Commodities tipped to collapse

[BSD]

See the following link for an excellent (and very simple) refutation of the guy predicting "a Nuclear Winter for Commods" a number of months ago

http://www.kitco.com/ind/resopp/mar292007.html

All basic and very boring fundamental research that covers the underlying trend for the majority of commodities.

Here are the bear's comments

http://www.kitco.com/ind/veneroso/nov062006.pdf

In the 6 months since Veneroso penned this piece, how many of the following have been discovered or had a completed BFS:

1. A major copper deposit offering more than 150,000 kt Cu production
2. A decent Nickel Sulphide deposit
3. A major Oil/gas reserve

Six months has not produced a lot of new supply (that would come on line in about five to ten years) despite the apparently massive flow of exploration money.

The commodities bull is well intact.

 

[Uncle Festivus]

Is it possible to ascertain how much of the recent momentum of commodity prices is due to hedge fund trading? That is, to remove the speculative portion of trades & leave a truer measure of the supply/demand fundamentals to give a better view as to whether we are heading for another even more spectacular blow-off top or if it is more of a sustainable occurance.
Whatever the truth, I have my doubts about the short term prospects for China because it's based on such rickety financial foundations; the Shanghai market is up 25% since the correction of 5 weeks ago - pure gambling with loose money provided by looser financial institutions. Certainly no lack of liquidity.
Watching the yen carry trade & Japanese interest rates closely

 

[BREND]

The costs involved to get the commodities from earth to market are much higher nowadays so that is factored into the present day pricing situation.Bottom lines are higher along with higher demand than we are used to.I think monetary inflation would cover it broadly.

The cost to product 1 ton of nickel is USD10,000. Nickel price is near to USD50,000 for 3 month futures. Margin is still very high.

 

[chops_a_must]

The cost to product 1 ton of nickel is USD10,000. Nickel price is near to USD50,000 for 3 month futures. Margin is still very high.

Although this varies between 5,000 and 15,000USD.

Given the 27 month contract is trading between 35,000 and 40,000USD a ton for nickel, what do you see as the long term prospects? I can't see it dipping below 40,000 in the next year or two.

Nickel to become the new gold perhaps?

 

[BSD]

Whatever the truth, I have my doubts about the short term prospects for China because it's based on such rickety financial foundations; the Shanghai market is up 25% since the correction of 5 weeks ago - pure gambling with loose money provided by looser financial institutions. Certainly no lack of liquidity.
Watching the yen carry trade & Japanese interest rates closely

Two Points

The Chinese government has over $1 Trillion USD in reserves and is very relevent to Chinese progress, hardly rickety

The Chinese stockmarket is as relevent to the Chinese economy as Melbourne Cup day is to ours.

Nobody is borrowing in Yen to punt the Shanghai exchange

 

[dhukka]

From Paul Van Eeden's latest column. The last two paragraphs are particularly interesting:

In the US the question is whether the fallout from the real estate sector is going to materially hurt economic growth or not. Meanwhile, in China, the government is seriously trying to curb speculation and liquidity.

China will raise its banks’ reserve requirements for the third time this year on April 16th. The latest 0.5% increase brings the reserve requirement to 10.5% and comes on top of repeated increases in interest rates as well as curbs on investments in real estate, auto manufacturing and other industries during the past year. Apparently the Chinese government’s efforts to curtail investment growth and speculation have had very little impact.

No wonder. Monetary growth in China, as measured by M2, is running at 17.8% and I bet that M3 growth is even higher. Essentially that means the yuan is losing about 20% of its buying power every year so the only rational thing to do is to spend the money as fast as possible. If you hold onto the currency you lose 20%. If you buy something useful you’ll at least have something useful and if you gamble with the money you still come out ahead as long as you don’t lose more than 20% a year. That is why monetary inflation leads to an increase in the velocity of money and a tendency towards ever more speculation.

Regardless of the rhetoric about prudent monetary policy, management of liquidity and monitoring of debt levels, the bottom line is that the Chinese banking industry is skating on thin ice. Excessive loans for ill-conceived capital projects and an astounding large percentage of non-performing loans simply means extra-ordinary systemic risk for China’s financial system. With its centrally planned government and huge foreign exchange reserves the government could always intervene, and I fully expect it to, but that does not mean the country can withstand an economic downturn and financial meltdown unscathed.

 

[CanOz]

From Paul Van Eeden's latest column. The last two paragraphs are particularly interesting:

You have no idea how visiable this is too! I think every time a business gets a loan, they go out and buy a new BMW 735, Porche Cayenne, or Audi Q7! Its very common for developers to borrow money, get a fixed asset started, and then bolt with the money, including the banks.

This is a regular occurance with the Governments funding too, and now its hittingthe rural areas.

Cheers,

 

[drillinto]

Resource boom expected to continue: Reserve Bank of Australia

http://www.rba.gov.au/PublicationsA..._apr07/rec_rise_com_prices_long_run_pers.html

 

[Sean K]

Wayne, you still in the bear cave?

