Base Metals Mixed
Posted on: Jan 16th, 2009 | By Doug Casey | Filed under Financial News
The base metals were mixed on Thursday. Copper declined during the pre-dawn hours, but recovered well during the day, moving into the green to finish at $1.4709/lb., up a penny and a half.
Nickel had a day of broad, sweeping ups and downs, to little ultimate effect as it closed at $4.6501/lb., down 4½ cents. Zinc had a weak day, ending at $0.5477/lb., down a penny. Aluminum was little changed, shedding a half-cent, to $0.6493/lb., while lead was even less changed, adding a tenth of a cent, $0.5029/lb.
Copper held up but the industrial metals were generally weak, hurt by news that machinery orders in Japan were down 16.2% in November over October. That was more than twice the anticipated decline.
Further downside pressure was supplied by news of a contraction in New York state manufacturing production. The Federal Reserve Bank of New York reported that manufacturing contracted for a ninth straight month in January, and a gauge of expectations for six months from now was negative for the first time.
Manufacturing in the Philadelphia region also shrank, for the 13th time in the last 14 months, a separate report showed. It was down for a fifth straight month in January.
And stockpiles ran their usual dance number. Yesterday, copper inventories monitored by the LME raced higher by 5,175 metric tons, to 387,325 tons, yet another fresh 5-year high.
“Further big builds in LME stocks [yesterday] will add to the downside on prices,” wrote analysts at Barclays Capital in London. “Relentless build in metal inventories is a clear signal of growing market surpluses and weak physical demand.”
“Copper is in a very dire situation,” said Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York.
“The next thing to worry about now is deflation,” Groenewegen added. “With the economy imploding, the threat of deflation means that consumer spending will fall and demand for goods will fall dramatically. For the base metals, this will have a significant impact.”
In company news, Rio Tinto (NYSE:RTP) reported that its fourth-quarter global iron-ore production output was down 18% in the fourth quarter output, vs. the same period for 2007. That was “in line with expectations”, CEO Tom Albanese said yesterday.
The diversified miner also said that the group’s earnings for the fourth quarter would be negatively impacted by the “sharp” decline in the aluminum price, while provisional copper pricing was expected to reduce the group’s underlying earnings by about $360 million for the second half of 2008.
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