Against the Grain

Someone suggested the report’s title should be changed to “Against the Odds” for that it seems is what metals prices are doing as they hold or move higher in the face of storms presently swirling around them. First another slew of poor economic data. Secondly, on the financial front we are seeing a dangerous cocktail of static to falling equities, higher US Treasury bond yields and a jump in the gold price. Finally, specific to metals, stocks continue to literally pour into warehouse.

Metal volumes were very light in Asia as the market braces for the full Chinese return on Mon. The extent of the slowdown in Japan was highlighted today by some very poor Dec figures perhaps exaggerated by the persistent strength of the yen, unemployment rose to 4.4% (Nov 3.9%), industrial production fell 9.6% and 20.6% yoy (-8.5% / -16.6%), CPI rose 0.4% yoy (+1.0%), household spending fell 4.6% yoy (-0.5%) and slightly encouraging housing starts were 1.001 million units (954 k units) while construction orders fell 27.5% (-12.5%). To top it off South Korean Dec industrial production fell 18.6% yoy (Nov -14%), not a good time for exporters. Swedish miner Boliden said it will cut Q1 refined cu production in Sweden and Finland by 17 kt (’07 production was 300 ktpa).

The UK woke up to find Jan GfK institute consumer confidence index had slipped to -37 (Dec -33). The metals hovered around the closing levels with al and pb the strongest. Just after 08:00 gold jumped US4 15 / oz without any reaction from other financial markets. The LME stock again saw cu (NO 7050 and Hull 5 k), al (Hull was busy 4 k into there) and zn (Hull 15,050 we believe this is from a northern European producer) in, on the week cu jumped 67 kt; al leapt 111 kt, zn hiked 45 kt; pb up 2 kt; ni 3 kt and sn 295 tonnes. On zn (similar to cu and al) we believe there will substantial increase in warehouses over the next six months as producers work to get excess material out of consumer markets and into more diverse locations, taking advantage of rent deals in this lower shipping cost environment. The markets seemed content to wait for some US data.

The US advance Q4 GDP was -3.8% less than expected and without the jump in inventories it would have been -5.1% (Qn3 -0.5%). This included real final sales collapsing 5.1% (Q3-1.3%). The market then had the Jan Chicago manufacturing PMI 33.0 (Dec 35.1) unfortunately a 27 year low. Finally the final Jan Uni of Michigan consumer sentiment index was 61.2 (preliminary 61.9 & Dec 60.1) expectations 57.8 (57.2 & 54.0). Metal prices seemed to be in time warp hardly budging on any of the news in the lightest volume in weeks.

At the end of the week cu was down 92, al steady up 2, zn dipped 63, pb rose 5, ni off 900, sn dropped 1475, gold jumped US$ 28 / oz and out near the week’s high, oil leaked US$ 0.70 / bbl, DJI presently up 50 points and 10 year US bond yield up by 0.16%. The star currency on the week was £stg presently 1.44.

The Fed voted to keep its target range for the federal funds between 0 to 0.25% on continued anticipation economic conditions are likely to warrant exceptionally low rates for some time. Furthermore they restated their intention to employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. To that end the Fed said it would continue to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant. This includes the purchase of longer-term Treasury securities. The failure of more specific action saw 10 year bond yields jump to 2.69%. At the same time the House of Representatives passed the Obama fiscal package which now heads to the Senate. Disappointingly it was passed along party lines as all Republican members voted against the bill.

The Fed decision saw the US$ strengthen which meant commodity prices eased in very quiet Asian trading. The NZ central bank slashed rates 1.5% to 3.5% and Dec Japanese retail sales were off 2.7% yoy. In London, prices continued to drift with gold the biggest loser testing 880. The LME stocks again dominated by thumping increases in cu (NO 16 k, Netherlands 5 k and Sing 3 k) and al (Europe 45 k including Rott 30 k, Asia 11 k and US 3 k).

Looking forward there was an interesting article on Bloomberg relating to lumber, a collapse in U.S. wood-product output is seen by an analyst as setting the stage for a rebound in lumber prices that are the lowest in at least 22 years. U.S. makers of wood products have slashed capacity in the past three years to the lowest since at least 1973, when the Federal Reserve began tracking the data. He anticipated that lumber futures, down 36% in the past year, may rally if the spot price rose by as much as 40% this year. Commodities are renowned for their boom and bust cycles even if PM Brown denies the UK economy does. Some poor data in Europe, Dec German unemployment jumped to 7.8% (Nov 7.1%). The Jan Euroland economic sentiment indicator fell to 64.9 (67.2) the lowest level since its inception in ’85. In recent weeks the economic slowdown has seen unrest in several EU countries today it reached towards the centre with a general strike in France.

