Base Metals Staggering
Nov 18th, 2008 | By Doug Casey | Category: Financial NewsThe base metals were all stuck in red mud on Monday. Copper fell during the pre-dawn hours and rallied back into the afternoon, but not enough to erase the losses, finishing at $1.61/lb., down 6 cents from Friday. Except for a modest morning rally, nickel was down straight through the day, closing at its intraday low of $4.6025/lb., down 26½ cents.
Zinc declined until New York opened, but pushed back up from its lows to end at $0.5154/lb., down just over a penny. Aluminum plunged in the pre-dawn hours, and rose for most of the day, but wound up shedding more than 2 cents, to $0.8308/lb., while lead plummeted to its intraday low of $0.5747/lb., down nearly 3¼ cents.
Copper led the industrial metals lower yesterday, as news that Japan is officially in recession simply added to the likely prospect of an extended worldwide economic downturn.
Copper “has further to fall than the other base metals,” wrote Daniel Brebner, an analyst at UBS AG (NYSE:UBS) in London. “Cutbacks in aluminum are occurring and the price has fallen a long way whereas copper can fall further and we have yet to hear of any meaningful cutbacks in copper supply.”
Surging stockpiles aren’t helping any, either. Inventories monitored by the LME shot up another 1,800 metric tons on Monday, to 275,900 tons, the highest level since February 2004. Stocks have risen almost 40,000 tons already this month.
Macquarie Bank joined the big gloom line, slashing its 2009 forecast for copper by 43%. “We now see surpluses developing in many of the major metal markets in the very near term, which is likely to sustain a strong shift in pricing and producer behaviour,” Macquarie Research wrote.
Meanwhile, aluminum fell to a three-year low on speculation more metal will be shipped out of China, adding to global supplies. China’s Ministry of Finance said it will lower the tariff on some aluminum to 5% from 15% as of December 1. Shipping costs, measured by the Baltic Dry Index have plunged more than 90% since the end of May.
“This allows China to compete on price with producers globally and of course what will happen in this environment, prices will fall,” said Brebner said.
Source: Base Metals Staggering
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.