Archive through February 02, 2005

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vermante

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Post Number: 206
Registered: 11-2002

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Tuesday, January 04, 2005 - 08:56 pm:

Thanks again rederob.

Re Base metals - The base metals index is certainly bullish as seen in the 5 year chart. My concern is will it keep rising. With now the general public and taxi drivers talking about the weak U.S dollar , it may be a strong signal that the U.S dollar is about to reverse and strenghten.Couple that with higher interest rates in the U.S. and the rise in Gold , Silver and the base metal index may be curtailed.

Interesting times ahead.

Cheers

Vermante

(Message edited by vermante on January 04, 2005)

rederob

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Post Number: 540
Registered: 10-2002

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Votes: 1


Tuesday, January 04, 2005 - 09:52 pm:

vermante
At this stage there is nothing to suggest a trend reversal in the base metals complex, so I would not be concerned.
As for the taxi drivers talking about a weak US dollar, that's still a "positive".
The negative is when they start to give you advice on which euro bonds to buy and tell you to keep clear of the yen as it's too closely tied to the greenback.
Worse still, they may even tell you to load up with gold bullion - then it's time to get out the worry beads.
Of course, taxi driver and hairdresser recommendations must first be strongly positively correlated.
ps, the game is over when Dubya tells his loyal supporters that buying gold is not going to protect them.

vermante

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Post Number: 208
Registered: 11-2002

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Wednesday, January 05, 2005 - 08:15 am:

rederob,

Based on overnight market action , the worry beads are out in the short term re-Gold-Silver-and Base Metals. BHP down 4% in London over night. You may yet get to buy BHP at an attractive price over the next couple of days/weeks. ?

Cheers

Vermante

rederob

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Post Number: 541
Registered: 10-2002

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Votes: 1


Wednesday, January 05, 2005 - 09:04 am:

True vermante.
The following is borrowed from an article in the Financial Times overnight - behold the carnage.....

Base metal markets were hit by frenetic selling on Tuesday as the dollar continued to rally and amid concern over slowing Chinese demand.
Aluminium, which peaked at $1,972 per tonne last week, on Tuesday fell more than 8 per cent to $1,797.5 per tonne - its biggest one-day fall in 17 years.
In the week between Christmas and new year, aluminium hit a 9½-year high, rising to levels that many analysts called "overbought".
Having been closed on Monday for a public holiday, traders came back to the London Metal Exchange confronted by a strong dollar rally and saw it as a signal to sell.
Copper had a similarly precipitous fall - from last week's peak of $3,165 per tonne - down almost 8 per cent to $2,905 per tonne.
"Many base metals had hit multi-year highs at the end of last year, and stops were triggered," said Will Armitage at IG Index.
Copper prices rose 34 per cent last year, aluminium rose 21 per cent and there were double-digit gains for lead, zinc and tin.
The rises came amid frequent warnings of a slowdown in global growth in 2005. China, the world's biggest consumer of copper, is likely to see a slowing of its economic growth this year, with Barclays Capital warning that China's copper consumption will only rise by 10 per cent this year, after 15 per cent in 2004.
"Base metal prices were savaged as aggressive selling and a dearth of buying interest pushed all the contracts sharply lower," said Alan Williamson at HSBC.
"Early selling pressure from China in the copper market spread to the aluminium contract and as prices began to fall this triggered wave after wave of long liquidation by the momentum and technically driven funds," he added.
Analysts said further long liquidation was likely in the short term, particularly if the dollar continued to gain ground.
"We think we have seen the top of the commodity cycle," said Nick Moore in an interview with Bloomberg. "We are in the endgame."
The falls in base metals prices meant mining stocks turned out to be some of the biggest losers in the stock market on Tuesday.
In London, the biggest faller was Xstrata, down 4.8 per cent to 887½p. This was followed closely by BHP Billiton, off 4 per cent at 596p, Rio Tinto, down 3.3 per cent to £14.83, and Anglo American, which shed 1.6 per cent to £12.07.

rederob

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Post Number: 542
Registered: 10-2002

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Thursday, January 06, 2005 - 05:25 pm:

After Tuesday's carnage BHP in Oz gave up very little (less than 2% cf 4% in London) and closed today over $15.
In fact, apart from tin, all the base metals have closed near or above their long term support lines - in the case of nickel a substantial fall can occur before hitting support - and they rallied slightly overnight (apart from lead).
While we are in the "silly season", thin trading conditions can blindside us to the trends, and and these remain fundamentally unchanged:
Most base metal warehouse stocks are either declining overall or balancing destocking with replenishment week-on-week: And this in an environment of long-term backwardation for several of the metals.
Global demand may decline this year in percentage terms, but in total tonnage terms will still markedly outstrip 2004 on present indicators: The question unanswered thus far is if several of the metals will deplete warehouse stocks entirely before ramped up production can rebalance the ledger.
Currently the supply/demand equation suggests upside will continue medium term.
Moreover, if the legacy of thin warehouse levels is not quickly turned around via the much vaunted mid-year replenishment phase, the second half of 2005 could be better than the first.
Let's see how the dust settles later this month.

