What's Moving the Market?
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20er-De-em
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The London Metal Exchange Base metal complex made some moderate gains Monday,
with only nickel slipping slightly in premarket trade. A strategist told
Platts: "There are some significant items out of China this morning. China's
manufacturing shrank by the most on record and export orders dived, as such
the Yunnan Provincial Government announced that it will buy 1 million mt of
base metals to help smelters in the region that are struggling with weak
domestic demand and lower prices. Yunnan will buy 150,000 mt of copper,
300,000 mt of aluminium, 150,000 mt of lead, 300,000 mt of zinc and 100,000 mt
of tin, according to reports. The reserves will be kept for one year." He
added, "It should help front end prices, but not do much for prices in H2 2009
and 2010, as it will simply encourage Chinese mines/smelters to stay open in
the face of a supply glut." Three-month nickel eased $65 to hit $10,135 at
1000 GMT, having closed on Friday at $12,300/mt.
"It shouldn't be a surprise to learn that Chinese manufacturing is now
starting to suffer deeply from the downturn in the West," said the strategist.
Zinc was flat during premarket trade, seen at $1,205/oz. An LME ring trader
highlighted the fact that zinc was trading at a premium to lead. "Among the
fund community there is a feeling that zinc is the metal to be the least
bearish about at the moment," said the trader. BNP Paribas analyst Michael
Widmer echoed the bullish sentiment, but gave a long-term outlook: "As demand
slows, producers have curtailed production, but the market should still be in
surplus next year. We believe that zinc will lead a rally in base metal prices
from 2010 onwards." Fairfax told clients: "Metal price are likely to soften
further as markets comprehend the ongoing impact of the credit crisis.
However, a bear market rally looks equally likely as we expect new fund flows
to support equity markets towards the year-end."
Longer term the investment bank believes: "Metals are effectively denominated
across a wide range of currencies. While lower demand is generating downward
price pressure, we expect that commodities could provide a better store of
value haven than other dollar-denominated instruments." Tin was indicated up
$280 at $12,300/mt, lead lost up $22 at $1,117/mt, while copper also made some
slight gains of $33 to hit $3,703/mt. However, Fairfax said: "Prices in China
are under pressure after a contraction in the country's manufacturing index to
a seasonally adjusted 38.8 for November from 44.6 in October ... prices in
London appear to be holding for the time being." Fellow complex heavyweight
aluminium was also up $4 at $1,773/mt. Both alloys went untraded in premarket
business. Standard Bank analyst, Walter de Wet, said the month of November was
bearish for commodities, "and base metals in particular."
This commentary was first published in Platts Metals Alert. If you have any feedback about this commentary or want to find out more about Platts Metals products and services, please contact webeditor@platts.com.
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| This content first appears in Platts Metals
Alert. Platts Metals Alert is the metal industry's leading real-time data feed service. It provides continuous breaking Metals news from the editors of Platts Metals Week, a long-term global team of metals specialists dedicated exclusively to metals reporting, 24-hours-a-day. |
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