Base Metals Remain Weak
May 22nd, 2008 | By Doug Casey | Category: Gold MarketThe base metals were mostly in the red on Wednesday. Copper was erratic, bouncing all over during the day, but ended up sliding somewhat, finishing at $3.8102/lb., down 3 cents.
Nickel continued to hit the skids, dropping throughout and just managing to come off its intraday low at $11.2279/lb., 46¼ cents.
Zinc failed to hold above $1, as it slipped to close at $0.9891/lb., down 2¾ cents. Aluminum was up most of the day though it came off its highs around noon, to close at $1.3432/lb., up less than a penny, while lead’s woes were prolonged as it fell to $0.9683/lb., down a penny and a third.
Copper was unable to take any heart in the rising gold and oil prices, as traders remained focused on economic worries.
Also playing in were rising stocks. Inventories monitored by the LME gained 2,300 metric tons yesterday, nearly 2%, to 124,950 tons, although that left stockpiles still 11% smaller than a year ago.
“The underlying cost drivers for the base metals are favourable for headline prices this morning, with crude oil over $130 a barrel and the US dollar softer, especially against the (renminbi),” JP Morgan analyst Michael Jansen said.
“However, the base metals are trading in a mixed fashion with demand concerns carrying slightly more weight today than the other factors,” he was forced to conclude.
Analysts at RBC Capital Markets advanced a different theory for the weakness in the industrial metals, writing that, “Open interest in the metals has fallen in recent days, so we wonder actually if there were some long base metals/short oil and gold strategies that were put on and forced to stop out.”
They added that, “Also, we have not really seen the presence of so-called ‘hot money’ players in the base metals markets in recent days and would imagine they are very active in the oil markets, at least helping to propel prices there.”
In company news, Japan’s Sumitomo Metal Mining Company, which intends to be among the world’s top five nickel producers in the next decade, announced that it will spend about ¥200 billion (US$1.9 billion) to develop a nickel mine in the Solomon Islands in the South Pacific.
The company plans a smelter for the Solomons that will start processing in 2013, with an expected output of 30,000 tons per year. Sumimoto also has two major projects under development in the Philippines, and shares a 21% state with Mitsui in New Caledonia’s embattled Goro project.
Source: Base Metals Remain Weak
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