In the US weekly jobless claims rose 3 k to 588 k. The Dec durable goods orders fell 2.6% (Nov revised to -3.7% from previous -1.5%). Then Dec new home sales came in off 14.7% at 331 k units (Nov -4.4% at 388 k units) a significantly lower number than expected. Metals shrugged this off and seemed to latch onto gold that recovered from this new uncertainty. The Jan Kansas City Fed district manufacturing index added to the gloom falling to -25 (Dec -18). In equities Ford announced ’08 losses of US$ 14.6 billion (Q4 alone US$ 5.9 bill) and insists it still does not need government aid.

Metals took a breather overnight after their frantic rally Mon and helter skelter sell off y/day and this mornings trading is rather more subdued. For the next six day we can expect a flurry of high fluted ideas and comments from the great and the good attending the World Economic Forum in Davos, expect more rhetoric than solution. This evening we get the Federal Reserve FOMC press release with the rate widely predicted to remain unchanged at 0.25%.

The weekly ABC / Washington Post consumer sentiment index was 54 from previous -53 and matching the 23 year low. On the gold front there seems to be a significant correlation between it and £ stg, last week as the latter sank to a 20 year low gold breached US$ 900, since then the currency’s recovery has seen gold ease back. There were mixed economic reports South Korean Jan consumer sentiment improved to 84 off a 10 year low of 81 as Australian Q4 CPI fell 0.3% to an annual rate of 1.2%. In Germany the forward looking Feb GfK consumer sentiment ready was 2.2 unchanged as Jan French consumer confidence improved to -41 (Dec -44). However Italian Jan business confidence did not keep up the good news as it fell to 65.5 (66.8). The Greek metal producer Mytilineos has temporary closed its Romanian Sometra pb / zn operation (’08 zn 65 kt and pb 20 kt) while al producer Norsk Hydro announced plans to cut 10% or 170 kt of output this quarter including 30 ktpa at its Neuss smelter in Germany. Metal prices remained in a tight range till al moved higher in the floor as reports of an al producer buy back programme circulated. The metals this week seem to be acting like a wave tank with prices swing backwards and forwards on a daily basis. This corresponds to movements in the general financial arena as risk levels change. At present the supporting factor would seem to be anticipated government action by the new US administration.

With the Obama US$ 825 billion stimulus package working its way through Congress one of the biggest criticisms we have come across is the lack of near term spending. In a report we read the Congressional Budget Office has identified 3% of it spent in ’09 and 16% the next year. The IMF issued a World Economic Outlook Update in which it projected world growth would be 0.5% this year from its Oct ’08 estimate of 2.2%. A difficult day to understand as the afternoon strength despite the IMF report suddenly crumbled in the kerb led by a slump in gold to 882 at one stage.

Further evidence of just how the mining sector was caught off guard by the economic pullback was revealed by Freeport six months ago, they couldn’t replace old tyres fast enough on their fleet of mining trucks. Such was the demand for tyres in Jan ‘07 the gold producer Barrick, paid as much as US$ 60 k per tire for its largest vehicles, while some tyres changes hands in internet auctions at US$ 300 k. Now Freeport scavenge spare parts from idled vehicles to save costs with about 100 ore carriers and other heavy equipment at mines in the western US.

With most of Asia still out amongst the base metals only cu saw any turnover and as London came in buyers quickly took them higher, with cu moving over 3600. Then in the next hour prices retreated led by gold and cu despite a weaker US$ (1.33) and recovering oil, in the case of gold ETC’s a falling US$ will create negative cash flows. In Australia Dec business confidence improved to -20 (Nov -30) having been in negative territory for 12 months. The LME was another full house of global increases led by cu and zn, this saw cu jump US$50 before succumbing to selling again. The other metals are keying off the more volatile red metal. In Europe comes evidence to support y/day’s US data that the sharp economic decline could be slowing, Jan Italian consumer confidence survey rose to 102.6 (Dec 99.6) and the German Jan Ifo institute business confidence survey was 83.0 (82.7), better than the anticipated fall. Evidence of how closely the major sn producer, Indonesia, is watching the market came today as it announced a further reduction in ’09 output below 100 kt as demand falls. The morning saw a gentle price decline as gold came off.

