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In reply to: tom924 on Wednesday 13/10/04 10:45pm

Falling in love with metals may be a big mistake and shows lack of knowledge of the market. In manufacturing, many materials are used to make a product, not just metals. With manufacturing running hot in China at present, we can expect shortages in supply of raw materials, not just metals. I know that there is a shortage of rubber for tyres in the motor industry; without tyres, you do not get cars, trucks, and need less nickel, copper etc. There is not enough materials worldwide to give the Chinese the same car ownership as the West. So we can expect the design of cars to change to reflect the materials available. Manufacturers do not pay exorbitant prices for materials , they substitute. Expect the price of materials to hit a ceiling that reflects what economies can afford for goods.

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In reply to: uptrend on Thursday 14/10/04 08:00pm

Hi uptrend,


I have been saying for a long time to anyone who will listen that there is a "commodity" boom that covers many raw materials, not just metals.


I do follow metal prices closer because that is what I am most heavily invested in.


Particularly Nickel.


I did suggest a few days ago(as many others did) that a correction was due, perhaps overdue, & it happened last night.


I am comfortable with that.






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I'm sure nickel, copper etc have great futures but we need to be aware that many materials have finite economic reserves. Man has always resolved this problem by substitution and innovation. You do not need to be PHD to know that motor car technology is old and in urgent need of updating to reflect the avalability of fuels to supply it. This also applies to other metals uses. A substitute for nickel is ceramic, plenty of sand in the world.
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Metalsome hedgers take zoom out of boom


October 15, 2004

HAS the metals boom ended for the short term? Obviously it is too early to tell, but the signs are not good because the big hedge funds are exiting.


In the old days, metals moved in accordance with demand and supply predictions and the levels of stock.


While that is still the case, movements are currently multiplied many times because some of the biggest metal speculators have become the highly leveraged hedge funds.


For most of 2004, the hedge funds have been nervous about the slowdown in China, but recent reports indicated that it would be mild.


As late as last week the hedge funds were filled with optimism and took copper to a new 15-year high.



But then in Melbourne, General Motors announced that sales of its cars in China had slumped (The Australian, Tuesday) and later BHP announced that it expected the supply of copper to exceed demand in the second half of 2005.


The funds are operating on either borrowed money or major futures commitments, so as soon as they experience unpleasant surprises indicating that a market is going into reverse they rush to liquidate their holdings. That's why so many metals fell 10 per cent this week as the funds dumped not only copper but aluminium, nickel and zinc. After a big exit, the funds do not return until they are satisfied that either the warning sign was a hoax or underlying conditions have changed.


So a mass hedge fund exit often triggers further falls as the asset class loses its appeal and is replaced by an asset that is on the rise.


At the moment, oil is the darling of the hedge funds.


Oil production is highly sensitive to terror attack and to the sort of weather damage that occurred in the Gulf of Mexico in the wake of Hurricane Ivan.


Paradoxically, as the hedge funds pour money into oil and push the price higher, this reduces consumer money for products that use metals and locks in lower metal prices.


Naturally the main focus of the oil squeeze is in the US, and higher oil caused the Dow index to slip below 10,000. But in Australia, Treasurer Peter Costello is warning that the higher oil price might reduce the growth estimates that Treasury issued during the election campaign and which were the basis of many of John Howard's late promises.


Hedge funds are on the constant lookout for asset plays. Early this year, the most popular global asset class was Australian dollars, but our currency was dumped from close to US80c to below US70c because higher US interest rates lowered the interest rate differential.


On the local front the equivalent of hedge funds have bought a big slice of Australian Leisure & Hospitality and are basking in the delights of the Woolworths-Coles battle for control of the pubs group.


The big rise in metal prices came on the back of the China boom. Given that Chinese growth is likely to be maintained around 7 or 8 per cent for the foreseeable future, the underlying strong demand is not going to suddenly stop. But because for the next year or two China will be implementing an extremely complex slowdown exercise, there is always a chance it will overshoot.


Australian resource shares were hit hard yesterday but the falls were only a small portion of the huge gains that have been enjoyed over the past year or two.


For example, Bluescope Steel has fallen more than 5 per cent but the stock had risen 80 per cent from its low. BHP Billiton fell 4 per cent but its shares had risen almost 40 per cent ÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢ÃƒÆ’Æâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¬ÃƒÆ’Æâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“ and the list goes on.


Longer term, the increased use of the hybrid electric car will see more oil-based transport energy swung across to copper as battery power supplements petrol. But it will be many years before this affects overall oil demand.



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Inco CEO says strong metals market 'far from over,' despite recent slippage


Nancy Carr

Canadian Press



Thursday, October 14, 2004



1 | 2 | NEXT >>





TORONTO (CP) - Inco Ltd.'s chairman and chief executive says high demand and dwindling supplies will keep metal prices high, despite a recent weakening in the sector.


"In our view, strong metals markets are far from over," Scott Hand told the Metals Analysts Group of New York on Thursday. Toronto-based Inco is one of the world's largest producers of nickel.


