Against the Grain

Cu gapped US$ 350 Mon after the weekend earthquake in the world major supplier Chile, the epicentre was south of the capital Santiago and away from the human tragedy side the cu industry has escaped significant damage. This is very good from the long term recovery aspect. By 17:00 it had become clear the country’s biggest export earning industry’s infrastructure had sustained limited damage and will help power the future recovery.

Select trading in Asia was dominated by cu with over 5000 lots traded and continued to be the only game in town in London as volume quickly moved over 7500 lots and other turnover struggled, the trading vultures descended on cue . Well the LME stocks were just swept aside, pb rose (Antwerp 1725) and al (Rott 1800 & US 2300) continued to fall. In another move breaking down the independence of LME warehouses Trafigura Fri took over the UK NEMS group, no surprise this is a business were charges are set by an Exchange. A Bloomberg report after 09:00 said a Codelco briefing said supply contracts would be met and any short falls in the southern mines would be compensated for by operations in the north. Their two most affected mines El Teniente (380 ktpa) and Andina (220 ktpa) are affected by power cuts but equipment seemed undamaged and gradual restarts should begin. The cu worries have overshadowed the  focus on zn TC discussions as the International Zinc Association meets in the US. By 12:30 cu was on its lows below 7400 as the US$ gained ground as the € fell back on fiscal worries. Further Anglo American said four cu mines and other facilities were affected by the earthquake but all are restarting after power was restored. In Peru Doe Run announced it had reached a deal with Glencore to allow the La Oroya polymetallic smelter shut since Jne to restart. As the US$ ducked and dived after the US ISM so did cu in volume, while other metals activity remained muted. Technically cu has been trading around near term support of 7380. By the close over 17,000 Select cu contracts had traded in a US$ 270 range leaving the other metals literally on the sidelines.

Focusing back on the world economy and the demand for metals today we see a flow of Feb manufacturing PMI data in China the official government reading was 52.0 (Jan 55.2) and the small / medium business HSBC reading was 55.8 (57.4); India 58.5 (57.7); Russia 50.2 (50.8); in Europe Italy 51.6 (51.7), France 54.9 (55.4), Germany 57.2 (53.7) and Euroland 54.2 (52.4) and the UK unchanged at 56.6. The Jan Euroland unemployment rate was steady at 9.9%. The Italian annual GDP fell 5% (’08 -1%) however economists were more interested in the country’s deficit to GDP that grew to 5.3% (2.7%) well over the EU statutory level of 3%. In the UK worries of the threat of no clear overall winner at the coming election saw £ fall below 1.50.

In North America the highlight was at 15:00 the Feb US manufacturing PMI at 56.5 (58.4) strong but less than expected (58.4), inventories and employment rose, production and new orders declined. Before that some housekeeping Dec Canadian GDP increased 0.6% (+0.4%) and Q4 annualised GDP 5% (+0.9%). The US Jan personal income up 0.1% (+0.4%) and spending increased 0.5% (+0.2%). The Jan construction spending fell 0.6% (-1.2%). In a blow going forward for the U3O8 market it is reported a new nuclear strategy being drawn up by the US will see a further permanent reduction in weapons (like another mine opening).