Will Commodities Recover?

[tech/a]

Agree that this is likely to be a corrective pattern rather than a V top and V bottom.

Will likely base then move up to test highs then make a new low before either consolidating to make a 5 wave corrective pattern or move to a new wave pattern from a wave 3 correction.

Expect similar in the charts above.

 

[Kipp]

Will someone please tell me if the kitco prices are ok again? Their website has been crap for the past week- at a very frustrating time when prices were sent to hell... is Zn currently 1.57? And Ni 9.30?

 

[MalteseBull]

that was short lasted

 

[bowser]

interesting article from Jim Rogers:

http://news.moneycontrol.com/india/...itefalljimrogers/market/stocks/article/215150

Worth a read for bull or bears.... 30-40% correction then off to the races again???

 

[rederob]

Just some basic technicals on the "Big Three".

I expect them to pull up or stall in the Red Boxed areas.

Tech
Grateful if you can update your "big 3" charts.
It appears KZL is the present "winner" on the commodities rebound.
I expect further rises in commodities, strengthening early September.

 

[phoenixrising]

Tech
Grateful if you can update your "big 3" charts.
It appears KZL is the present "winner" on the commodities rebound.
I expect further rises in commodities, strengthening early September.

He's overseas atm, I think he said 6 weeks about 2 weeks ago. Hopefully he'll see this late Aug in time for your early Sept prognosis. I'm interested also.

Cheers

 

[dubiousinfo]

Copper shortage looms in mainland

China could soon face a shortage of refined copper and may have to sharply ramp up imports, mainly because production from domestic producers is falling in a hot economy.

Friday, August 04, 2006

China could soon face a shortage of refined copper and may have to sharply ramp up imports, mainly because production from domestic producers is falling in a hot economy.
Refined copper imports fell 44 percent in the first half of this year to 389,560 tonnes, which helped bring down the high-flying world copper price after it hit a record of US$8,800 (HK$68,640) in May.

But Chinese analysts say the mainland, which uses more than 10,000 tonnes of refined copper a day, cannot afford to stay away from the import market for much longer because output from local producers is falling.

If China does turn to imports again, copper could soar again from the US$7,800 price it has ranged in lately on world markets.

"The Chinese copper market may see a shortage in September," said Jing Chuan, senior analyst at Great Wall Futures, expecting Chinese smelters will reduce production because of insufficient concentrate, the raw material for copper.

Domestic copper consumers are being compelled to pay premium prices for copper, which could attract higher imports to the country.

China's eight top smelters may cut production as they are demanding suppliers pay fees of US$100 a tonne for treating and 10 US cents a pound for refining spot imported concentrate. Suppliers are only willing to pay about US$80 and 8 US cents.

The smelters' need for spot imports would also rise if overseas miners pare back a price-sharing scheme on multi- year contracts as soon as this month. The price-sharing scheme allowed smelters to share in the benefits of a rising copper price.

"China produced more copper in the first half because the smelters held large inventory of concentrate. But they have used up most of the inventory," said Zhang Heng, analyst for Jinrui Futures, a unit of Jiangxi Copper, the mainland's largest producer.

Yang Jun, who heads a team representing the eight smelters, said last month smelters might cut production by 10 percent in the second half. Analysts say that could mean a cut in 100,000 tonnes of copper.

Also, analysts believe the State Reserves Bureau may end its latest copper sales soon.

"The bureau's sales should be about done," an analyst at investment and trading firm Wanxiang Resources said.

The body, responsible for managing China's copper stocks, sold 62,400 tonnes of stocks in May to June and is still selling another 46,600 tonnes in Shanghai, according to industry officials.

"There is another problem - when the bureau will buy back?" Jing Chuan at Great Wall Futures said, referring to the agency's need to replenish stocks.

Meanwhile to feed China's booming economy, more copper is needed, not less, by the fabricators. Copper substitutes have also done little to ease demand.

"The overall situation is stabilizing. Copper imports should rise," said Zhang Xuefeng, a trade manager at Luoyang Copper, which makes refined copper and copper rods.

The analyst at Wanxiang Resources said big fabricators were receiving more orders and that would push up their copper demand from September.

In June the major fabricators imported 32,800 tonnes of refined copper duty free for processing the metal into products such as rods and strips for exports, half of the country's imports in that month.

Smaller fabricators, who buy copper from merchants, took up about 9,000 tonnes of imported metal in June.

REUTERS

 

[wayneL]

I was speaking to a friend who is a BigKnob of one of the major mining companies up here in Geraldton today. We were talking about interest rates/real estate etc. when out of the blue, unsolicited from me, he starts talking about the mining boom.

(I never say say anything bearish around mining folk)

Anyways he says and I quote "I give another 12 months max before it falls on its ****". The reasons are to do with China and I would be betraying a confidence if I repeated (and much of it was over my head anyway) as it seemed to be sensitive info.

