You can see that zinc is the only one, that in recent months, supplies are depleting, while the others are increasing eg copper....
nizar
29th-January-2006, 12:24 AM
yes so the question is how can we benefit from rising zinc prices..??
ZFX already had its run, KZL in the process....
Maybe TZN is the next one to get into....? they start production in jan07, so i wonder if zinc prices will hold up till then....??
rederob
29th-January-2006, 10:46 AM
yes so the question is how can we benefit from rising zinc prices..??
nizar
Keep buying KZL and ZFX; add to your holdings if you can afford to.
Never believe that because a stock has had its run, its run is over.
Zinc will rise substantially in 2006 and so will zinc producer share prices.
The run in a share price is only over when the underlying price drivers fall by the wayside. Zinc is the rising star of the base metals from a fundamentals perspective. Plus, major funds are piling more cash into commodities as a hedge against inflation: So we have short, medium and long term gains to look forward to.
michael_selway
8th-February-2006, 08:48 AM
nizar
Keep buying KZL and ZFX; add to your holdings if you can afford to.
Never believe that because a stock has had its run, its run is over.
Zinc will rise substantially in 2006 and so will zinc producer share prices.
The run in a share price is only over when the underlying price drivers fall by the wayside. Zinc is the rising star of the base metals from a fundamentals perspective. Plus, major funds are piling more cash into commodities as a hedge against inflation: So we have short, medium and long term gains to look forward to.
LONDON (Reuters) - Metal prices fell from fresh highs
in London on Tuesday as sharp drops in gold and oil triggered
profit-taking by investment funds, traders said.
On the London Metal Exchange (LME), the world's largest
non-ferrous metals market, no metal was spared a commodity-wide
sell-off, extending to precious metals and oil, they said.
"Gold was under pressure earlier in the afternoon, and that
then flowed throughout the commodity sector," a fund source
said.
Copper, used in electrical cables and plumbing, hit
fresh all-time highs of $5,100 a tonne in early trading.
It then spiralled down to $4,969.50, down $90.5, or 1.7
percent, from Monday's close of $5,060. It settled recently at
$4,995.
"It does look as if they are all selling off -- it is just a
question of how severe this becomes," a trader said.
Aluminium, which earlier hit a new 17-1/2 year high of
$2,678 a tonne, spiralled down to $2,599, off 2.6 percent from
Monday's close of $2,669. Recently, the price stood at $2,630.
Lead, whose key end-use is in automobile batteries,
was hit even harder, falling as low as $1,250, down a hefty
$125, or 9.0 percent, from the $1,375 previous close.
Traders said that technical charts, which are used to
predict future price moves on the basis of past performance, had
signalled that rises were being over-extended.
"This is all fund-driven -- consumers are still not buying
it, unless they really have to," the trader said.
FUNDS REMAIN KEY
Base metals have racked up repeated bull-market highs in
2006 on an influx of fresh investment fund money. Many of the
latest investors to join the commodity boom -- pension,
endowment and mutual funds -- are new to the market.
Copper's continual setting of new records encouraged more
investment, which in turn spurred it to even higher prices.
Analysts expect a sustained downturn in prices at some
point, but said it was hard to know exactly when it would occur
given the huge influx of money and the near irrelevance of
fundamentals.
"On the surface the base metals look strong, but there is a
danger the rug could get pulled from underneath the market,"
said William Adams of Basemetals.com.
He said there might be a very big price fall if it became
clear that economic growth was not living up to expectations.
The stunning two-year bull-run in all commodities -- oil and
precious metals are also at generation peaks -- is good news for
miners and explorers of raw materials.
IPE Brent futures fell a dollar on Tuesday, extending a
sell-off at the end of the previous session.
A fund investing in gold and precious metals mining
companies achieved the strongest returns for a UK-registered
mutual fund in the week to February 3. The CF Ruffer Baker Steel
Gold fund rose by 8.11 percent from a week ago.
yes zinc supplies on LME decreasing by approx 2000tonnes per day..
Commodities: Zinc price likely to extend gains on global shortage
Simon Casey Bloomberg News
MONDAY, JANUARY 30, 2006
LONDON Zinc prices have risen so fast that Robin Bhar, a metals industry analyst for 22 years, is about to raise his forecast for the second time in two months.
"We've all been left behind," said Bhar, who works in London with UBS. "It's just phenomenal. No one in their wildest imagination thought it would get to these levels."
Zinc has almost doubled since July 15 to $2,250 a metric ton on the London Metal Exchange, where it traded at record levels for 11 straight days this month. Prices may stay high as China increases imports and mining companies struggle to expand production.
"There is a global shortage," said Greig Gailey, chief executive of Zinifex, a zinc supplier based in Melbourne. "New mine development is a lengthy process, and it's difficult to see new mines coming on stream in the short to medium term."
Zinifex has no new mines planned until 2008 at the earliest.
Driving the market is China, where a booming economy is stoking demand for the metal, which is used as a rust-resistant coating for steel in buildings, cars and appliances. Rising prices have increased profit for companies like the Swiss company Xstrata and the Canadian company Teck Cominco, the world's biggest zinc miner.
The jump has raised raw material costs for steel makers like Arcelor and Mittal Steel.
Pension funds and speculators are joining the rally in zinc and metals including copper, aluminum and gold, seeking an alternative to stocks and bonds.
Money held by funds tracking commodity-linked indexes will rise 38 percent this year to $110 billion, according to Barclays Capital. Hermes Pensions Management, which oversees Britain's largest pension fund, said two weeks ago that it would invest £1 billion, or about $1.8 billion, of BT Group's retirement plan in commodities including metals.
"Two, three, four, five years ago, we would have seen that with the hedge funds, but not the big state pension funds," Bob Diamond, chief executive of Barclays Capital, said last week. "We are seeing an asset class shift."
LONDON Zinc prices have risen so fast that Robin Bhar, a metals industry analyst for 22 years, is about to raise his forecast for the second time in two months.
"We've all been left behind," said Bhar, who works in London with UBS. "It's just phenomenal. No one in their wildest imagination thought it would get to these levels."
Zinc has almost doubled since July 15 to $2,250 a metric ton on the London Metal Exchange, where it traded at record levels for 11 straight days this month. Prices may stay high as China increases imports and mining companies struggle to expand production.
"There is a global shortage," said Greig Gailey, chief executive of Zinifex, a zinc supplier based in Melbourne. "New mine development is a lengthy process, and it's difficult to see new mines coming on stream in the short to medium term."
Zinifex has no new mines planned until 2008 at the earliest.
Driving the market is China, where a booming economy is stoking demand for the metal, which is used as a rust-resistant coating for steel in buildings, cars and appliances. Rising prices have increased profit for companies like the Swiss company Xstrata and the Canadian company Teck Cominco, the world's biggest zinc miner.
The jump has raised raw material costs for steel makers like Arcelor and Mittal Steel.
Pension funds and speculators are joining the rally in zinc and metals including copper, aluminum and gold, seeking an alternative to stocks and bonds.
Money held by funds tracking commodity-linked indexes will rise 38 percent this year to $110 billion, according to Barclays Capital. Hermes Pensions Management, which oversees Britain's largest pension fund, said two weeks ago that it would invest £1 billion, or about $1.8 billion, of BT Group's retirement plan in commodities including metals.
"Two, three, four, five years ago, we would have seen that with the hedge funds, but not the big state pension funds," Bob Diamond, chief executive of Barclays Capital, said last week. "We are seeing an asset class shift."
LONDON Zinc prices have risen so fast that Robin Bhar, a metals industry analyst for 22 years, is about to raise his forecast for the second time in two months.
"We've all been left behind," said Bhar, who works in London with UBS. "It's just phenomenal. No one in their wildest imagination thought it would get to these levels."
Zinc has almost doubled since July 15 to $2,250 a metric ton on the London Metal Exchange, where it traded at record levels for 11 straight days this month. Prices may stay high as China increases imports and mining companies struggle to expand production.
"There is a global shortage," said Greig Gailey, chief executive of Zinifex, a zinc supplier based in Melbourne. "New mine development is a lengthy process, and it's difficult to see new mines coming on stream in the short to medium term."
Zinifex has no new mines planned until 2008 at the earliest.
Driving the market is China, where a booming economy is stoking demand for the metal, which is used as a rust-resistant coating for steel in buildings, cars and appliances. Rising prices have increased profit for companies like the Swiss company Xstrata and the Canadian company Teck Cominco, the world's biggest zinc miner.
The jump has raised raw material costs for steel makers like Arcelor and Mittal Steel.
Pension funds and speculators are joining the rally in zinc and metals including copper, aluminum and gold, seeking an alternative to stocks and bonds.
Money held by funds tracking commodity-linked indexes will rise 38 percent this year to $110 billion, according to Barclays Capital. Hermes Pensions Management, which oversees Britain's largest pension fund, said two weeks ago that it would invest £1 billion, or about $1.8 billion, of BT Group's retirement plan in commodities including metals.
