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What's Moving the Market?
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20y -Ja-ua
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A New Year rally for the London Metal Exchange's base metal complex came to an
abrupt end late Wednesday and continued Thursday, with the bulk of commodities
suffering in the wake of news crude oil stocks jumped, pressuring ICE Brent
prices back down under $50/barrel. ICE Brent was spot bid at $46.10/barrel at
1110 GMT Thursday. Early trade saw base metal prices fall further doing little
to bolster trader confidence. "The period between Christmas and New Year and
then just after was a bit of a strange interlude from reality," an LME ring
trader told Platts. "Things were moving up and the rejigging of the indicies
saw a lot of buying come in, especially in nickel, but any optimism in the air
was crushed by the heavy weight of reality yesterday with the sudden rise in
oil stocks sending prices shooting down." Reality has also hit the markets in
the form of poor unemployment figures and economic indicators. "It's all been
very poor," the trader said. "Everything has turned down as a result."
Base metals.com analyst William Adams said in his daily research note that he
had been wary of the base metal rally, saying that yesterday's correction
confirmed his bearish feelings: "If we had to presume what has happened then
we'd say traders have front run the index funds rebalancing, the buying dried
up and now the market needs to wait for the actual rebalancing to hit the
market between January 9 and 14-15." Tin saw the biggest loss in its value in
early trade Thursday, bid down $365 at $11,260/mt at 1016 GMT. Nickel, which
rocketed up to back above $13,000/mt earlier in the week, followed tin on the
march down, losing $225 from its Wednesday closing price to be seen at
$12,075/mt. "I think we'll get back down to the lows that we saw before
Christmas," the trader commented. "People are looking for things to get
better and waiting for the opportunity to get back on the long side, but I
think they'll have to wait a while yet."
Elsewhere on the complex, zinc drifted down by $16.50, bid at $1,263.50/mt and
aluminium ducked down $25, bid at $1,569/mt. Fellow bellwether copper also
dropped down, losing $79 to be seen at $3,261/mt. Platts reported Thursday
morning that Japanese copper smelter Mitsubishi Materials was considering the
possibility of reducing production of refined copper due to bleak demand. The
company said earlier it plans to produce 23,615 mt/month of copper at two
smelting plants in the country for the first three months of 2009. A spokesman
said that the plan was currently under review and will be finalized by early
next week. "Production cuts will have a cumulative effect in time," said the
trader, "but demand is falling faster than supply is being reduced." Lead and
aluminium alloy were the only metals to make gains in early trade, with lead
up $10 at $1,150/mt and the standard alloy contract gaining $10, bid at
$1,090. North American alloy dropped down $10, bid at $1,090/mt.
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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