Base Metals Regroup - Tin Finally Starts Coming Down
May 31st, 2008 | By Doug Casey | Category: Gold MarketThe base metals were mostly in positive territory on Friday. Copper struggled mightily to turn in a positive day yesterday, rallying twice off of steep drops, and it eventually succeeded, finishing at $3.6679/lb., up 2 2/3 cents.
Nickel didn’t fare as well, sinking below the $10 mark and staying there to close at $9.8407/lb., down more than 17 cents. Zinc traded very choppily, ending at $0.9034/lb., up more than three-quarters of a cent. Aluminum pushed steadily higher through the day, adding better than 2 cents, to $1.3111/lb., while lead tacked on 2½ cents, to $0.8877/lb.
With the exception of nickel, the base metals closed a rough week with some modest gains as traders returned their attention to potential supply shortfalls, and shoved demand considerations to the back burner for at least one day.
Was the selloff overdone, and is a rebound coming?
“Copper’s fundamentals this year are very supportive — this is a market in deficit. We would expect to see any further drop from these levels as being short-lived,” said Gayle Berry, metals analyst at Barclays Capital.
Berry added that, “I would expect aluminum to remain really quite well supported … Smelters in China do face further power hikes that will further raise their costs of production.”
Copper also saw a drop in stockpiles. Inventories monitored by the LME fell by 1.450 metric tons (1.2%) yesterday, to 124,950 tons. In addition, the Shanghai Futures Exchange reported a decline of 44,554 tons in the past week, contrary to predictions that stocks would advance there.
Taking all this into account, Barclays Capital analysts wrote that, “Our expectation for softness in copper prices has been realized and we view dips below $8,000 a ton as a buying opportunity given tightening concentrate supply.” Copper was at $7912/ton yesterday.
Meanwhile lightly-traded tin, which has been the best metals performer of the past year, may have peaked. Open interest in tin futures, or contracts that have not been closed or liquidated, has slumped 12% in the past month, indicating that investors are finally pulling back after prices rose to an all-time high.
“Tin is such a thin market that, when sentiment turned, there is no depth,” said Stephen Briggs, an analyst at Société Générale in London.
Source: Base Metals Regroup - Tin Finally Starts Coming Down
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.