"Two, three, four, five years ago, we would have seen that with the hedge funds, but not the big state pension funds," Bob Diamond, chief executive of Barclays Capital, said last week. "We are seeing an asset class shift."
Yeah only 1 base metal is fundamentally sound atm, the others are all speculative
GSJBW also retains short-term Outperform recommendations on a few preferred pure play metal producers. However, the broker does note that greater leverage to metal price movements makes these investments considerably riskier vis-à-vis the two large diversified plays mentioned earlier. It is for this reason the broker advises a more cautious and selective approach is seen as appropriate for the so-called "pure-plays".
GSJBW’s preference remains with the zinc producers. The broker’s short list of preferred pure play stocks contains three names: Oxiana (OXR), Zinifex (ZFX) and Kagara (KZL).
Copper however has been volatiel these last few weeks
Zinc Falls, Extending Drop in Base Metals Such as Aluminum, Tin
Feb. 13 (Bloomberg) -- Zinc fell to a four-week low, leading a decline in base metals such as lead and tin that had surged two weeks ago. Aluminum fell, extending its decline from a 17-year high.
Zinc, used in galvanized steel, has plunged more than 12 percent since reaching a record Feb. 2, and lead used in batteries has plunged 17 percent from a Feb. 3 record. Aluminum has dropped 8.2 percent the past five sessions. The rallies faltered on concern high prices will spur new supply and that economic growth will slow, eroding demand growth.
``New money may not enter the markets with the same vigor as has been the case in the past, especially if growth in the U.S. shows signs of slowing on the back of steadily rising interest rates,'' said Edward Meir, a commodity analyst at Man Financial in Darien, Connecticut.
Zinc for delivery in three months fell $82, or 3.7 percent, to $2,118 a metric ton on the London Metal Exchange. The metal is up 60 percent from a year ago.
``We are not in a bear market, but the bull market has been put on hold for the time being,'' Andrew Silver, a London-based trader at Natexis Commodity Markets, one of 11 companies that trade on the floor of the exchange, said today in a Bloomberg TV interview.
The Reuters Jefferies CRB index of 19 commodities, including aluminum, fell 1.2 percent to 327.57, after touching 327.08, the lowest since Dec. 28. The CRB index last week plunged 4.1 percent, the biggest drop since 1990, led by declines in copper and nickel.
Zinc Producers
Shares of mining companies that produce zinc also fell, including the world's top producer, Vancouver-based Teck Cominco Ltd. The stock fell C$2.65, or 4 percent, to C$64.50 at the 4 p.m. close of Toronto Stock Exchange trading. Teck Cominco is up 48 percent from a year ago, even after an 11 percent drop in the past week. Toronto-based Falconbridge Ltd., the third-largest producer, plunged 3.7 percent to the lowest since Jan. 24.
Zinc's slump this month has accelerated as prices fell below pre-set levels for sell orders, including the 10-day moving average of $2,315 ton Feb. 10 and the 30-day moving average of $2,169 today, analysts including Robin Bhar at UBS AG in London.
``Zinc has gone up really quickly,'' Bhar said. ``Arguably this is a technical correction,'' Bhar said. Funds, especially commodity trading advisers whose trading patterns are based on technical charts, sold the metal today, he said.
Demand Prospects
Barclays Capital, Macquarie Ltd. and Societe Generale say the prospects for zinc demand remain stronger than any other metal traded on the LME, because the production will fall short of demand for a third straight year.
Macquarie today increased its 2006 forecasts for zinc and other metals. Zinc this year will average $1.175 a pound, or $2,589 a ton, a 47 percent increase form the bank's previous estimate. Macquarie expects zinc demand to outpace production by 400,000 tons this year.
Zinc users may use stockpiled metal to fill the production shortfall. Inventory monitored by the LME has declined for seven consecutive months to 372,850 tons, or less than 13 days of global consumption.
Other metals on the LME also dropped. Aluminum extended losses after falling the most in 13 months Feb. 10. Aluminum for delivery in three months dropped $71, or 2.8 percent, to $2,459 a ton, compared with a 17-year high of $2,678.10 on Feb. 7.
Lead fell $19, or 1.6 percent, to $1,187 a ton, down from a record high of $1,435 on Feb. 3. Tin fell $50, or 0.6 percent, to $7,775 a ton, and has dropped 2.8 percent since reaching an eight-month high of $8,001 on Feb. 2.
Copper
Copper and nickel are the only gainers on the LME. Copper rose $32, or 0.7 percent, to $4,870 a ton, ending a slide to a two-week low on renewed speculation that investment funds are buying the metal to diversify their portfolios away from stocks and bonds.
Copper had reached a record high on Feb. 7 as demand outpaced production and investors poured money into commodities. Fund investments in commodities will gain almost 50 percent to $120 billion this year, Standard Bank in London said this month. More investment from pension funds and mutual funds has helped boost copper prices by 56 percent in the past year.
``The market has been pushed up by a lot of fund buying,'' said Natexis' Silver. Natexis is one of 11 companies which trade on the floor of the London Metal Exchange, or LME.
Nickel rose 1.2 percent to $15,050 a ton.
Gold Falls
Gold, which reached a 25-year high on Feb. 2, fell to a five-week low after the dollar strengthened against currencies such as the euro, diminishing the metal's appeal as an alternative currency.
The dollar rose to its highest in almost six weeks against the euro on speculation U.S. government reports this week will indicate a strengthening economy. Gold has dropped 6.3 percent from a 25-year high of $575.35 an ounce in London on Feb. 2.
Gold for immediate delivery in London fell $12.05, or 2.2 percent, to $538.95 an ounce at 6:49 p.m., the lowest since Jan. 9. Before today, prices were up 32 percent from a year earlier.
Zinc is hot. Everybody is talking about it and buying anything related to it. My interest in the “Great Protector” was piqued about three years ago by the great Jim Rogers who mentioned it in interview as a laggard in the metals cycle. With zinc being the best metal performer in 2005 it looks like Jim is right again. But how sustainable is the current strength in zinc prices?
Let’s start by looking at the inflation adjusted price of zinc. In the early 70’s zinc reached an inflation adjusted price of $10,000 per tonne. At the beginning of 2006, the zinc price is still under $2500 per tonne. This historically low price is less than one quarter of zinc’s inflation adjusted high. If the commodity super-cycle plays out, the ultimate price of zinc could be stunning, perhaps far surpassing the high water mark of $10,000 per tonne.
This technical fact is supported by the long-term fundamentals of the zinc market. Take a look below at this graphic created by Teck-Cominco showing current and future mine supply versus expected demand. This graphic illustrates what is termed the “Zinc Supply Gap”.
It is apparent that years of underinvestment have left few projects in the pipeline. In fact, many producing mines are set to close over the next few years. It is worth noting that in the past, Teck-Cominco purposely choose to not develop any of it’s zinc deposits so it would not undercut the viability of its’ massive Red Dog zinc mine.
Not only are there not enough projects in the pipeline to meet demand. The economics of planned projects continue to degrade. Oil, electricity, even giant tires for mining trucks are all in short supply. More critically, experienced geologists and miners are an aging group and tough to find. To top it off, mining regulations are more rigid than ever before with stringent environmental and aboriginal concerns pushing out development timelines even further.
On the demand side, Asia is the key player, with their hyper-growth expected to drive demand in the zinc market. In fact, growth is now expected to be closer to 4% per year, rather than the 1.5% or 2.5% currently modeled.
Zinc has few substitutes and could easily take out its’ old highs without too much dislocation in the economy. It contributes only a small portion of the end cost for the products it is used in. For example, the average car uses about 17 pounds of zinc. At ten times today prices zinc would only add an extra $170 dollars to the cost of a car.
A slowdown in the U.S. is always a factor when considering base metal prices, but America uses only about 11% of the world’s zinc. Furthermore, World population is growing at an exponential rate, creating more people thirsting for their first taste of Western living standards. North America and it’s housing market could affect base metals prices in the short term, but the future will see Asian economies much less dependent on exports. The ramifications of this inflection point will go far beyond base metal demand, but that is beyond our scope here.
Currently there are a lot questionable valuations for mining companies and zinc miners are no exception. I would look for a quality senior and mid-tier producer along with juniors with proven management and decent land packages. With the price of zinc rising, these companies should do well over time.
saichuen
17th-February-2006, 09:09 AM
i honestly think that zinc is a good mid to long term investment for those who has an interest in resource stocks. while i'm not a professional stock analyst here, but it isnt hard to see the that the global supply of zinc is declining while the demand is still pushing ahead. all the news posted here and around seems to suggest a similar trend as well.
apart from the big names like ZFX, KZL or PEM, AIM seems to be another potential zinc stock that's probably be on the rise next. it's worth a closer look. that said, i hold a small interest in AIM. :2twocents
michael_selway
17th-February-2006, 10:44 AM
i honestly think that zinc is a good mid to long term investment for those who has an interest in resource stocks. while i'm not a professional stock analyst here, but it isnt hard to see the that the global supply of zinc is declining while the demand is still pushing ahead. all the news posted here and around seems to suggest a similar trend as well.
apart from the big names like ZFX, KZL or PEM, AIM seems to be another potential zinc stock that's probably be on the rise next. it's worth a closer look. that said, i hold a small interest in AIM. :2twocents
ZFX on Commsec, they raised 2008 EPS forecasts today! it was 93 before now its 150! I wonder why so much despite recent Base Metal Corrections?
