Base Metals Remain Stagnant - Aluminum Fundamentals seen as Strong
Jun 3rd, 2008 | By Doug Casey | Category: Gold MarketThe base metals were mixed on Monday. Copper was off in the pre-dawn hours but rallied back during the New York session yesterday, to finish little changed at $3.6665/lb., down just over a tenth of a cent.
Nickel pushed back over the $10 mark in the pre-dawn hours but couldn’t hold there as it slumped steeply before rallying back to close at $9.9012/lb., up 6 cents. Zinc was off for most of the day, ending slightly above its intraday low at $0.8844/lb., down almost 2 cents. Aluminum was tightly rangebound, finally shedding half a cent, to $1.3064/lb., while lead had a very sharp mid-morning rally and wound up tacking on a penny and a third, to $0.9005/lb.
It was kind of a nothing day for the industrial metals, with none of them making a strong move in either direction.
Copper held up well, bouncing back after touching a ten-week low early in the morning hours.
“There are still a lot of bulls in the market,” said analyst Daniel Hynes at Merrill Lynch. “So we get this bout of buying after what some may see as excessive sell-off, but I don’t think it has to be sparked by particular macro economic data.”
Marc Elliott, analyst at investment bank Fairfax, sees little hope for any sustained rally, though. “Barring any supply-side event such as a strike or severe production disruptions, I see the market as steady towards the downside this week, as we’re moving towards the seasonal slowdown in China,” Elliott said.
Supply doesn’t seem to be a problem at the moment. Inventories monitored by the LME did fall by 1,000 metric tons, to 123,950 tons, yesterday. But that still leaves them more than 10% above their level at the beginning of May.
Aluminum stocks are also very healthy, at more than 1,070,000 metric tons, putting them about 60% above where they were at the beginning of the year. But there may be output problems looming.
Chinese officials said yesterday that the country is facing worse than usual power shortages over the next few months as earthquake-hit Sichuan may need to import electricity. Power is more of an issue for energy-intensive aluminum production than for any other metal.
What happens in China is crucial, Lehman Brothers analysts wrote in a recent note, predicting that Chinese demand could grow by an average of 13% annually until 2020, supporting prices. “We believe that China will remain an important price driver in the coming years,” they wrote.
Source: Base Metals Remain Stagnant - Aluminum Fundamentals seen as Strong
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