The metal prices remained near their lows despite the attempt of gold to clear US$ 900. At 14:00 the Nov Case Shiller 20 city yearly home price index came in -18.2% (Oct -18%) this is 25.1% off its mid ’06 peak. Then the Jan Conference Board consumer confidence index was 37.7 (Dec 38.0) a recovery was predicted. This was offset by the Jan Richmond Fed manufacturing index improved to -49 (-55). The crude oil weakness (US$ 44.1) could be accounted for by reports that storage VLCC’s are slipping anchor after the recent very higher forward month contango rates have been traded out making the trade less viable. The metals research group CRU expects global cu demand to fall 4% in ’09.

Asia was immersed in a holiday; Chinese NY, Australia Day, Indian Independence Day and Tet celebrations. As the great and the good prepare to meet this week at the World Economic Forum in Davos, Michael Elliott of Time Magazine in his article “Stormy Weather” gave this view of the present economic situation - “It was, for a few years in the middle of this decade, the trope that you heard all the time. The global economy, it was said, was a Goldilocks one. Just like a bowl porridge that the child in the fairy tale sampled, it was neither too hot, nor too cold. It was wonderfully, warmly just right. It’s worth thinking how that analogy might be extended into out times. The global economy, you might say, now resembles the sort of congealed, cold, gray, glutinous bowl of oatmeal, curling up at the edges, that was once to be found in the lesser sort of Scottish boarding houses, with a couple of flies dancing a lazy highland reel on its surface” (www.time.com).

A very quiet start to the week with support coming from a robust gold and oil prices while on the other side the deluge of poor economic news continued led by job losses. Another hefty rise in LME stock dominated by cu (Rott 9575 & Busan 3500), al (Asia 8 k, Europe 7350, US 3875) and ni (Rott 768 and Sing 360), however the market has become numbed to this and concentrated more on the gold rise. The metals soon shrugged off stocks and struck out for higher ground, one gets the feeling its general short covering and after the continued flow of poor news on the weekend new shorts are being quickly stopped. The morning seemed to see metals track gold, oil and equities. The IAI reported Dec world inventories increased 17 kt to 2.959 million tonnes (Nov 2.942 mill tonnes and Dec ’07 2.848 mt). A cyclone has shut Western Australian bulk export operations. The LME has reduced initial margins on cu, al and pb effective 28 Jan.

The US opened and gold quickly sank below 900 with materially affecting the base sector which held the am gains. The Dec Chicago Fed national activity index was -3.26 (Nov -2.47). Just after 13:30 gold turned up on a sixpence and the base recovered. The real flurry of US data came at 15:00 when Dec existing home sales surprised rising 6.5% to 4.74 million units (Nov -2.9% to 4.45 mill units); Dec Conference Board leading economic indicators rose 0.3% to 99.5 (Nov -0.4%), coincident index fell 0.5% at 104.1 and lagging index -0.4% at 113.3 then more up to date Jan Dallas Fed manufacturing output survey improved to -50.5 (-60.6). This good run was tempered by Caterpillar announcing it was cutting 20 k jobs of these 12 k were employees or 12% of the workforce. This more optimistic start to the week sparked a fall in the US$ and general advance in commodities with gold and cu sparkling. At the close cu had posted over a 10% rise in impressive volume of 12 k lots on Select (270 lots traded Asian time).

The clear winner in the commodity stakes is gold as investors lose faith in governments’ ability to navigate economies out of the present turmoil. This is highlighted most clearly in the ETF (exchange trade fund) arena were various commodities and commodity indices are traded on stock exchanges priced off the underlying product. This innovative product has allowed small investors to participate in the commodity zone without treading in the futures market minefield. Since the start of the year investor buying of gold and oil ETF products have rocketed and one can surmise are partly responsible for their strong moves. The advantage of the gold and oil ETF is they are priced off the underlying physical product and not a futures contract.

Asia wound down ahead of Chinese New Year next week as they prepare to welcome in the Year of the Ox. The weekly Shanghai stocks saw cu rise 969 tonnes to 16.567; al declined 8154 tonnes at 179,434 and zn off 369 tonnes at 61,742. The base metal prices recovered slightly overnight but then pounced on by sellers as soon as London got going. The LME stocks rose across the board daily and weekly with the latter seeing cu up 33kt; al 243 kt to an all time record surpassing the ’94 total; zn 23 kt; pb 5 kt; ni 1644 tonnes and sn 660 tonnes. It should be remembered this time last year people were wondering when the LME warehouses would be empty. It seems the Chinese cu TC / RC charges are settling out at US$ 75 and US$ 0.075 c/lb.