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michael_selway
18th-February-2006, 01:29 AM
Heres a question I got from "someone" in another forum that i'd like to share my veiw on
i dont understand, in the last 2 weeks zinc price has fallen by more than 15%
but LME supplies have fallen by almost 16,000tonnes, or more than 4%...
sooner or later, this should turn around...
any thoughts?
Yes this is what i think
Ok all metals have been overbought a bit in Jan 06 so a bit of a correction for all is justified
However, fundamentally zinc is still strong. The reason why even though the LME supplies are falling but prices arent rising because its coming off a high supply base, ie it still has 360k tonnes left, no real danger of running out atm.
Lead/Copper/Alluminium on the other hand is coming off a low supply base LME , ie last yr it got depleted. So even though supplies are recently increasing, theres still a danger of running out eg supply shocks etc
So for ZINC, have to wait till it gets depleted to low levels, then prices may go nuts, maybe end of this year.
thx
MS
nizar
18th-February-2006, 12:41 PM
ok, so ur saying zinc price may continue to fall until end of this year??
bold statement...
since the share prices of unhedged zinc producers such as KZL and ZFX are very dependant on the price of zinc, do u think their sp will fall until the end of the year ??
Care to eloborate?
michael_selway
18th-February-2006, 12:46 PM
ok, so ur saying zinc price may continue to fall until end of this year??
bold statement...
since the share prices of unhedged zinc producers such as KZL and ZFX are very dependant on the price of zinc, do u think their sp will fall until the end of the year ??
Care to eloborate?
nono, as time goes by, as LME supllies fall and become smaller, Zinc Price will rise
Thus sp of ZFX, KZL, OXR, should rise assuming no "bad news" about those companies and also they dont "overshoot" ie jump higher than they should be worth [(production*zinc price)-expenses] etc
atm it seems Zinc price around 0.9c/lb or around $2000/tonne is support
In Jan 06, it jumped to as high as $1.08/lb or around $2400/tonne, now thats called overshooting/speculation
thx
MS
michael_selway
19th-February-2006, 04:12 PM
atm it seems Zinc price around 0.9c/lb or around $2000/tonne is support
Correction above $0.90/lb I meant
michael_selway
19th-February-2006, 04:24 PM
Btw some historical charts of other commodities, see how they compare with base metals and each other etc.
ZFX has attained the status of a Consistently healthy Star Stock following analysis of the company's latest interim results.
ZFX remains in a position of Strong financial health. With all ratios in Strong positions financial risk is manageable and the company is able to satisfy Golden Rule No 1.
Net operating profit before tax and significant items has risen markedly from $85.3 million in the previous corresponding period to $202.7 million. The result was driven by higher zinc prices and metal production. Return on Assets (ROA) has increased from 10.23% to 18.79% while pre abnormal Earnings per Share (EPS) has risen 164.57% to 46.30 cents. With strong growth in ROA and EPS the company is able to satisfy Golden Rule No 2.
The company last closed at $7.31 at a PE of 11.35 times, which when compared to the Materials sector average of 15.73 times, suggests the company is potentially undervalued at current prices. This is supported by the PEG of 0.07. With such a low valuation the company is able to satisfy Golden Rule No 3.
An interim dividend of 10 cents per share fully franked has been declared. This sees the company trading on a dividend yield of 1.92%, a modest yield by today's market standards. With a market capitalisation of $3,590 million ZFX easily satisfies Golden Rule No 6. With 22 day average daily dollars traded of $41.340 million liquidity is not an issue.
The outlook for the company remains positive with consensus analyst forecasts expecting ZFX to achieve full year EPS of 125.9 cents. This would see the company trading on a forecast PE ratio of 5.81 times and a PEG ratio of 0.07. The company's dividend is also expected to increase to 31.2 cents which would see the company trading on a forecast yield of 4.27%.
With a strong growth profile and an increasing yield, ZFX could possibly suit both growth and income seeking investors.
Copper May Fall This Week as Blockade Lifted at Indonesia's Grasberg Mine
Feb. 27 (Bloomberg) -- Copper may fall this week after the Grasberg mine in Indonesia, the world's second biggest for copper, resumed operations following the end of a three-day blockade, easing concern about a shortage of the metal.
Six of 11 traders, analysts and investors polled by Bloomberg on Feb. 23-24 said copper will be little changed and four said it will drop. One forecast a gain.
Operations were stopped at Grasberg on Feb. 22 after villagers demanding to be allowed to sift through ore in the company's waste piles blocked a road leading to the site. The blockade was lifted at 6 p.m. Jakarta time Feb. 25, Freeport spokesman Siddharta Moersjid said in a telephone interview.
``Workers have returned and started the evening shift,'' Moersjid said. ``The blockade was opened voluntarily, and the protesters have given their demands to Freeport and the local administration. We will continue discussing their demands.''
Copper for delivery in three months on the London Metal Exchange rose 0.9 percent last week to $4,850 a metric ton. The metal has declined 2.5 percent since Feb. 7, when it traded at a record $5,100 a ton. Copper for May delivery on Comex gained 0.9 percent to $2.207 a pound.
Copper for May delivery on the Shanghai Futures Exchange declined 1 percent to close at 45,700 yuan ($5,682) a ton, the lowest level in four days. Chinese prices include 17 percent tax and a 2 percent duty.
Hedge-fund managers and other large speculators cut net long positions, or bets that prices will rise, on the Comex division of the New York Mercantile Exchange by 84 percent to 603 contracts in the week to Feb. 14, the lowest since May 2003, the U.S. Commodity Futures Trading Commission said Feb. 17.
Low Stockpiles
Any declines may be limited by concern global stockpiles are still low. Inventories of copper monitored by the LME, Comex and the Shanghai exchange dropped last week to 201,886 tons as of Feb. 24, equal to less than five days of global consumption.
The Grasberg mine produces about 4 percent of the world's copper. It's also the biggest gold mine. Production losses caused by two landslides at the mine in 2003 resulted in global output lagging demand that year and in 2004.
Smelters worldwide are ``well stocked'' with copper concentrate, Michaela Hessling, a spokeswoman in Hamburg at Norddeutsche Affinerie AG, Europe's largest copper refiner, said in an e-mail Feb. 23. Concentrate is a raw material shipped by miners to smelters.
More investment funds are putting money into commodity markets, Triland Metals Ltd., which trades on the LME floor, said in a report Feb. 24. Copper will top its record high this year, the company said.
`Stalemate'
As much as $200 billion of fund money is invested in commodities, of which $30 billion are in base metals, Citigroup Inc., the world's biggest financial-services company, said in a report dated Jan.25.
The six forecasts for little change in copper prices this week is the highest since Bloomberg began its weekly survey in May 2004.
``It's a stalemate,'' said Andrew Cole, an analyst at Metal Bulletin Research in London who was among those who predicted little changed. ``Funds' net longs are the lowest since mid-2003 but inventories are also very low.''
Beware those that produce alot of Copper:
BHP: Chile's state-owned Codelco is the world's largest copper producer. BHP Billiton became the world's second-largest copper producer after buying Australia's WMC Resources Ltd.
RIO: is the world's fourth-largest copper producer. Phoenix-based Phelps Dodge Corp, is the world's third-largest copper producer.
Omg Nickel LME stocks nearly all Gone! 30k+ supplies vanished in 1 day yesterday, any know why?
It's called an "error".
In fact LME inventories rose 174 tonnes overnight.
Kitco do not have a good record of always correcting their errors, so occasionally their metals charts are shoddy for a period.
michael_selway
1st-March-2006, 01:32 PM
It's called an "error".
In fact LME inventories rose 174 tonnes overnight.
Kitco do not have a good record of always correcting their errors, so occasionally their metals charts are shoddy for a period.
Merrill Lynchrates the stock as Sell, High Risk
The broker suggests the stock is expensive at current levels and should be sold at prices above $6.00, as the current share price implies a zinc price that is not sustainable in its view. Following a review of its model the broker has lowered its dividend and earnings forecasts for the stock.
MS
Zinc has a truckload of upside to its price.
It's good advice to ignore mainstream commentators.
I prefer KZL to ZFX, but still think ZFX will outperform many other metals producers this year.
I will be surprised if zinc does not hit $3000 by year's end, and actually think it will hit it by September: No other base metal has as strong a case for rising in price this year.
