Base Metals

May 1 2012 Issue

• Broad rise in cancelled warrants causing concerns: Market Summary

  01 May 2012

  Financing deals, warehouse queues and low load-out rates are making physical availability of many metals tighter than we would normally expect given the fragile demand background

• Cancellations getting significant again: Lead - Market Analysis

  01 May 2012

  Cancelled warrants have also climbed sharply in this market. Combined with supply disruptions, this is underpinning prices. However, a global market surplus is still expected this year.

• Demand Indicators May 1 2012

  01 May 2012

  Demand indicators for the base metals market

• Downloadable Base Metals Weekly Data May 1 2012

  01 May 2012

  Downloadable data for week May 1 2012

• Largely being ignored: Nickel - Market Analysis

  01 May 2012

  The price rebound was sharp last week, but it seems to have stalled. Unless production cutbacks are announced, prices will remain under pressure.

• No hurry to chase prices: Tin - Market Analysis

  01 May 2012

  Despite a rebound, the downtrend remains intact. While stocks continue to rise we feel that there is little need to chase prices higher.

• Premiums hit new highs on growing stock bottlenecks: Aluminium - Market Analysis

  01 May 2012

  Sentiment across the base metals picked up last week, which halted the earlier slide in prices. Spot premiums continue to rise, reaching record high levels in the US. This will no doubt help marginal smelters stay in production, encourage new capacity to come on stream and see idled capacity reactivated. All of this will result in the aluminium market fundamentals deteriorating further when cutbacks are what is really needed.

• Price still holding up better than we think they should: Zinc - Market Analysis

  01 May 2012

  Warehousing games continue, but the stock overhang is huge and will only continue to grow as the market will remain in surplus both this year and next.

• Shorts covered, but funds are back firmly on the sidelines: Funds focus

  01 May 2012

  The threat of the euro crisis flaring up again means investors are reluctant to build length in the base metals, but the backwardation in copper and soaring warrant cancellations is deterring shorting. A neutral, risk-off stance is likely to persist until better clarity on Europe and China emerges.

• Still prefer to look for shorting opportunities: Technical analysis

  01 May 2012

  Overall, the medium term trend for the base metals is to the downside, so if we are not already short we are looking for shorting opportunities. However, for the moment, there may still be more room on the upside in some markets, but the higher prices go in the short term the better the shorting opportunity will be.

• Waiting for Chinese exports: Copper - Market Analysis

  01 May 2012

  A rise in cancelled warrants has prompted short-covering and that in turn has seen the spread move deeper into backwardation, all of which has lifted prices. However, there are some signs of weakness in US data and that might spook the market. Metal in Chinese bonded warehouses is tied up as collateral for loans, so Chinese smelters are set to step up exports from their own inventories to suppress the LME backwardation. Until this happens, outright prices will remain elevated and shorters will be deterred.