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22 May 2012
Demand indicators for the base metals market
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22 May 2012
Downloadable data for week May 22 2012
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22 May 2012
The outlook for base metal prices in the short term is likely to involve further losses, unless we see production cuts emerging, or if risk appetite returns and triggers short covering. Neither seems likely at moment.
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22 May 2012
Buying the Q2-Q3 dips may once again prove to be a good strategy, as it was in 2011, and in 2010.
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22 May 2012
Prices found support above $2,000/tonne. The fact that this level held suggests to us that the market is now starting to price in production curtailments. If cuts do not materialize – and even if they do – further price weakness cannot be ruled out in the short term, given the concerns about the fate of the euro.
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22 May 2012
This market needs more production cuts. It is almost as if the world’s non-Chinese producers are stubbornly digging in their heels waiting for more large-scale closures of Chinese NPI capacity. However, this is a dangerous game to play. Many aluminium producers adopted this same strategy, and look where they ended up. Prices are at risk of falling further in the short term.
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22 May 2012
The market is in a small supply surplus, but stocks are increasingly getting stuck in rent deals or bottlenecks at warehouses. We suspect that prices will react quickly if production cuts materialise.
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22 May 2012
Cancelled warrants have surged to 40% of LME stocks. Constrained production in China, Indonesia and Peru has played a part. However, against the wider economic backdrop, this may not be sufficient to pull prices back over $20,000/tonne. More price weakness is expected in the next couple of weeks, and sub-$19,000/tonne is no longer out of the question.
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22 May 2012
The tightness in copper spreads has eased and prices have retreated. We have called the weekly copper price direction correctly for the last 14 weeks, and 23 weeks correctly during the last six months. Our view at the moment is that demand concerns may take prices lower still in the short term after they have consolidated recent losses.
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22 May 2012
In general we are continuing to hold a short stance. However, in some cases technical indicators are suggesting that prices may have become oversold and may need to consolidate or even rebound before continuing lower. In these cases, we would mostly wait for the next short signal.
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22 May 2012
With prices around $1,900/tonne, there is still room on the downside, but we would expect to hear more talk about production curtailments if prices ran down further to the $1,750-1,800/tonne area, which is certainly not out of the question in the short term. Indeed, we see little reason for prices not to fall until cutbacks are made, especially as the tighter spread lately will make warehousing deals less attractive.