"Although western industrial production has been quite flat prior to this year, nickel demand growth has averaged seven per cent - fuelled by global stainless steel production that rose nine per cent in 2003 alone, as well as by rapid economic growth in China," Hand said in a prepared statement.


"Now, with the return of strong global industrial production growth in the traditional industrial economies - the U.S., Japan and, to a lesser extent, in Europe - nickel's prospects are getting even brighter."


Hand said the price of nickel has averaged about $6.30 US a pound so far this year, although it has weakened recently.


Nickel closed up slightly Thursday at about $13,200 US per tonne on the London Metal Exchange, after falling 17 per cent Wednesday to a three-week low of $13,000 US per tonne, or $5.90 US a pound.


Hand said he expects nickel demand to increase in China over the second half of 2004, after being flat for in the first half, and noted that in 2005 China will be the world's largest consumer of nickel.


The tightening credit environment in China will dampen demand for nickel, he said, but nickel consumption should still rise by 20 per cent in that country this year.


Earl Sweet, assistant chief economist at BMO Financial Group, agreed that metals prices should continue to rise for the foreseeable future, despite a slight cooling of China's economy.


The bank's commodity price index for September, released Thursday, showed the price of metals and minerals had increased by 22.5 per cent over the past 12 months.


"You have to look beyond the day-to-day, week-to-week trading volatility and look at where prices are relative to their historical levels," Sweet said.


"You can see that they're extremely elevated and that's a reflection of very tight markets and that's not likely to change over the course of the next year or so."


He added that if the massive Chinese economy slows from nine per cent growth to eight per cent growth, as forecast, "it's not going to make much of a difference in the fundamentals."


He blamed hedge funds for the recent price swings in metals.


"Hedge funds have been very active in the commodities markets now that the stock markets have just been going nowhere . . . so they've turned their attentions to commodities and going in and out has caused quite substantial volatility."


The soaring price of crude oil, which closed at a record high Thursday on the New York Mercantile Exchange of $54.76 US per barrel for November delivery, Sweet added, is having a partly undeserved dampening effect on metals.


"The fact that oil prices have pushed upwards . . . would suggest there's a greater chance that there will be a slowdown in the global economy and therefore that causes people to trade out of things like metals," Sweet said.


"But the fact that oil prices are high, relative to historical standards, and metal prices are high, relative to historical standards, reflects the very strong demand coming from Asia and also from good growth elsewhere in the world."


Inco's rosy predictions come about a year before it starts up its massive Voisey's Bay nickel project in Labrador and as it considers restarting a scaled-down version of its Goro project in New Caledonia, which was shuttered in 2003 due to high costs.


They also come one day after Prudential Financial downgraded Inco's stock because of the volatility in nickel prices and after prices for copper, gold and aluminum experienced dramatic drops.


Most metals stocks regained ground on Thursday.


Shares in Inco (TSX:N) closed up 74 cents at $45.04 Thursday on the Toronto stock market. Nickel miner Falconbridge (TSX:FL) gained 18 cents to $31.26, zinc and copper miner Teck Cominco (TSX:TEK.B) added 16 cents at $27, and aluminum giant Alcan closed up 21 cents at $59.04.



A substitute for Nickel is ceramic?? I Never read about that in over a year of closely following Nickel stories http://www.ShareScene.com/html/emoticons/blink.gif

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QUOTE (thekiwi @ Friday 15/10/04 03:41am)

You have to question the soundness of the current nickel boom when you visit your local hardware shop and see a shiny stainless steel garden spade priced at $20. It looks like the model that is used by royalty to plant trees. Is it really necessary to use nickel in this way? The reason for this spade to exist is the low wages in China giving room to massively upgrade the humble garden spade. I'm sure the Chinese would prefer a wage rise and for us to use an ordinary steel spade priced at $20. Time will tell which spade we will end up using and what benefits are passed onto the manufacturers.

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In reply to: uptrend on Friday 15/10/04 03:55pm

Hi uptrend, good points.


I tell you the truth I can't think of one thing that I bought that is made of stainless steel over the last year.


I did get a stainless steel hip flask off a friend for being a groomsman at his wedding but I doubt his buying caused Nickel prices to jump over $6 us/lb.


Perhaps if we write to John Howard & make a complaint about Nickel prices he will do something to get Nickel prices back where they belong($3.50 us/lb??)?????


Perhaps it would be better to make the spades from ceramic?????


They would be cheaper,


there is plenty of sand in the world??



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Sell Banks, buy resources???


November, 2004



Bank on resources

Stephen Calder


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Do you think the resources boom is over? Are you looking elsewhere for the next winning sector? If so, you may be missing out - particularly if you are overweight in the banking sector, as many investors are.


According to financial service provider ABN Amro: "With the reporting season at its end, we believe the Australian economy is firing on more cylinders than a V8 Monaro. Despite this, we have few inflation concerns with labor market reforms driving productivity improvements (which corporates are now banking). Where will we see the most upside in the medium term? Resources - in particular, RIO and BHP Billiton."