The economic gloom continued with the flash estimate UK Q4 GDP falling 1.5% (Q3 -0.6%) the sharpest fall since Q2 ’80 and tipping the country into a recession. However, all was not gloom as UK Dec retail sales jumped 1.6% (Nov +0.3%) but the stats office was quick to point out this was distorted by the reduced VAT, and heavy pre Christmas sales (even officials want to cloud any sunlight) yoy sales rose 4% (+1.3%). In Europe Jan flash PMI readings showed a slackening of the recent declines – France manufacturing 38.1 (Dec 34.9) and services 42.9 (40.6); Germany 31.7 (32.7) and 45.5 (46.6) respectively and Euroland 34.5 (33.9) and 42.5 (42.1). The Jan French business sentiment index was steady at 73 the all time low.

There is no data out of the US although the new Treasury Secretary (ex NY Fed Governor) during his confirmation hearing told senators that Obama believed China was “manipulating” its currency, suggesting a more confrontational stance toward that country than under the Bush administration. This could raise fears of the economic turmoil raising protectionist walls and stoking the problems further. The afternoon saw the metals stage a methodical and determined recovery, similar to recent Friday moves as the “bear trap” shut. Asia will be thin Mon with Australia Day, Chinese NY and Indian holiday. In recent weeks Asian trading has been accounting for up to 30% of LME Select trading it will be interesting to see with them away if a new trading pattern develops, do not be surprised to see market pushed violently either away when China is out.

Over the week commodity prices were mixed with bears caught badly in the smaller metals cu fell 103, al down 115, zn off 100, pb slipped 54, ni up 1245, sn jumped 1375, gold leapt US$ 60 / oz, oil up US$ 7.7 / bbl, DJI fell 180 points and worryingly 10 year US bond yields rose 0.35% as market threat over the size of the US budget deficit.

Nothing highlights the paranoia of politics more than the news that Obama was sworn in for a second time yesterday after it was noticed one word was out of sequence in the original go and the Administration did not what conspiracy theorists saying he was not correctly inaugurated. After the close the US NAHB reported that their Jan housing market index declined to 8 (Dec 9). An article in NYT today discussing the fall in the British Pound referred to London as “Reykjavik – on – the Thames”.

There was some pretty bleak economic news in Asia, Chinese Q4 growth was 6.8% yoy (Q3 9%) the slowest pace for 7 years, Dec industrial output rose 5.7%, CPI rose 1.2%, PPI fell 1.1% while urban fixed asset investment rose 26.1% compared to 26.8% in the 11 months to Nov. In South Korea Q4 growth fell 5.6% (Q3 +0.5%) and yoy -3.4%. The Chinese General Administration of Customs said Dec cu imports rose 89.4% you to 211 kt (Nov +38% and Dec ’07 +17%), cu concentrates rose 19% yoy (Nov +4.5% and Dec ’07 +4%). Some of this could be the result of arbitrage trading and not reflect the level of industrial demand. Unwrought al imports rose 10% and alumina 32% with iron ore up 1% (Nov -8%). There are also reports of a tightening scrap cu market as the National Bureau of Statistics said Dec cu output rose 3% yoy to 304 kt. The BoJ left rates unchanged at 0.1% not much room to cut further as they predicted two years of contracting growth highlighted by a 35% fall in Dec exports yoy (Nov -26.7%) and import dropped 21.5%.

This coincided with another mine closure in zn as Lundin Mining said it would permanently cease production at its Galmoy in Ireland, in ’07 it produced 45 kt of zn, 11 kt of pb and 129 k ozs of silver. In Bulgaria KCM will cut ’09 zn output by 16% to 63 kt and pb 9% to 59 kt. Better news from Australia, the Federal government announced conditional approval for Xstrata to expand its McArthur River zn / pb open pit mine. Russia abolished export tariffs of 5% on ni and 10% on cu cathodes. The 10% tariff on the export of refined cu and cu alloys remains. Standard practice dictates new tariffs are set initially for nine months, after which the government must decide on whether to extend them indefinitely. In Europe the Dec French household consumption expenditure on manufacturing goods fell 0.9% (Nov +0.3%) yoy -1.7% (+1%) an economist referred to this as “France joining the dead consumer society”. In Nov Euroland new industrial orders fell 4.5% (Oct -4.7%) revealing a yearly slump of 26.6% (-15.1%). The Jan UK quarterly industrial trends survey slipped to -43 (Dec -42). Dec UK car production fell 47.5% yoy down 5.7% for the whole of ’08. The LME stocks dominated a global spread of inflows into al and cu.