But there you go.

Cheers

 

[Magdoran]

interesting article from Jim Rogers:

http://news.moneycontrol.com/india/...itefalljimrogers/market/stocks/article/215150

Worth a read for bull or bears.... 30-40% correction then off to the races again???

Hello Bowser,


Thanks for posting the link. I’m a fan of Jim Rodgers, especially from the time he and George Soros were a team in the early days of the Soros fund.

“Hot Commodities” was a really interesting read (still have it on my shelf), and gives an interesting macro perspective on commodities and economic cycles and opportunities.

This interview shows that in the longer term Rodgers is still bullish across the board on commodities. It is interesting reading his take on China and India, preferring the Chinese market to the Indian…


Regards


Magdoran

 

[ducati916]

et al

Whenever you discuss China, almost by definition you are discussing the US in addition. The bone of contention currently, and for quite some time is the CAD & *real* value of the Yuan.

Although far from accounting for the entire Government liabilities, the CAD is a good illustration of the fallacy of the numbers taken out of context;

The Balance of payments figures are invariably difficult to interpret correctly due to the nature of the accounting.

An hypothetical example;

Current Account;
Income Profits earned abroad............$1750

Financial Account;
Private Direct Investment...............[-$1,500]
of which,
Financed by borrowing...................[-$500]
Unremitted profits......................[-$1000]
Banks overseas borrowing................+$500

Change in Reserves.......................[-$750]

The current account would seemingly show a deficit of $750, the reality is however, a completely different result.

Such is the position with the US current account deficit, and unless you can see all the figures you'll never know the true position.

What is a *fact* is that when the Bush administration passed the tax breaks on repatriation of foregin profits expiring the end of 2005, the rally in the US$ was enormous, convincingly demonstrating the fallacy of the current account deficit based on limited information.

So while their are structural problems that must be addressed, Medicare, Medicaid, Social Security and Pensions, the CAD that is portrayed in the media is only part of the story.
The second and much longer story is the relationship of the US & China and their symbiotic relationship.

As to Gold and speculative money, consider the following stats from last week;
Equity Funds.......................[-$920M]
Cash....................................+$7.95B
Taxable Bonds..................+$900M
Municipal Bonds...............+$207M

China can only consume 42% of their own output [this is a very small consumption]
They thus rely on the rest of the OECD bloc to take the surplus production.
The US accounts for some 68% of the 58% surplus.
Walmart alone accounts for 30% of the US 68%

Now supposing China did not cycle the FX surplus back to the US via the purchase of Treasuries? Could, would the US continue to purchase Chinese manufacturing output?
Protectionism is very strongly on the rise through Congress & Senate working parties, you need only look at various mergers that were blocked recently.

Trade tarriffs, etc are again a fact of global trade, thus, should China NOT support the US consumer, the US consumer would possibly be denied the opportunity to purchase from China just in case they would still wish to, or could afford to.

China is still a managed economy.
It is managed locally with great inefficiencies and wasted capital.
In China, it has led to massive overinvestment in manufacturing assets in sectors already suffering from oversupply. Investment in fixed assets -- everything from steel mills to cement plants to oil refineries to highways -- grew by 30% in the first half of 2006.

Although the reported profits of China's largest industrial enterprises climbed 28% in the first half of 2006 over the same period in 2005, companies in some sectors have seen profits squeezed, sometimes to the vanishing point. According to government numbers, 80% of the profits in the Chinese economy went to companies in the oil, power, coal and nonferrous metals sectors. The other 30 sectors of the economy shared just 20% of corporate profits.

Profits in the Steel sector dropped by 20% in the first half of the year. The problem is overcapacity. Too many steel companies have added too much capacity, driving down the price they can charge for their product.

Cheap money in plentiful supply has produced a real estate boom in China, too. Higher prices pull more money into real estate, of course. In the first six months of 2006, real estate investment climbed 24.2% over the same period in 2005. According to the National Bureau of Statistics, 1.41 billion square meters of housing were built from January through June 2006, up 21% from 2006.

China needs GDP growth north of 7% a year just to stay even with the number of new job seekers thrown up by its massive population every year.

A purely rational economic analysis would say that if Chinese textile makers can't compete after the yuan is appropriately revalued, then the least-efficient companies in the sector should go out of business and the jobs should flow to countries, perhaps Vietnam, where lower labor costs would allow textile makers to make a profit.

That would mean shipping jobs out of China, however, and advocating that is political death in a country that needs to create 20 million jobs a year to keep the population governable by the Communist regime.

Therefore, it would seemingly be economic suicide to dampen demand from the US via refusal to fund the deficit in trade. The second part of the equation being, how much of the infra-structure, & productive assets belong to US Corporations via their FDI investments?
Just because the profits are not being repatriated due to tax reasons, does not mean the profits are not accruing to Corporate America.