ABN Amro's Aaron Stambulich says the group's research shows that the biggest gains in the Australian sharemarket over the next couple of years will be made in resources stocks. "There is no evidence from a diverse range of companies - including Gunns, BlueScope Steel, and Ridley in addition to the resource companies - to suggest that demand from China is slowing. With power outages and transport bottlenecks still occurring, China's growth will be most supportive for the bulk resource suppliers, while base metal prices could be affected by developed economy weakness," Stambulich says. "This is why we recommend investors increase their exposure to resources."


Why Rio and BHP? Because these companies are recognised performers, well known to Australian investors, and they also benefit from strong earnings overseas. But Stambulich says "nowhere near enough retail investors are positioned to take advantage of this upside. Why? They own too many banks. They can't or won't sell them because they like their bank shares and they don't like paying CGT [capital gains tax].


"Some of our clients report 35% of their CHESS [Clearing House Electronic Subregister System] holdings are in the big four banks. This represents a serious diversification problem for the investor."


The group has been showing its clients how they can invest in resources without losing their exposure to banks or triggering CGT. The strategy is not available to do-it-yourself (DIY) superannuation funds, since it involves using warrants for cash extraction, a strategy prohibited to self-managed super funds. It involves keeping the bank stocks in the investor's portfolio by rolling them into instalment warrants. By converting bank shares to instalments, investors maintain exposure to their existing shares while releasing capital for further investments without crystallising any capital gains liability. In effect, the investor uses the bank shares as collateral for a loan, and invests the funds in other shares.


Warrant issuing activity was again strong in September, despite the announced departure of Deutsche Bank from the ranks of issuers (the bank is maintaining a market in its existing warrants). Almost 200 new warrants were issued, with Macquarie Bank the dominant participant.






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Analysts upbeat on outlook for base metals despite pull-back


Sun Oct 17, 2:47 AM ET Business - AFP


LONDON (AFP) - Base metals prices have suffered sharp falls after surging by 50 percent so far this year, but analysts expect prices to remain at lofty heights going into 2005 thanks to strong demand and investor interest.


After scaling a first peak in early 2004, base metals prices saw another surge in late September and early October to fresh multi-year highs, before plunging last week on worries about a possible cooling of China's economy.



Base metals prices endured one of the heaviest single-day falls on record on Wednesday, as dealers took profits and showed concern about the outlook for the Chinese economy, a huge source of demand for metals, analysts said.



On the London Metals Exchange (LME), the world's leading base metals market, copper prices tumbled by 10 percent in one day, nickel by 18 percent, aluminium over seven percent, tin four percent, lead five percent and zinc seven.



Nevertheless, analysts gathering in London for the annual LME Metals Seminar remained bullish on the outlook for the complex.



"Critically, metal inventories are at record lows, meaning that even modest differences in supply and demand can have a huge impact on one's opinion on price and even on price direction," said Barclays Capital analyst Ingrid Sternby.



"We remain positive on metal prices for at least the rest of the year and into the first quarter of next year, expecting fresh highs during this period.



"We believe prices will be driven higher by increased consumer demand following the summer slowdown, and renewed investor buying due to technical momentum and growing confidence about the global outlook," she said.



Base metals were then expected to fall back from peak levels, but remain above historical averages, Sternby predicted.



Her view was echoed by Societe Generale analyst Stephen Briggs, who said base metal prices on the LME "will at the very least remain historically high well into next year, and further volatility is likely in the next few months."



"However, we do not believe that the cycle has been abolished and we expect prices generally to ease over the course of 2005," he added.



"We tentatively now forecast that aggregate average US dollar LME prices will surge by 40 percent this year and slip by no more than five percent in 2005."



Briggs estimates base metals demand will grow by at least 6.5 percent worldwide in 2004, while 5.5 percent growth "is possible" next year.



Before last week's slump, lead prices had surged by 71 percent since the start of 2004, shooting above the 1,000-dollar mark in early October for the first time in 24 years, as stocks declined to the lowest level since 1990 and investors piled into commodities.



The price of copper rose by 61 percent from levels at the start of the year to reach 3,178 dollars a tonne on October 11, the highest level for 16 years.



Copper inventories are approaching historic lows, with less than 100,000 tonnes of the metal available in LME warehouses.



"At the average rate of drawdown so far this year, this could be gone by mid-November," said Sternby, noting frequent strikes in Chile, the world's biggest producer of the metal, had taken their toll.


"The Western world market is seriously short of copper," she warned.


Demand for the metal raced ahead by 15 percent in China this year and by 5.5 percent in Western economies.


As for aluminium, the most-consumed metal, its price was showing a rise of over 20 percent this year at its peak earlier this month, when it flirted with the symbolic 2,000-dollar-per-tonne mark, the highest level for nine years.


As well as strong demand from China, notably from automakers, aluminium was supported by a spate of strikes in North America, which could deprive markets of 800,000 tonnes of lost production this year, according to analysts.


Other base metals have also climbed strongly this year, by as much as 76 percent for tin, 28 percent for zinc and 48 percent for nickel.



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