LONDON (Reuters) - Copper prices hit a new all-time high of $5,105 a tonne on the London Metal Exchange (LME) on Friday, clearing the early-February previous peak of $5,100 on renewed speculative buying, traders said.
Three months prices were quoted at $5,105/5,115 at 1625 GMT, up from Thursday's close of $4,930."
Hm i wonder how much is speculation? 10%?
rederob
18th-March-2006, 12:57 PM
"Speculators send copper to record peak on LME"
Hm i wonder how much is speculation? 10%?
MS
Not much point wondering about "speculation": It's also built into the price of most traded equities.
The issue is what you act on and why?
The ISCG reckon copper was in "balance" last year, but several key commodity followers reckon it was in deficit.
The ISCG has to rely on reported numbers, but other market followers interpolate merchant and consumer destocking - ie numbers that remain unreported.
Another way to test the picture is to look at prompt delivery prices, which have risen lately in Europe, suggesting metal is tight.
Although global output rose 4% last year, it was at least matched by demand.
The supply/demand equation for 2006 should tighten further in the second quarter, so it leaves us to review the picture in the second half.
What factors will then be at play?
That's speculation.
nizar
18th-March-2006, 09:47 PM
OH MY, LOOK AT ZINIFEX EARNINGS UPGRADE FROM MERRIL LYNCH AT THE BOTTOM OF THIS ARTICLE!!
Goldman Sachs JB Were Bows To Higher Metal Prices
March 02 2006 - Australasian Investment Review – (AIR)
Over the last two years, we have seen a battle rage between those analysts who subscribe to the "super-cycle" paradigm, otherwise known as the "stronger for longer" paradigm, and those who warn that history is littered with analysts who ignored the "fact" that markets always revert to their long term mean.
As time passed, numbers in the mean reversion school dwindled as more and more analysts bowed to reality and threw their models out the window. Metals prices, it seemed, were not going down.
Twelve months ago, GSJB Were analysts were among those arguing strongly on a stronger for longer theme, and duly shifted their metal price forecasts as a result. Nevertheless, Weres maintained an ultimate belief that within about two years prices would indeed revert towards the mean.
In January, the analysts were forced to upgrade shorter date prices to more closely reflect spot prices. Weres did not wish to be seen undervaluing Australian resource stocks, but maintained that prices a full two standard deviations above the mean were looking unsustainable. The analysts announced they would put prices under monthly review.
Suffice to say, the review is over. Weres’ forecasts now "embrace the notion of step-change". Having studied the situation extensively, the analysts cannot perceive of a supply surge that will suddenly take the market into surplus. Nor do they consider that current high prices will serve to undermine demand and rebalance the markets. They are now "increasingly confident" that higher commodity prices are with us for some time to come.
The analysts have used recently available data to reassess their demand/supply modelling, and rolled out longer dated forecasts to 2010. New price forecasts appear in the accompanying table, and Weres now suggests an order of preference for metals investment should be zinc number one, followed by nickel, then copper, aluminium and lead.
China’s predicted ongoing demand has been well documented. On the supply side, Weres can identify a number of issues that have limited the response of the mining industry to higher prices: a paucity of quality projects ready for development; infrastructure limitations; rising capital and operating costs; skills shortages; and long lead-times for equipment orders.
Weres still believes in a natural order, meaning that one day these bottlenecks will be overcome, and supply will arrive. However, the analysts’ "tenure of forecast" is only to 2010, and they can’t see it happening before then. China, and increasingly India, will ensure commodities prices remain demand-led.
Is there a risk to Weres’ newfound faith? Well, there’s always a risk. At this stage of the game, a risk would have to be a demand disruption of global consequence, as has occurred before in the form of two oil shocks, the fall of the Soviet Union, and the Asian crisis.
Such crises are never easy to predict, but Weres suggests a collapse of Middle East stability and a bird flu pandemic are two that spring to mind. On the supply side, well the industry is already working at 100% capacity just to meet demand. Any "shock" would likely only be on the downside.
As Weres’ analysts to date have been mean reversion disciples, they have not often changed their long term price forecasts. Indeed, when moved to raise them 12 months ago, it was the first time in ten years. At that point they also assumed ongoing "flat" prices in discounted terms, meaning longer dates fell on the appropriate discount.
Now they suggest prices will stay flat in nominal terms, out to 2011, applying a 2% inflation rate.
The accompanying chart suggests that in the past 36 years, commodities prices (as measured by the Goldman Sachs Commodities Index) have step-changed only once – during the first oil shock of the 1970s. The question now is: at what new level will the index settle at as a point of mean reversion?
On a metal-by-metal basis, Weres believes zinc still has the strongest fundamentals of all. Zinc concentrates are in acute deficit, treatment charges are at record lows, and some smelters are struggling to source feedstock. The analysts are finding it hard to identify sufficient mine projects that could be developed quickly enough to bring the market back to balance before 2008 at the earliest.
Nickel has jumped over aluminium and copper to be number two on the podium. Although continuing to forecast a modest surplus in nickel for 2006, Weres suggests beyond that the market is relying on supply projects that could take three years to reach design capacity. Hence nickel will likely return to deficit in 2008-10.
Copper should also remain in modest surplus for the time being, but again Weres has concerns about the development of sufficient new mine capacity that could prevent a return to deficit after 2008.
Aluminium is the odd one out, as although it is in deficit in 2006, increasing Chinese smelting capacity could well see the market balance by 2007, and move into surplus beyond. Will Chinese government attempts to curb aluminium exports work?
A significant policy change in the analysts’ long term metals forecasting unsurprisingly has significant repercussions for Australian resource stock valuations. Let’s start with everyone’s favourite twins – BHP Billiton (BHP) and Rio Tinto (RIO).
On the basis of general price increases (and assuming iron ore at a forecast 10% increase), Weres has now switched preference to the "cheaper" stock with the greatest metal leverage – BHP.
BHP’s greatest exposure is to copper and nickel, and Rio to copper, both of which Weres predicts will hit a trough before 2007 but then rise substantially thereafter. The accompanying table indicates the analysts’ updates to normalised profit after tax (NPAT) and earnings per share (EPS).
Most notable are the changes to dividends per share (DPS) for Rio as opposed to BHP. This reflects Weres’ assumption that BHP will undertake buybacks rather than lift dividends, but that Rio will undertake buybacks but continue to pay special dividends.
Looking now at other significant metals companies, Weres is forecasting earnings increases for Zinifex (ZFX) of 4%, 40%, and 62% in 2006-08, and a present valuation increase of 39%. Weres rates Zinifex as Outperform.
The unexciting changes include Alumina (AWC): 0%, 9%, 1%, 11% (downgrade to Marketperform) and Iluka (ILU): 0%, 0%, 0%, 1% (Underperform).
Stop press: Merrill Lynch metals analysts have just released a report in which they, too, have made significant upgrades to metals prices. Merrills suggests, however, that while supply/demand fundamentals continue to look strong, there is at least some evidence of inventory-build in copper, nickel, lead and aluminium over the past months. Only zinc inventories have significantly declined.
But despite inventory changes, Merrills believes the market is principally being driven by extensive investment fund buying.
The analysts have made metal price increases across the board, with copper up 21% in 2006 and 21% in 2007. Similar changes have been made to zinc (54%, 72%), and nickel (7%, 15%). Aluminium has been lifted 5% in 2006, and Merrills’ thermal coal prices have been raised from US$43/t to US$48/t in the 2006 Japanese financial year, and from US$40/t to US$48/t in the 2007.
Once again, the flow through of metal price increases is significant for those Australian companies leveraged to such prices. Thus Merrill’s earnings forecasts for BHP have increased by 7% in FY06, 9% in FY07 and 13% in FY08.
Similar increases have been applied to Rio Tinto (8%, 8%, 5%), Zinifex (50%, 222%, 268%), Oxiana (55%, 72%, 73%), and Minara (19%, 20%, 15%). Alumina remains the odd one out again with 2%, -1% and 0%.
London - Zinc prices hit a record peak in Europe on Friday and copper rallied over two percent to close in on last month's record high as buyers returned to the market.
Three month zinc futures on the London Metal Exchange (LME) rallied to a new all-time peak of $2,455 a tonne early on Friday, up 3.4% from Thursday's close at $2,375. By midday it was $2,451.50.
Prices have jumped over 25% since the start of the year as investors have switched attention from other metals to zinc.
"The trend is undeniably upwards on the grounds that we're expecting a very sizeable deficit again this year. Last year was about 430,000 tonnes and we're expecting something around half million mark again this year," Gerard Burg, minerals and energy economist at the National Australia Bank in Melbourne, said.
UBS analyst Robin Bhar said: "LME stocks have fallen to just over 300,00 tonnes, a decline of 280,000 from a year ago, as consumers take metal from LME warehouses to meet strong demand."
