004

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Wednesday, June 02, 2004 - 02:08 am:

rederob

That is fair comment re gold production

If it is cost effective there are indeed dividends

I agree that the USA is running an inflationary policy ... but that is countered by its spare productive capacity and competition from China, India, Europe and many other producing nations

To try to maintain their standard of living with inflationary monetary policy seems a little short sighted to me

I would prefer they exported peace not violence, but their constitution enshrines the right to bear arms & their economy seems to depend a little too much on pornography, obesity, luxury, guns and drugs

Sic transit gloria mundi

The world does not owe the USA a living, but as it is a leading democratic nation one can only hope for a revival of its moral authority, based on the elimination of poverty, disease and ignorance.

Perhaps the gold bugs have a point, though I suspect that energy and other more useful mineral resources will be the preferred "gold" of the future, along with health, education and computer technology.

Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

rederob

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Post Number: 97
Registered: 10-2002

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Votes: 0


Wednesday, June 02, 2004 - 09:04 am:

hilarius
i never met gloria mundi but i think i went to school with her brother, magister
america is indeed in diabolicals
they certainly have excess production capacity and this will make it difficult for them to get out of the bind they are in through adopting an inflationary policy - these are counteracting forces
premier Beattie is over in the states trying to promote trade
pm howard is going to convince big arnie that gas is the go, then chew the fat with dubya on wmd successes
meantime we see our mineral and energy producers going gangbusters

die dulci freure

eblode

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Post Number: 67
Registered: 11-2002

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Wednesday, June 02, 2004 - 11:14 am:

My latin is improving listening to you guys.
Eugenio

justice

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Post Number: 212
Registered: 01-2003

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Wednesday, June 02, 2004 - 04:56 pm:

cogito, ergo doleo

GO BIGish

rederob

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Post Number: 98
Registered: 10-2002

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Votes: 3


Thursday, June 03, 2004 - 07:12 pm:

Speculators have knocked down copper prices by about 4% in the past few days, and other base/precious metal