rederob

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Post Number: 544
Registered: 10-2002

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Saturday, January 08, 2005 - 02:18 pm:

Although precious metals hit a chord with the greenback and sang an ugly tune, by Thursday base metals were in harmony with their fundamentals and recording some nice highs by week’s end.
Backwardation on copper, nickel and lead continues to climb, while zinc prices crept higher despite a large warehouse addition midweek.
Oil prices have not fallen below $40/bbl as was suggested due to the “milder” US winter and present momentum is taking it back to $45 range.
With thin trading volumes largely behind us for another 11 months we shall get a clearer picture of overall market direction by month’s end.
I won’t sit on the fence with cute language; I can see nothing yet to suggest either a slowdown in demand or the prospect of lower medium term prices.
Throughout 2004 most producers and suppliers successively increased prices.
These have been absorbed by the market with little fuss.
While we may not, in equities, see the stellar returns of the past year, the fact is that most are going to make record profits this financial year – there may even be some reasonable dividends on offer for a change.
Miners also have the multiple benefit of (a) reinvestment in capital equipment (b) reduction of debt and (c) increased exploration activity.
This latter aspect not only adds to the miner’s ore reserves, but occasionally leads to a bumper new find.
Happy days……

rederob

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Post Number: 549
Registered: 10-2002

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Wednesday, January 12, 2005 - 06:19 pm:

This time last year everyone was excessively bullish on base metals and rightly so.
Now there are two distinct 2005 camps.
First come believers in the red hot China economy, and;
Second are believers of the meltdown economy - literally a China syndrome.
I am firmly in the former camp.
Those contemplating a meltdown are, for the moment, on thin ice.
China should slow its pace of growth.
It has taken steps throughout the latter part of 2004 to ensure a "soft landing", and the recent trade balance data suggests it's working.
One of the better, recent, articles on commodities is at:
http://www.resourceinvestor.com/pebble.asp?relid=7749
Specialist metals analysts generally see a strong first half for base metals in 2005, with the prospect of slippage in the second half.
Restocking is seen as the key to 2nd half prices falling as ramped up production more than meets demand.
But beware.
The greenback is locking itself in for another dramatic slide in 2005 and this may well coincide with metals restocking in the 2nd half. If so, metal prices are poised for further rises, although Oz equities would be slugged on exchange rates.
My early prognosis is for base metals on average to increase by 10%plus in 2005.
Moreover, in the first half I will not be surprised by price increases greater that 30% at some point before markets start to settle.
Early signs this week are exceptionally supportive of base metals, so let the good times rock and roll.

rederob

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Post Number: 550
Registered: 10-2002

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Friday, January 14, 2005 - 10:39 pm:

It's been a while since I last posted inventories, so early in 2005 this is where we stand:
London Metal Exchange Warehouse Stocks
Metal Tonnes in Storage Change from
previous day
Aluminum 700,925 -2225
Copper 44,650 -1525
Nickel 19,704 -126
Lead 38,900 -275
Zinc 633,875 -2350

New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
previous day
Aluminum 84,954 -1362
Copper 48,447 -8
Those interested in following metal inventories can go to:
http://www.kitcometals.com/
With Chinese aluminium exports likely to tail off over coming months it will interesting to see how COMEX stocks hold up (if at all).

You probably realise that metal prices are responsive to greenback movements, but don't take the obvious as gospel in this climate of thin metal markets.
Tonight, for example, base metals are barely affected by a significantly stronger greenback (indeed copper is up about a cent/lb as I write).
More likely, speculation, gossip and rumour will drive prices strongly in any direction, especially if given credence by mainstream media.
I will keep making the point, don't be blindsided by irrelevance. If metals continue to drawdown, demand is stronger than supply - it's that simple (especially when this has been the trend for most base metals for a year or longer).
Briefly on nickel: This metal accumulated warehouse stock levels for several months, until the past week or so when the trend changed sharply.
Why?
Some consumers actually stopped buying steel!!! For example, a few Japanese car manufacturers closed down assembly lines for a few weeks.
Norilsk was also delivering nickel to UK warehouses where there was no local demand.
In other words, there were disparate attempts to manipulate nickel's price downward.
However, real demand was simply suppressed short term, and is now returning with a vengeance.
In the second quarter Norilsk loses a month or so of shipments due to annual flooding. Plus Inco shut down its Copper Cliffs smelter and Minara shuts down Murrin Murrin for repairs. Gross effect could be as much as 80,000tonnes unavailable - a bit of a problem when there is only 20,000tonnes in LME warehouses.
And a quick aside to Justice: I have not got onto ZFX yet - the beggar won't fall into my buying range......