He added that pressure on stocks would likely increase further in the second quarter, usually the period of peak demand.
Other metals markets were also higher.
Spot silver hit $10.40 an ounce, beating the previous 22-year peak of $10.37 set on Wednesday and gold was quoted at $555.50/556.25, unchanged from levels.
Copper rose to $5,035 in midsession trading from Thursday's close of $4,930, nearing February's record $5,100.
The market had searched hard for direction this week, with copper underpinned by stubborn resistance below $5,000.
"There has been a lot of time and money invested in getting copper back to these levels after it broke down over the last couple of weeks," another trader said.
"There is bound to be some selling on rallies, but the market will be supported, and next week, it has the potential to hit $5,100," another dealer said.
New York copper was also strong, rallying to a a fresh record high of $2.3150/lb.
The strength in commodities prices helped lift the FTSE 100 share index above 6,000 points for the first time since March 2001.
But fundamentals in copper, used widely in electronics and construction, were less positive.
A report by the International Copper Study Group showed that in 2005 the copper market was in surplus by 2,000 tonnes versus a deficit in 2004 of 887,000 tonnes.
"The data shows mine utilisation was up to an amazing 98% in December and that means we could have sharply higher supplies of concentrate," Nick Moore, global head of commodities at ABN AMRO, said.
"Refined output utilisation was also much firmer towards the end of the year and that suggests we will see more copper," he said.
He added: "The real shocker was the estimated balance. Since October we have had three consecutive months of surplus."
The market balance was in surplus by 20,000 tonnes in October, rising to 185,000 in December, ICSG data showed.
Moore estimated the cumulative copper surplus over the next four years would be around 2 million tonnes.
Zinc Advances to a Record in London After Stockpiles Decline
March 21 (Bloomberg) -- Zinc rose to a record in London as a decline in stockpiles signaled strengthening demand from China, the largest consumer of the steel-galvanizing metal.
Inventory tracked by the London Metal Exchange fell 2,400 tons, or 0.8 percent, to 302,700 tons, the exchange said in a report today, equal to less than 11 days of global consumption. Stockpiles have dropped 48 percent in the past year.
``All is still down to China's demand and supply constraints,'' Juan Pablo Orjuela, a London-based analyst at Koch Metals Trading Ltd., a member of the LME, said today by telephone. ``There's good physical demand for zinc and users have to turn to LME stockpiles.''
Zinc for delivery in three months on the LME rose as much as $20, or 0.8 percent, to $2,490 a metric ton, beating the previous all-time high reached on March 17 by $5. The contract traded at $2,480 a ton as of 10:33 a.m. local time.
China became a net importer of zinc for the first time in 2005 as its booming economy stoked demand for steel needed for buildings, cars and appliances. The country imported 620,816 tons last year, equal to about 6 percent of world demand, as steel production jumped 25 percent. Demand for zinc will outpace supply by 210,000 metric tons this year, according to Deutsche Bank AG.
``The zinc market is going to become as tight as copper,'' Stephen Briggs, an analyst at Societe Generale in London who has followed metals for 25 years, said in a phone interview yesterday. ``Every speculator is buying zinc now.''
Kagara Shutdown
Kagara Zinc Ltd., an Australian producer supplying metal to Korea Zinc Co., shut its smelter in northern Australia after Cyclone Larry left the plant without power. The smelter may be shut for a week, Joe Treacy, the company's executive director, said today by phone from Queensland.
The plant, which processes over 100,000 tons of zinc concentrate a year, wasn't damaged.
Copper for delivery in three months climbed $40, or 0.8 percent, to $5,145 a ton today. Among other metals for delivery in three months on the LME, aluminum rose $18, or 0.7 percent, to $2,506 a ton. Nickel gained $5 to $14,800 and tin lost $25 to $7,925. Lead increased $6 to $1,180 a ton.
Copper, Zinc Prices Rise to Records in London as Global Inventories Fall
March 27 (Bloomberg) -- Copper and zinc prices rose to records in London on speculation that metals demand, driven by worldwide economic growth, will reduce inventories and trigger supply shortfalls. Gold and silver also climbed.
Global growth will expand this year by more than the 4.3 percent rate the International Monetary Fund projected in September, IMF Managing Director Rodrigo de Rato said March 15. Copper stockpiles tracked by exchanges in London, New York and Shanghai slumped 7.7 percent last week to a seven-week low, data showed. Zinc inventories dropped to the lowest since July 2001.
``People are positive on the demand side of these metals as the global economy grows,'' said Jon Bergtheil, head of global metals strategy at JP Morgan Securities Ltd. in London. ``Falling inventories also help.''
Copper for delivery in three months rose $60, or 1.1 percent, to $5,310 a metric ton ($2.4082 a pound) at 7:05 p.m. on the LME after reaching a record $5,332. Prices have more than tripled in the past three years.
On the Comex division of the New York Mercantile Exchange, copper futures for May delivery rose 3.55 cents, or 1.5 percent, to $2.43 a pound after reaching $2.438, the highest ever. A futures contract is an obligation to buy or sell a commodity at a fixed price for delivery by a specific date.
Zinc for delivery in three months rose $44, or 1.7 percent, to $2,624 a ton on the LME after reaching a record $2,630.30. Before today, prices had surged 93 percent in the past 12 months.
Zinc stockpiles tracked by the LME fell 1,000 tons, or 0.3 percent, to 295,825 tons today. Copper inventories dropped 850 tons, or 0.7 percent, to 123,850 tons.
Gold prices rose the highest in three weeks, and silver extended a rally to a 22-year high as the metal approached $11 an ounce.
Newmont
Newmont Mining Corp. said last week copper production at the Batu Hijau mine in Indonesia will be lower than the company expected this year because of unstable earth conditions.
Copper users, such as pipemakers and power-cable manufacturers, already face a production shortfall this year, some analysts said. The deficit will be 207,000 tons, London-based consulting company Bloomsbury Minerals Economics Ltd. said last month. The metal has been in a shortage since 2002, the company said.
Hedge-fund managers and other large speculators increased their net-long positions, or bets prices will rise, in Comex copper futures to 3,010 contracts in the week ended March 21, U.S. Commodity Futures Trading Commission data showed on March 24. Net- long positions more than tripled from a week ago.
Citigroup Forecast
Citigroup Inc., the largest U.S. bank, raised its 2006 price forecasts for copper, nickel and aluminum because of global economic expansion and supply shortages. Copper will average $1.85 a pound, or $4,079 a ton, 16 percent higher than the bank's previous forecast, John Hill, Citigroup's San Francisco-based analyst, said in a report today.
``Given the current economic and operating environment, it is difficult to see how metals supplies will be meaningfully replenished,'' Hill said.
Citigroup also raised its nickel forecast by 8.3 percent to $6.23 a pound, and aluminum by 1 percent to $1.023 a pound.
Imports of copper and its alloys into China, the world's largest consumer of the metal, plunged 50 percent in February, China's Customs General Administration said today. The drop marked the fifth straight month of declines.
Imports of the metal in the two months ended February dropped 43 percent to 132,308 tons.
High Costs
Chinese traders have been reluctant to import copper because prices for the metal in Shanghai have been below the cost of bringing the metal into the country, analysts including Calyon Global Trading's Maqsood Ahmed said. In addition to the London copper price, Chinese users have to pay a 17 percent value-added tax, 2 percent import tax, premiums and freight charges.
Gold futures for April delivery rose $6.30, or 1.1 percent, to $566.80 an ounce on the Comex after reaching $568.60, the highest since March 6. A close at that price would mark the highest since March 6. Silver for May rose 14.5 cents, or 1.4 percent, to $10.88 an ounce after reaching $10.94.
Aluminum inventory dropped 3.2 percent last month from January, the London-based International Aluminium Institute said today.
Stockpiles declined to 3.16 million metric tons in February from 3.27 million tons in January, the institute said today in a report. Inventory was 3.17 million tons in February 2005.
On the LME, aluminum prices rose $16, or 0.6 percent, to $2,555 a ton. Nickel gained $75, or 0.5 percent, to $15,275. Tin climbed $75, or 0.9 percent, to $8,300. Lead gained $2, or 0.2 percent, to $1,250.
michael_selway
31st-March-2006, 02:01 PM
London Metal Exchange Warehouse Stocks(Mar 30)
Metal Tonnes in Storage Change from
previous day
Aluminum 780,325 +150
Copper 121,300 -75
Nickel 32,826 +222
Lead 88,250 0
Zinc 286,750 -3675
Hm Zinc is heading to 0 in LME supplies before end of year 2006, anyone disagree?
thx
MS
rederob
31st-March-2006, 06:15 PM
MS
Most LME zinc is stored at New Orleans.
This warehouse had hardly been touched until the hurricanes hit last year, and most of the metal leaving it has gone to be "cleaned" - so will be returned.
As a result, we get ambiguous data on the New Orleans metal flows because we cannot tell how much is truly leaving for consumption rather than cleaning.
