Base Metals Sag
Dec 1st, 2008 | By Doug Casey | Category: Financial NewsThe base metals were mostly mired in negative territory on Friday. Copper fell from the pre-dawn hours to mid-morning, then rallied back, finishing at $1.6414/lb., up a half-cent from Tuesday.
Nickel declined until nearly mid-morning, then rose, but not enough to take it back to break-even as it closed at $4.449/lb., down 9 cents. Zinc mirrored nickel’s performance, also ending down in the red at $0.5337/lb., down 2 2/3 cents. Aluminum had another weak day, giving up just over 2 cents to $0.7725/lb., while lead, despite a strong rally late, dropped 3½ cents, to $0.4946/lb.
Copper was little changed, but wound up November down 9.8% for the month. It was the fifth straight month of declines for the metal, marking the longest such streak since early 1999.
“Markets are under pressure on account of the bearish macro backdrop, which is directly manifesting itself through rising LME stock levels,” said Edward Meir, of MF Global (NYSE:MF).
That was certainly the case yesterday, as inventories monitored by the LME rose 1%, to 291,650 metric tons, the highest level since February 25, 2004.
Forecasts have gotten very gloomy indeed. Copper supplies are expected to exceed demand next year by 250,000 metric tons, RBS Global Banking & Markets wrote yesterday. And that’s the good news, as the surplus will then widen to 500,000 tons in 2010, the bank estimates.
The situation appears equally bad concerning aluminum, whose losing streak equals that of copper’s. Aluminum supply will outpace demand by 1.4 million metric tons next year, or double this year’s surplus, according to BNP Paribas SA.
Traders are concerned that China may reduce or even cancel taxes on primary aluminum exports. That was the word from unnamed sources in the China Nonferrous Metals Industry Association.
Said Michael Widmer, a BNP Paribas analyst in London, “If more metal found its way outside China we would have an even bigger oversupply in the global aluminum market.”
On the other hand, Reuters reported that, “China is looking at buying base metals as state or commercial reserves to take advantage of the lowest prices for years and bolster weak demand, industry sources said on Friday.”
In addition, Reuters wrote, “Beijing, keen to help strengthen smelters as it looks to bolster the economy, is changing a long-established policy of restricting expansion in the resource-intensive metals industry.”
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