The London Metal Exchange base metals complex opened trading on Tuesday
morning down across the board after Monday's UK holiday. Friday's gains were
dented by the strengthening dollar, which continued build on gains over the
weekend with Eur1 buying $1.4597 at 1052 GMT Tuesday. "Not a great deal has
been happening," an LME ring trader told Platts. "Prices have been drifting
down in a reaction to the strengthening dollar, which has picked up
significantly. However, the quiet summer season is not quite over yet although
we are expecting demand in China to pick up a bit this week now that the
Olympics are over." The trader added that while energy prices seemed to be
finding their own price levels on the back of bullish fundamental news, the
base metals were being dictated to by dollar moves and looked likely to
continue to be for the near term. "If the base metals were very active this
would not be the case," he said. "Now they are just following the dollar."
He added: "Of the main base metals, only copper is trading at a significant
premium to its costs of production. This reflects the significant supply side
constraints that have buoyed prices over the past 3-5 years. Reasonable
production growth is, however, in the offing and copper's out-performance will
be challenged in 2009, although we expect higher prices to eventuate in the
08Q4 period as China addresses its burgeoning economic slowdown." Copper was
seen in premarket business up $45 at $7,625/mt. The trader noted that we could
see metal prices detach from swings in the dollar, but that this was unlikely
for the time being. "If the dollar improves then we could see some more
wastage. To me it feels as if it is going to be a slow day. There are no big
surprises around the corner." Tin was up $300 at $21,000/mt. Tin has been
assisted over the past few months by supply concerns born from both Indonesia
and China.
Jansen went on to say in his research note: "Zinc, lead and nickel are
currently trading at prices that place the least efficient producers in a
negative cash margin environment. Historically the downside in prices is
limited to the 90th percentile of mining cash costs. On this basis further
declines are possible." Nickel was indicated on a three month basis up $240 at
$20,270/mt, zinc was seen up $30.25 at $1,820.25 while lead was indicated up
$76 at $1,931/mt. Fairfax said of zinc: "Blue Note Mining is to cut its work
force at its Caribou zinc/lead mine in Canada to reduce costs. A number of
zinc and lead operations have cut production or suspended operations due to
the weaker zinc and lead prices in the market." Both of the alloys were
untraded in premarket business.
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.
Updated: August 227, 2008
This content first appears in Platts Metals
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