Nevertheless, as zinc inventories are drawn down, as the assuredly will be over the course of this year, incredible pressure will be placed on prices.
At this point we will see zinc coming out of the woodwork, as it were, so opportunists can milk the strong backwardations that will be in play.
I doubt we will hit "zero", but it's not impossible.
More likely we will see what has occurred in the nickel market: Where inventories went to a few thousand tonnes, and high prices have kept the warehouses busy on each way trade ever since. The other impact was to draw most inventory to warehouses so that producers no longer had any metal sloshing around. As a result, nickel prices have remained comparatively high when one looks at historical inventory versus price levels.
A simpler way of saying this is that producers have lost the ability to "manipulate" the market because they simply don't have any spare metal available.
michael_selway
1st-April-2006, 03:02 AM
MS
Most LME zinc is stored at New Orleans.
This warehouse had hardly been touched until the hurricanes hit last year, and most of the metal leaving it has gone to be "cleaned" - so will be returned.
As a result, we get ambiguous data on the New Orleans metal flows because we cannot tell how much is truly leaving for consumption rather than cleaning.
Nevertheless, as zinc inventories are drawn down, as the assuredly will be over the course of this year, incredible pressure will be placed on prices.
At this point we will see zinc coming out of the woodwork, as it were, so opportunists can milk the strong backwardations that will be in play.
I doubt we will hit "zero", but it's not impossible.
More likely we will see what has occurred in the nickel market: Where inventories went to a few thousand tonnes, and high prices have kept the warehouses busy on each way trade ever since. The other impact was to draw most inventory to warehouses so that producers no longer had any metal sloshing around. As a result, nickel prices have remained comparatively high when one looks at historical inventory versus price levels.
A simpler way of saying this is that producers have lost the ability to "manipulate" the market because they simply don't have any spare metal available.
VANCOUVER -- Even as prices for copper, nickel and precious metals began to climb in 2001, zinc was the laggard, living up to its reputation as the latecomer to any commodities party.
But beginning in late 2004, prices for zinc -- used primarily to rust-proof iron and steel -- began to climb, reflecting dwindling stockpiles and increasing global demand.
Over the past six months, that trend accelerated. Zinc yesterday rose $55 (U.S.) or 2.1 per cent to $2,668 a ton on the London Metal Exchange, continuing a streak that has seen prices climb by 40 per cent this year.
"You have a very compelling story here where the visible inventories, the ones that traders and people in the business can see, are going down almost every day," said Patricia Mohr, vice-president of Scotia Economics.
Those skimpy inventories, combined with expected demand growth of about 4.5 per cent this year, point to continued strong zinc prices in coming months, Ms. Mohr said. "On a more fundamental basis, what this indicates is that there hasn't been any significant mine development in the past decade."
Supplies are so constrained that even small disruptions are having an apparent impact on prices, TD Newcrest analysts Greg Barnes and Cliff Hale-Sanders said in a March 27 report. A cyclone that hit northern Australia last week and forced the closing of a zinc plant, knocking about 1,000 tonnes of zinc metal out of the supply loop, was seemingly enough to excite the zinc market, they wrote.
Market participants are also watching Xstrata PLC's progress at its McArthur river mine in Australia, where the Swiss company has applied to convert what is now an underground operation into an open pit, the report said.
"If the government of Australia's Northern Territory does not allow the project to proceed, the zinc market could move from being very tight to almost impossibly tight over the next several years," the analysts wrote.
With rising prices, zinc producers are dusting off old projects. Vancouver-based Teck Cominco Ltd., the world's biggest zinc producer, and Toronto-based Falconbridge Ltd. are looking at Lennard Shelf, an Australian mine that's been mothballed since 2003.
Some have already made the decision. Winnipeg-based HudBay Minerals Inc. is in the process of reopening the Balmat zinc mine, mothballed since 2001, in New York state this year.
HudBay chief executive officer Peter Jones yesterday said his company's projections indicate zinc inventories could possibly hit zero some time in the fall. "There is a very solid underpinning for zinc prices right now," he said.
London Metal Exchange Warehouse Stocks(Apr 03)
Metal Tonnes in Storage Change from
previous day
Aluminum 775,900 -3325
Copper 120,675 -1250
Nickel 32,100 -468
Lead 89,750 +125
Zinc 280,600 -4500
New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
previous day
Aluminum 193,728 -519
Copper 20,667 -14618
Amazing fall in supply!
professor_frink
4th-April-2006, 11:10 AM
just been reading a couple of articles on the commodities bull over the weekend-
They're trying to flog off their newsletter, but they are still fairly interesting articles, especially the second one, which goes into the technicals of the big base metals
http://www.zealllc.com/2006/21bull.htm
http://www.zealllc.com/2006/basetech.htm
michael_selway
7th-April-2006, 09:39 AM
just been reading a couple of articles on the commodities bull over the weekend-
They're trying to flog off their newsletter, but they are still fairly interesting articles, especially the second one, which goes into the technicals of the big base metals
http://www.zealllc.com/2006/21bull.htm
http://www.zealllc.com/2006/basetech.htm
Credit Suisse rates the stock (ZFX) as Upgrade to Outperform
Following a quarterly mark to market of earnings, the analysts point out that PE’s in the global metals and mining sector have been pushed to near single digits. As a result, they have lifted their recommendation on the stock to Outperform and their target by $5.95 to $11.62. <== Nearly Double, crazy stuff!
that's a fairly hefty upgrade!
At the rate it's going though, it'll probably hit that by the end of the month :D
nizar
7th-April-2006, 10:18 PM
Credit Suisse also predicts that supply of zinc will be in deficit this year by 466,000tonnes...
Rally Not Over'
Bullish metals forecasts are prompting investors such as pension funds and hedge funds to place more money in funds that track commodity indexes.
``There are no signs that funds have lost appetite,'' said Angus MacMillan, a metals analyst at Bache Financial Ltd. in London. ``As long as you have a list of problems, funds will keep piling in.''
``The three-year rally in the metals is not over,'' said Credit Suisse analysts led by David Gagliano in New York.
``The trend over the next 10 to 15 years should be bullish for commodities,'' Daniel R. DiMicco, chief executive officer of U.S. steel producer Nucor Corp., said in an interview from Nucor's headquarters in Charlotte, North Carolina today. ``There will be ups and downs during that period, but the downs won't be as severe as they have been in the prior 20 years.''
Zinc rose $93.50 to $2,781 a ton. Earlier, it gained as much as $114, or 4.2 percent, to $2,801.50 on a ton on the LME.
Zinc inventory has dropped 30 percent this year to 276,325 tons. Credit Suisse forecasts demand for the metal, which is used to galvanize steel, will exceed production this year by 466,000 tons.
http://quote.bloomberg.com/apps/news...4qg&refer=home
rederob
7th-April-2006, 10:32 PM
Zinc inventory has dropped 30 percent this year to 276,325 tons. Credit Suisse forecasts demand for the metal, which is used to galvanize steel, will exceed production this year by 466,000 tons.
http://quote.bloomberg.com/apps/news...4qg&refer=home
Given that there is only about 150,000 tonnes available (the other 125,000 tonnes is "cancelled") then zinc consumers will be in dire straits if Credit Suisse are right.
A not so so obvious trend has been a recent decline in LME drawdowns from locations excluding New Orleans, suggesting consumers have tapered off buying activities as prices climb higher.
This is a common feature of tight markets and tends to bring on a price retrace, allowing dip-buying for the canny consumers who know full well prices will keep rallying into the foreseeable future.
I think it possible for zinc to reach $4000 per tonne by year's end - another 35% from here, but the price inelasticty of zinc will allow such an increase without great impact on final product prices.
nizar
7th-April-2006, 10:53 PM
Given that there is only about 150,000 tonnes available (the other 125,000 tonnes is "cancelled") then zinc consumers will be in dire straits if Credit Suisse are right.
A not so so obvious trend has been a recent decline in LME drawdowns from locations excluding New Orleans, suggesting consumers have tapered off buying activities as prices climb higher.
This is a common feature of tight markets and tends to bring on a price retrace, allowing dip-buying for the canny consumers who know full well prices will keep rallying into the foreseeable future.
I think it possible for zinc to reach $4000 per tonne by year's end - another 35% from here, but the price inelasticty of zinc will allow such an increase without great impact on final product prices.