rederob

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Post Number: 556
Registered: 10-2002

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Monday, January 17, 2005 - 10:58 pm:

Across the board LME warehouse drawdowns again tonight.
RIO and BHP jumped today and BHP will likely break $16/share within the week.
Iron Ore prices are set to jump again via Asian consumer (largely Japanese) contract negotiations - nickel is a dead cert to be carried higher, too.
Copper demand remains strong, so the below chart gives a good idea where prices could be next month.

Last year I suggested that by the time OXR is producing copper, it would be around $1.50/lb. Given that most of the sums for OXR were done when copper was only 80cents/lb, this is one stock that remains grossly undervalued - largely because copper is "discounted" by traders in favour of OXR's gold exposure. I think OXR will be trading well above $1.30 within 6 months, with a price target of $1.50 in mind.

ingot54

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Post Number: 309
Registered: 05-2004

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Thursday, January 20, 2005 - 07:46 pm:

Rederob

This article is copyright, but may be read in entirety at the air.com.au site, as you know. I reproduce the feeder notes only ...

Enjoy our daily stories, but don't forget it's a weekly magazine. Download the latest issue HERE

Chinese Smelter Cut Triggers Zinc Rise
Zinc prices rose by 2.8% on Wednesday to reach a new 7 year high. The already bullish market was given an extra boost, commodity specialists at Macquarie report, by reports that the Zhuzhou smelter in China would cut production by 100,000t at least until April.It is a ...

Just goes to show how quickly things turn around. ZFX closed slightly lower today, after a small rally yesterday. My interest is only in seeing how the price of ZFX responds to the Fundamentals.

For example, whether this kind of news was known to the more astute followers of the metals market, and whether such things are factored in already.

It's much easier to ride a horse in the direction it's going - Abe Lincoln.

rederob

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Post Number: 558
Registered: 10-2002

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Votes: 2


Thursday, January 20, 2005 - 08:16 pm:

ingot
China's power issues are being slowly and methodically addressed. But until they are, aluminium and zinc smelters, which draw massive amounts of electricity, will continue to suffer periodic closures.
Zhuzhou accounts for about 3% of world output, so it's a big player.
However, I think the "astute" players are more aware of this year's touted zinc supply deficit and holding long positions on this premise, rather than Zhuzhou's outage.
Overnight the greenback toyed with metal markets, and ZFX was a minor casualty in the Oz equities sector.
I seemed to have missed ZFX run by trying to get in too cheaply - still hoping for that retrace!
Tho next week I fear will be a sellers market in commodities as the greenback's near term rally has little left imo.
As is always the case, time shall tell.

rederob

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Post Number: 561
Registered: 10-2002

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Saturday, January 22, 2005 - 11:01 am:

A vote of thanks to the reader that puts one star next to my posts - but you did miss the one of 12 January - helps me quickly scan back to previous posts as reference source.
To the real action:
Oil spiked 2% overnight as the big freeze sets in over NE USA and heating oil supplies are already 13% lower than same time last year: Nearing the psychological $50/bbl whish stands a chance of becoming support in 2005:
OPEC meet next on 30 January and are likely to leave quotas unchanged or perhaps, trim back a touch.
Base metals had a firm night, bar nickel (which fell back just slightly). The result was spurred by a slight decrease in the greenback, but against higher energy prices.
Consistent LME inventory drawdowns remain in play across the complex and will probably drive most base metals (except tin) to record highs over the next quarter.
There are always the usual caveats to performance - in this case will the US hit a roadblock near term, and /or will China go off the boil.
In the case of USA, mixed messages abound.
In the case of China, we simply want to be told whether the growth rate is nearer 6% or 10% - ie, good news or sheer jubilation!

rederob

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Post Number: 562
Registered: 10-2002

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Saturday, January 22, 2005 - 01:08 pm:

BREAKING NEWS: Globe and Mail

POSTED AT 2:12 PM EST Friday, Jan 21, 2005
Zinc price soars to 7-year high

"The three-month future price of zinc reached a seven-year high Friday on the London Metal Exchange as a result of Chinese smelter shutdowns.

The cash price of zinc traded at 58 cents (U.S.) a pound on the LME.

Zinc has lagged other base metals like copper and nickel. Zinc traded at 45 cents a pound in September.

The metal could average 59 cents a pound during 2005 as a result of mine supply shortages, Deutsche Bank also said in a report on Friday."

rederob

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