1013 [Dow Jones] 100-year bear market in commodities is ending says Southern Cross Equities, arguing that massive demand from the industrialization of China is occurring amid capacity constraints due to decades of underinvestment. "Only with significantly and sustained higher metal prices can new investment in production be justified on R.O.I.C. measures," says Southern Cross, adding that base metals inventories dangerously low and shortages of skilled labor, machinery and equipment are critical. "We believe the current conditions will last for another two decades, albeit with the expected shorter-term volatility." (DWR)

 

[BREND]

Although this varies between 5,000 and 15,000USD.

Given the 27 month contract is trading between 35,000 and 40,000USD a ton for nickel, what do you see as the long term prospects? I can't see it dipping below 40,000 in the next year or two.

Nickel to become the new gold perhaps?

There are already signs that nickel price has peaked. Inventory rises more than 1000mt yesterday.

I'm already bearish on copper in the near term, hence pulling down other base metals as well.

But still bullish over the long term.

 

[wayneL]

Wayne, you still in the bear cave?

Yeah still a bear. But a pragmatic bear.

I found a bull that had been hit by a train, so I skinned it and made its horns into a helmet. Comes in handy for when I venture out of my cave.

Being a swing trader it's easy to flip the disguise on and off at will. It's getting a bit smelly though, I'm dying to take it off so I can give it a wash...

....and I want some short positions godammit! Fancy that! A bear with no shorts.

 

[Sean K]

Yeah still a bear. But a pragmatic bear.

I found a bull that had been hit by a train, so I skinned it and made its horns into a helmet. Comes in handy for when I venture out of my cave.

Being a swing trader it's easy to flip the disguise on and off at will. It's getting a bit smelly though, I'm dying to take it off so I can give it a wash...

....and I want some short positions godammit! Fancy that! A bear with no shorts.

Looks like you should have shorts on at the moment to me. Copper, Zinc, Nickel all look like there's a bit of downside possibility in the short term. Next stops: Zinc to 1.4, Copper to 3.2, Nickel to 20.5. Maybe.

Medium term, I'm starting to think China is going to keep consuming the raw stuff for some time, then to be followed by India. Maybe.

You're not playing these though are you. Just corn and coffee??

 

[chops_a_must]

....and I want some short positions godammit! Fancy that! A bear with no shorts.

I believe he begins to look something like this:

 

[wayneL]

Looks like you should have shorts on at the moment to me. Copper, Zinc, Nickel all look like there's a bit of downside possibility in the short term. Next stops: Zinc to 1.4, Copper to 3.2, Nickel to 20.5. Maybe.

Medium term, I'm starting to think China is going to keep consuming the raw stuff for some time, then to be followed by India. Maybe.

You're not playing these though are you. Just corn and coffee??

Yeah I play copper. I'll trade anything on CME, CBOT, NYMEX, NYBOT (and subsidaries) but not the LME metals (nickel, zinc etc except via miners)

First and foremost, I have to like the setup, I like low risk entries**. Copper hasn't given me that yet, though could be setting up now.

**Low risk entry means an entry close to an apparent pivot bar.

Cheers

 

[wayneL]

I believe he begins to look something like this:

LOL, Just call me Humphrey B. Bear then.

The B. stands for Bull when necessary.

 

[BREND]

Today I advise my clients to short copper if it fails to break $7380 resistance level and moves down.

Also advise my clients to short zinc if it fails to break $3780 resistance level and moves down.

Few days ago had asked my clients to sell copper call options, strike $8200, Jun07, the sold options look pretty safe now with 2 weeks to go.
Copper is now $7290/ $7311/mt.

Copper short-term chart:
http://basemetal-trading.blogspot.com/2007/05/short-copper_23.html

Zinc short-term chart:
http://basemetal-trading.blogspot.com/2007/05/short-zinc.html

 

[Pommiegranite]

Today I advise my clients to short copper if it fails to break $7380 resistance level and moves down.

Also advise my clients to short zinc if it fails to break $3780 resistance level and moves down.

Few days ago had asked my clients to sell copper call options, strike $8200, Jun07, the sold options look pretty safe now with 2 weeks to go.
Copper is now $7290/ $7311/mt.

Copper short-term chart:
http://basemetal-trading.blogspot.com/2007/05/short-copper_23.html

Zinc short-term chart:
http://basemetal-trading.blogspot.com/2007/05/short-zinc.html

You'll have no clients left at the rate you're going. They'll have all of their cash under their mattresses.

 

[BREND]

You'll have no clients left at the rate you're going. They'll have all of their cash under their mattresses.

Time will tell if I'm right.

 

[BREND]

You'll have no clients left at the rate you're going. They'll have all of their cash under their mattresses.

Copper down USD240, Zinc down USD94. I'm right for now.

 

[TheRage]

Forgive my commodity ignorance but could someone explain what Paladium is used for and why it hit such highs a few years ago but has dropped back significantly compared against other commodities which are roaring ahead.