Great post rederob.... ur last point (in bold) sounds familiar, and has been made by other commentators.... (see below)
Thats the beauty of zinc :D
Zinc is my favorite base metal because it will be in supply deficit for the next three years, has few substitutes and in most applications, higher prices do not diminish demand. For example a car uses about $17 worth of zinc. If zinc tripled in price, it would mean only a 2/10th of 1% percentage increase to a $20,000 car. However, the impact on a zinc mine of a few pennies per pound is substantial.
http://www.kitco.com/ind/Gerbino/mar172006.html
michael_selway
8th-April-2006, 12:45 AM
Great post rederob.... ur last point (in bold) sounds familiar, and has been made by other commentators.... (see below)
Thats the beauty of zinc :D
Zinc is my favorite base metal because it will be in supply deficit for the next three years, has few substitutes and in most applications, higher prices do not diminish demand. For example a car uses about $17 worth of zinc. If zinc tripled in price, it would mean only a 2/10th of 1% percentage increase to a $20,000 car. However, the impact on a zinc mine of a few pennies per pound is substantial.
http://www.kitco.com/ind/Gerbino/mar172006.html
Absolutely spot on!
Btw Rederob, what do u mean by "cancelled" below?
"Given that there is only about 150,000 tonnes available (the other 125,000 tonnes is "cancelled") then zinc consumers will be in dire straits if Credit Suisse are right."
thx
MS
rederob
8th-April-2006, 07:22 AM
Btw Rederob, what do u mean by "cancelled" below?
MS
Metals delivered to LME warehouses is usually held "on warrant".
When metal is purchased, the warrant is cancelled and the metal becomes available for delivery.
By following the ratio of cancelled to all metal held is a useful indicator of the trend - or metal's fundamentals.
Here's the latest LME data from last night:
dutchie
8th-April-2006, 09:15 AM
G'day all
Does anyone know the code(s) for the price of oil charts to compare with a stock chart (say WPL) using Yahoo Finance.
I would also like to know what the codes are to show a chart on Yahoo Finance for the prices of:
Gold; Zinc; Copper; Uranium; Coal and Aluminium.
(Are there any ASX codes for these prices??).
Cheers
Dutchie
bvbfan
8th-April-2006, 06:18 PM
Does anyone know the code(s) for the price of oil charts...
I would also like to know what the codes are to show a chart on Yahoo Finance for the prices of:
Gold; Zinc; Copper; Uranium; Coal and Aluminium.
No such luck, Yahoo only has gold and silver they used to have platinum and palladium
try XAUUSD=X for gold , XAGUSD=X for silver
XPT - pt
XPD - pd
can also use AUD instead of USD
michael_selway
8th-April-2006, 07:21 PM
MS
Metals delivered to LME warehouses is usually held "on warrant".
When metal is purchased, the warrant is cancelled and the metal becomes available for delivery.
By following the ratio of cancelled to all metal held is a useful indicator of the trend - or metal's fundamentals.
Here's the latest LME data from last night:
Thx Red
Amazing so basically from the pic, 116300 are already "sold" waiting to be "shipped" out?
Also may I ask where u got the info above from (link)? Can you also post one for Copper
Thx
MS
rederob
8th-April-2006, 08:40 PM
MS said, "Amazing so basically from the pic, 116300 are already "sold" waiting to be "shipped" out?"
Yes, it's just a matter of time, but typical daily outflows have averaged over 3000tonnes in recent weeks.
MS asked, "Also may I ask where u got the info above from (link)? Can you also post one for Copper?"
Yes, but copper is boring, so I added nickel.
If the nickel trend keeps up then steel prices will also rally much higher.
And yes to the source; it's from one of the many subscription services that are available.
Unfortunately the LME once made timely and detailed data available for free.
Nowadays there is a cost to staying a step ahead: You will see the above data reflected in Kitco Metals on Monday.
michael_selway
9th-April-2006, 01:05 PM
MS said, "Amazing so basically from the pic, 116300 are already "sold" waiting to be "shipped" out?"
Yes, it's just a matter of time, but typical daily outflows have averaged over 3000tonnes in recent weeks.
MS asked, "Also may I ask where u got the info above from (link)? Can you also post one for Copper?"
Yes, but copper is boring, so I added nickel.
If the nickel trend keeps up then steel prices will also rally much higher.
And yes to the source; it's from one of the many subscription services that are available.
Unfortunately the LME once made timely and detailed data available for free.
Nowadays there is a cost to staying a step ahead: You will see the above data reflected in Kitco Metals on Monday.
Thanks again read, ok I see
Hey can you also post Aluminium, Lead, Tin, just want to see the current "cancelled" for them
Btw when u say copper is "boring"what do u mean exactly?
thx
MS
rederob
9th-April-2006, 06:27 PM
MS
I said copper was boring because the only action for it is in Asia, via China's SRB movements to Korean or Singaporean warehouses - likely in anticipation of delivery to parties that it tried to outwit last year when they went a wee bit too short and got caught.
There is no copper to speak of it Europe, a bit in USA and the rest pretty much spoken for in Asian warehouses: That's why the copper price keeps winding higher, and why the savvy funds are not frightened to pour more money into this particular commodity.
I think it's safe to say that copper will now easily reach $6000/tonne this year, and could add another 10% more before year's end.
While plant upgrades are in the pipeline, not a lot of new capacity will be brought on line in 2006.
Although 2007 will see the fruits of expansion plans put in train a few years ago, the question is whether increased output will take the market from deficit to balance, then oversupply.
Below is an Aluminium chart from LME (I don't have one for tin):
michael_selway
11th-April-2006, 09:21 AM
Credit Suisse rates the stock (ZFX) as Upgrade to Outperform
Following a quarterly mark to market of earnings, the analysts point out that PE’s in the global metals and mining sector have been pushed to near single digits. As a result, they have lifted their recommendation on the stock to Outperform and their target by $5.95 to $11.62. <== Nearly Double, crazy stuff!
ABN Amro rates the stock as
Buy - Initiation of Coverage
The broker has initiated coverage with a Buy rating, as in its view the stock will benefit from ongoing upgrades to zinc price forecasts given it is very leveraged to the price of the underlying commodity, which is being driven higher by inflows from investment funds. While taking a positive view the broker points out there appears limited growth in the company and its operating cashflow levels are quite high, leaving it at risk of any downturn in the zinc price. As a result, the broker suggests while in the next few months the stock should continue to perform it may then pay to look at switching into either another zinc play or a more diversified alternative. Valuation is $6.24 but rises to more than $10.00 based on current spot zinc prices.
Target price is $11.48
Current Price is $9.80
thx
MS
michael_selway
12th-April-2006, 12:24 AM
MS
I said copper was boring because the only action for it is in Asia, via China's SRB movements to Korean or Singaporean warehouses - likely in anticipation of delivery to parties that it tried to outwit last year when they went a wee bit too short and got caught.
There is no copper to speak of it Europe, a bit in USA and the rest pretty much spoken for in Asian warehouses: That's why the copper price keeps winding higher, and why the savvy funds are not frightened to pour more money into this particular commodity.
I think it's safe to say that copper will now easily reach $6000/tonne this year, and could add another 10% more before year's end.
While plant upgrades are in the pipeline, not a lot of new capacity will be brought on line in 2006.
Although 2007 will see the fruits of expansion plans put in train a few years ago, the question is whether increased output will take the market from deficit to balance, then oversupply.
Below is an Aluminium chart from LME (I don't have one for tin):
Hi yeah, oversupply in copper and aluminium soon imo (sometime in 2006), might mean danger for those who produce and sell them.
Btw have u got a "pic" liek the above for Lead?
thx
MS
michael_selway
14th-April-2006, 10:29 AM
London Metal Exchange Warehouse Stocks(Apr 13)
Metal Tonnes in Storage Change from previous day
MS
Most zinc inventory is held at New Orleans.
New Orleans stocks were flood damaged and most inflow and outflow in zinc in recent months has been due to the metal going to be cleaned, and then returned in good repair for sale.
As overall the quantity of cancelled zinc warrants is still very high, drawdowns will resume apace near term.
michael_selway
19th-April-2006, 12:44 PM
MS
Most zinc inventory is held at New Orleans.
New Orleans stocks were flood damaged and most inflow and outflow in zinc in recent months has been due to the metal going to be cleaned, and then returned in good repair for sale.
As overall the quantity of cancelled zinc warrants is still very high, drawdowns will resume apace near term.
--------------------------------------------------------------------------------
Breaking the ceiling
Despite rising prices, copper supplies may not arrive quickly enough.
Market moving towards deficit for the current year.
Zinc prices have actually reacted earlier than many expected
--------------------------------------------------------------------------------
Mumbai, April 18
Copper market is expected to continue to witness strong prices for at least three more years, thanks to extremely low inventory, supply disruptions helping to maintain tightness and continuing robust demand.
A large number of supply disruptions due to strikes, mine production problems, equipment delays and lower ore grades are cited as factors for the bullish view on prices. As a result, the refined market could swing into deficit in the current year.
Despite rising prices, supplies may not arrive quickly enough to contain price spikes. However, a sharp slowdown in global economic growth and concomitant slowdown in copper demand growth can potentially lead the market into a state of surplus. There is no sign as yet of that happening, though.
Macquarie forecast
Analysts at Macquarie Research Commodities have revised their price forecast upward for 2006, 2007 and 2008, even as the market had smashed through their previous forecast made early February. Their calculations suggest that market stocks are unlikely to return to reasonably comfortable levels before 2010.