Amongst all this gloom it is important not to lose sight of the fact that contrary to popular belief the world economy is still turning just at a slower pace which means people still need metal. The US began with weekly jobless claims jumping 62 k to 589 k from previous 524 k, at the same time Microsoft said it was cutting 5 k jobs 5% of workforce. The dire housing data continued, Dec housing starts fell 15.1% to 550 k units(Nov revised to -15.1% from -18.9%) and building permits slumped 10.7% to 549 k units (-15.8% to 615 k) well above estimates. The metals remain trading in the narrowest ranges in ages until the US equities opened lower (so far given back y/day’s gains) and combined with the above data knocked cu hardest.

Correction – someone reads the report; y/day I quoted Martin Wolf from the FT that in ’07 the ratio of China’s exports to GDP at 67% up from 38% in ’02 they checked the data and with the author and he was incorrect the real figure was 37%.

As the press fawned before him the markets gave the new President a reminder of the problems stacked in his in tray with the DJI falling 330 points or 4% in a general global slide. The emphasis seems to be on whack a bank as their shares fall both sides of the pond. The weekly ABC / Washington Post consumer sentiment index dropped to -53 after being steady at -49 for three weeks. No wonder China economy has caught a cold an FT article today said that in ’07 the ratio of China’s exports to GDP at 67% up from 38% in ’02, Martin Wolf “Why Obama must mend a sick world economy” (www.ft.com).

Base metals traded in a tighter than usual range in Asian time with volumes tailing off. The mood was darkened by the BHPBilliton Q2 production report which confirmed it shutting of the Raventhorpe ni mine in WA and part closure of the Yabulu ni smelter in Qld that it feed with the loss of 1800 jobs in the ni division out of a total cut back of 6 k jobs within the company or 6% of its 101 k workforce. Its cu output was down 11% in the quarter yoy to 308 kt on lower grades and electrical faults at its flagship Escondida mine. The Singapore Q4 GDP contracted 3.7% reducing yoy GDP by 16.9%. In Australia Jan consumer confidence was 89.9 (Dec 91.9). In Botswana African Copper put its Mowana cu mine on care and maintenance in its ramp up stage as they seek US$ 15 million in working capital. The LME stocks reflected the third Wed settlements led by a wave of al (US 68 kt, Rott 7875, Korea 6075 and Sing 5400), followed by zn (Hull 11,425), cu (Livorno 3750, NO 1625, Sing 1250 and Busan 1150) and ni (Rott 468 and Sing 360). The stock inflows reflect the global nature of the present slowdown, with no countries escaping. Areas that are holding better than most seem to be South America with its diversified exports, the Indian sub continent where growth is much more indigenous and Africa were the jury is still out. The metal prices seemed to ignore the stock data trading in narrow ranges below the opening levels, gold had another quick rally to 862 and oil continued to rally on what we hear is related to an option play. In Europe Dec German PPI fell 1.1% (Nov -1.5%) yoy +4% (+5.3%) while Dec UK unemployment rose to 3.6% (3.3%).

The metals weakened markedly around the start of the official rings with cu, al and zn plumbing daily lows. There is no significant US data with the markets waiting for the Obama administration to weave its magic. The DJI opened strongly (+100 points) which nudged metals higher before they dived to intra day lows - cu (3200), al (1330), zn (1135) and pb (1066) as technical selling came in breaking the zn 30 dma (1186) and looking to test that average in cu (3167) and pb (1041). Here is another example of the meaningless nature of quoting percentages - Royal Bank of Scotland stock rallied 22% today, sound good but is in fact £ stg 0.023 pence per share!

The hype would suggest that by 12:00 Washington time the world can relax and all will be well as Obama takes over the reigns of power in the US. Unfortunately we do not believe the real world works quite how the press has painted things. The UK bank bail out (the government call it an economic bail out through the banking system) has seen £ stg under intense pressure as it moved to a record low against the yen and 1.40 to the US$, it lowest level since ’01. The mood was darkened by suggestions that rating agencies would soon reduce the UK sovereign debt rating.

In Japan the Dec consumer sentiment survey declined to 26.2 (Nov 28.4) the lowest level in 26 years. In China it was reported urban unemployment rose to 4.2% the first rise in 5 years having been steady since Dec ’07 at 4.0%. Overnight base metal prices gave up some of y/day’s recovery as activity slowed ahead of the Chinese NY, with the selling continuing into London before recovering ahead of stocks. The surprise in the LME stocks was a 15 kt rise in cu (Bilbao landed 10,475, Rott 3 k and Sing 1300) and a pb increase (Vlissingen 4100 tonnes) while al on the other hand was routine up 15 kt. The prices got hit hard and fast cu testing 3300. In Europe Italian Nov industrial orders fell 6.3% yoy dropping a marked 26.2%. The Dec UK CPI was down -0.4% (Nov -0.1%), yoy +3.1% (+4.1%), yoy core CPI +1.4% (Nov (+2%), finally RPI fell 1.4% (-0.8%) yoy Dec was +0.9% (Nov +3.0%). The German economic stimulus package resulted in the Jan ZEW economic expectations index improving to -31.0 (Dec -45.2) while the current situation declined to -77.1 (-64.5). The IAI reported Dec daily average primary al output fell to 68,700 tonnes compared with 69,400 in Nov and 69,900 in Dec ’07. Total production in Dec (31 days) was 2.130 million tonnes, compared with 2.082 million in Nov (30 days) and 2.166 million in Dec ‘07. Some backward looking data the ICSG saw the cu market in a surplus of 50 kt in Oct ’08.

The metal prices picked up on a US$ 20 /oz jump in gold around 11:30 with no obvious reason why it sprang higher. By the officials the base metals slipped back as the US$ continued to strengthen. Rio Tinto today announced plans to idle a further 230 kt of al output taking the total to 450 kt or 11% of annual capacity including the permanent closure of the Beauharnois smelter in Quebec.

There is no US economic data to compete with the inauguration as government offices are closed. In the car world Italy’s Fiat took a 25% stake in Chrysler. The base metals were range bound as gold hammered higher breaching 865 during the fourth rings, while US equities lacked any Obama exuberance, as they fell and bond yields rose.

The bank’s balance sheets remain “quicksand” to unsuspecting national investors, back in October oil state and rich emerging market Sovereign Wealth Funds (SWF) took heavy stakes at lucrative rates in US / UK commercial and investment banks. They were quite surprised to see them quickly back for more. Now many of the entities have been absorbed into other organisations as they collapse from within. Next on the scene where Western governments who effectively created their own financial SWF’s as they sank tax payers funds into the bank sector arguing it were too big to fall. Now it is the national governments turn to be surprised as they have to divert more tax payer funds in even more complicated schemes as they argue the banks are too important to the economies to allow them to implode. Last week saw further bail outs in the US involving Bank of America (now the owners of Merrill Lynch) and Citibank while today it is UK and their now partly nationalised charges. Not surprisingly their public are turning against bailing out bankers who have lived off the hogs back for so long. All governments can do is hope they have stopped the rot otherwise a new plan will need to be hatched over a weekend. From the NYT Jan 19, Nobel Prize economist Paul Krugman explains it very well “Wall Street Voodoo” (www.nytimes.com).

Third Wed LME prompt date dawned with prices marginally firmer after Asian trading on a slightly weaker US$ and the mantra that China will (not could, might, maybe, should but a desperate WILL) buy cu to replenish stockpiles. The US is closed for Martin Luther King Day and there is no economic data of note. Price began to weaken after the LME stocks were dominated by a 50kt increase in al with others to follow no doubt after the Jan date business unwinds. There is talk on the newswires that BHPBillition will close its Western Australia Ravensthorpe laterite ni mine in its Q2 production report Wed. Metal prices drifted lower gathering momentum as al registered new 4 year lows.

The official rings saw the metals gain some support that took them off the lows. The equity spotlight was on the FTSE which was up over 100 points in the morning before ending down 100 points on bank and economic woes. The metals struggled to stabilise as al pushed to a 5 year low on fears that a lower energy price will ease smelter cost pressures and keep unwanted production on line. The Russian government has asked oligarchs to consider a of Russian mining assets that would create the worlds second largest miner (the companies are Norilsk Nickel, Evraz and Mechel steelmakers, VSMPO titanium maker, Metallionvest iron ore and Uralkali potash). A general recovery lifted metals in the kerb with cu leading the charge with al failing to find traction.