Currently, market stocks of copper cover 2.3 weeks of world consumption which could rise gradually over the next three years and reach 4.4 weeks of consumption by 2010.
Looking at projected refined production (17.825 million tonnes) and consumption (17.965 mt) numbers, the market is moving into deficit in the current year, analysts asserted.
As a result Macquarie Research has revised its forecast average copper prices for 2006 up to $5,590 a tonne (from earlier $4,850).
Demand-supply
In 2007, demand/supply balance may move into a small surplus (1.23 lakh tonnes), a quantity that does not suggest much downward pressure on prices. Should production disruptions persist or worsen, the situation could change. Therefore, the forecast price for 2007 is revised to $5,208/tonne, up from $3,527, analysts said.
Zinc prices
In the current year, zinc prices have actually reacted earlier than many expected. For the past six months or so, prices have been above the levels suggested by price/inventory relationship.
Refined zinc supply-demand balance suggests that the market could in a state of deficit of over 3.5 lakh tonnes, with total supply forecast at 10.737 mt and total consumption at 11.095 mt in 2006. Deficit for the year is higher than that of last year's 2.87 lakh tonnes. As the market is looking ahead to the tightness which is looming for later part of the year, prices have been rather firm. "We continue to expect virtually all of the LME zinc stocks to be run down by the end of the year, and the zinc market to be displaying all the signs of a shortage market, including prices moving to record highs," commented a Macquarie analyst.
LME cash price
The expert forecast that LME cash price for zinc during 2006 could well move above $1.40 per pound equivalent to $3,086 per tonne in the second half of the year.
In 2007, the deficit is seen substantially smaller but stocks would have reached one of the recent low levels, creating conditions for greater price rise.
michael_selway
20th-April-2006, 11:10 AM
London Metal Exchange Warehouse Stocks(Apr 19)
Metal Tonnes in Storage Change from
previous day
Aluminum 749,600 +1275
Copper 119,050 +7750
Nickel 28,596 +378
Lead 94,675 +475
Zinc 270,300 -1475
Charts
New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
previous day
Aluminum 196,141 +2529
Copper 17,832 -108
Hm copper LME supplies gained alot today, any ideas why?
What If Every Day Was Sunny And Spot Prices Stayed High Forever? (just for discussion - nothing more)
FN Arena News - April 20 2006
Long term commodity prices are determined as the average real price of that commodity over as much time as is deemed appropriate – maybe decades. In forecasting prices out to several years (and then discounting values to arrive at stock valuations) an analyst will always assume a reversion to the mean – that is, the further out you go the closer the price for any commodity will be to the long term average price.
The same is true for required currency assumptions.
The twenty-first century has brought about a challenge to the traditional way of thinking, and of measuring. The China effect has brought about talk of a "super cycle", or "stronger for longer" or a "secular change in prices". However you label it, it's all about shifting away from the long term curve into higher territory on a new long term basis. A step-jump.
Japan had the same effect post-war, but post-war did not see the same level and sophistication of stock analysis we have today. Many of today's asset pricing models were developed and refined in the sixties and seventies. So suffice to say, China has upset the apple cart (or maybe shaken all the sleepy apples off the tree).
Over the past couple of years, the concept of a super cycle has been a source of debate amongst resource analysts. One by one those analysts, if they weren't already major bulls, have capitulated. How can they denounce the super cycle concept when commodity prices keep hitting levels not even the most bullish were expecting?
With monotonous regularity, resource analysts have all but apologised to their clients and shifted up commodity price assumptions in the wake of spot price movements. Most no longer attempt to "predict" nearer term prices, but rather let spot prices lead the way. Not to do so has proven otherwise fatal, and analysts don't want to be the one calling a stock a sell just before it doubles in price.
The hard nuts, and maybe the old hands, are still preaching caution on a longer term basis. It is not hard to believe that the heat must eventually filter out of the commodities market, and that these current heady numbers will prove a necessary but unusual aberration some time down the track. Some time – but still prices keep going up.
The weight of demand – not just from the likes of China, India and co, but from investors who have never bought straight commodities before in their lives –continues to outstrip tardy supply developments. There is no real end in sight. Analysts have their views on maybe two, three or five years before things start to catch up. Some also throw in a little warning about overblown prices that could come a-crashing down with some violence, but crashes are never easy to pick.
Suffice to say, it will be something unforseen, rather than foreseen, that might trigger such an event.
Analysts are also careful to point out increasing costs in the resource industry, but such developments take a back seat when margins are astronomical. There is clearly some element of feedback loop in costs – for example, the cost of a new truck used in mining will be inflated by higher component and raw material costs, as will the cost of fuel. Could this be the sleeping trigger?
Meanwhile, analysts can only use spot prices as the overriding factor. On the release of Oxiana's (OXR) production report, UBS noted that the Golden Grove project had hit its straps just at the right time to deliver more zinc at ridiculous prices. Costs have increased too, but what the hey, don't forget Oxiana is unhedged.
Credit Suisse analysts have had to wrestle with their demons over Oxiana as well. In June last year they downgraded the leveraged miner directly from Outperform to Underperform. At the time, the share price was less than $1.00. Today it is more than $3.00.
In a report this morning, Credit Suisse has joined the capitulation team. This is what they said:
"Our concerns about costs, project delays, capex blowouts, grade and production outlook at various [sic] of OXR's assets are immaterial when compared to the leverage offered by OXR to booming commodity prices. We find it untenable to maintain a focus on long-term value at conservative commodity prices, when markets are quite clearly indicating this is not important. This applies both in terms of commodity prices themselves and OXR's equity valuation. We still have reservations over long-term valuation if and when commodity prices moderate, but we are shifting our focus for valuation to present year earnings, on high, but lower-than-spot commodity prices."
The analysts lifted their recommendation on Oxiana back from Underperform to Outperform, and took their latest target price from $2.00 to $3.65.
In the same daily report that featured Oxiana, Credit Suisse also proposed a somewhat flawed, but nevertheless interesting exercise (by the analysts'own admittance). Fresh from frustration over mining company valuations the analysts have said okay – what if today's spot prices become the long term average?
What if indeed. Under this scenario (and as CS notes, making absolutely no adjustment for likely increased costs) Alumina (AWC) would fall to a 2008 price/earnings of 6.3x from 18.6x.
Its net present value would rise from $6.50 to $25.76 – an increase of 296%. Want some more?
All major miners' PEs would fall to single digit numbers, if they weren't already. NPV increases include BHP Billiton (BHP) from $17.58 to $43.95 (150%), Portman Mining (PMM) from $8.05 to $11.48 (43%), Rio Tinto (RIO) from $63.01 to $97.73 (55%), and Zinifex (ZFX) from $6.88 to $25.96 (277%).
These are NPV numbers, without applicable premiums. While CS ascribes an NPV of $17.58 to BHP it is currently trading at around $31.25. The analysts' target price today is $35.79.
Imagine where resource stock prices could really be!
But this is just an exercise, and a fanciful one at that. If anything it smacks of Credit Suisse analysts saying "C'mon, if you wanna get silly, let's get really silly!" They are quick to point out that the concept of extrapolating commodity prices into perpetuity (the "long term") is just not correct.
Long term prices are not fleeting numbers.
So once again all we can say is: how long can this gone on? No one can rightly say.
michael_selway
22nd-April-2006, 11:43 PM
LME Official Opening Stock in tonnes
Date ALUMINIUM ALLOY ALUMINIUM COPPER LEAD NICKEL TIN ZINC NASAAC
London Metal Exchange Warehouse Stocks(Apr 25)
Metal Tonnes in Storage Change from
previous day
Aluminum 744,350 +1500
Copper 117,450 0
Nickel 27,948 -144
Lead 96,450 +2025
Zinc 266,175 +1150
New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
previous day
Aluminum 196,906 +5754
Copper 17,479 0
Zinc Inventory went up again...hm not sure why
thx
MS
Strw23
26th-April-2006, 11:24 AM
Great day for the XMJ so far. :) :) :)
Scott
rederob
26th-April-2006, 04:56 PM
MS, regarding your question:
Zinc Inventory went up again...hm not sure why
New Orleans has metal going off to be cleaned - moving off warrant.
When its saleable, it gets returned - on warrant.
Most of LME's global zinc supply remains at the New Orleans warehouse.
No need to be alarmed - trust me!
michael_selway
26th-April-2006, 05:55 PM
MS, regarding your question:
New Orleans has metal going off to be cleaned - moving off warrant.
When its saleable, it gets returned - on warrant.
Most of LME's global zinc supply remains at the New Orleans warehouse.
No need to be alarmed - trust me!
Hi thanks, how much was added/on warrant "in" today from New Orleans
Also how much more do u suspect will be returning to New Orleans (basically how much total was taken out to be "cleaned" and how much has returned thus far)