As far as China supporting the current historically high commodity prices, it doesn't look particularly promising based on the lack of profitability in Chinese industry, declining demand from the US as tightening credit starts to squeeze the consumer.

Anyway, food for thought
jog on
d998
___________

 

[BlueDaze]

Base Metals

Base Metals
by Doug Casey
August 11, 2006

Base metals are called that because they oxidize, corrode and react easily. The primary ones we're concerned with are: copper, nickel, lead, zinc, aluminum, and iron. Their inherent value lies in their industrial uses, not as money, like the precious metals - though silver is an interesting hybrid, being both an industrial metal and good for making small change as money. Compared with precious metals, base metals are plentiful in nature and therefore much cheaper, of course. The exploration question is not generally one of finding them, but one of finding enough of them concentrated in a large enough deposit to make them profitable to extract for a substantial length of time. Eventually, their fortunes are tied to the state of the world's economy - the fundamentals of supply and demand.

Supply, Demand and Prices

As we go to press, copper prices have recovered somewhat from this summer's correction, in part because of a possible labor strike at Chile's Escondida mine. This is characteristic of all base metals; numerous factors, including political and labor unrest, and even floods, affect the supply of base metals. In addition, cranking up supply in the short term is usually impossible; the process of prospecting, exploring and developing a mine takes many years, sometimes decades. The scale of most base metal mines is huge - they take an enormous amount of financing, require endless environmental permissions and need extensive infrastructure. These factors make it very difficult to balance supply with demand in the short term (meaning, up to a few years), creating frequent cycles of price increases when supplies tighten, followed by corrections when new supplies come online.

On the demand side, Asia, particularly China, has stayed in high gear, requiring prices to go up to match demand with supply. Some day soon, India will join the arena. The result has been rising prices.

Base metal prices during the last couple of years have risen faster than the price of precious metals, generating a lot of interest and excitement, even among mainstream investors. That's a sure sign to a contrarian of at least an intermediate high... though that doesn't mean they can't go higher before they correct. In fact, we wouldn't be surprised if they went to the sky, given price-insensitive demand and fixed supply and the involvement of hedge funds in the metals market. But any spike like that would be short lived, and for now we still see base metal prices as having gotten far ahead of themselves. In addition, we are bearish on the U.S. economy and are not sure that China can pick up all the slack we see coming, especially with so much of their economy going into exports to the US. At the same time, continually high prices have prompted everyone with assets that can be put into production quickly to move in that direction, so there could be a short-lived supply glut as that inventory of near-to-production assets come online.

The Crystal Ball

In the nearer long term (over the next decade or so), we're bullish on commodities, believing that we are in a super-cycle that corresponds to the 20-year bear market for commodities that started in 1980. In the medium range (3 to 5 years), we are also bullish, as anything that can be quickly dusted off will have been, and new discoveries will take longer to bring online. In the short term (zero to 12, maybe 18 months) we see a high probability of economic woes leading to a major correction. That will be our time to re-enter base metal plays aggressively.

Are we just guessing?

Not entirely. Consider the data from the futures market:

Copper for delivery in 27 months is US$5,590/tonne vs. the current US$7,260

Nickel: US$16,675 vs. current US$27,350

Zinc: US$2,293 vs. current US$3,125

Furthermore, as you can see from the production and consumption numbers in the table below, the higher prices have brought enough new supply online that base metals are not actually in a state of shortage at the moment.

Base Metal Company Stocks

Consequently, we are holding off on buying any new base metal company stocks, unless the company has something of such extraordinary potential that we don't want to wait, or if a company also has a lot of precious metals, which hedges our base metal bet.

 

[dubiousinfo]

Re: Base Metals

Furthermore, as you can see from the production and consumption numbers in the table below, the higher prices have brought enough new supply online that base metals are not actually in a state of shortage at the moment.

The production and consumption numbers in the table (the table is in the original article but not shown in the post above) shows a deficit for both zinc & nickel. In fact it shows Zinc actually has a higher deficit this year than the same period last year.

 

[rederob]

Re: Base Metals

The production and consumption numbers in the table (the table is in the original article but not shown in the post above) shows a deficit for both zinc & nickel. In fact it shows Zinc actually has a higher deficit this year than the same period last year.

Some people clearly don't interpret the data before they put pen to paper.
Every base metal is presently experiencing warehouse declines.
This is not the trend for northern summer - all warehouses should be showing stock build.
Why?
because demand continues to outpace supply despite the high metals prices.
I am more bullish now than I was this time last year on the metals and associated equities. Some good times will roll into our 4th quarter.
Sit on the side lines and watch profits forgone, or jump in and enjoy the ride!

 

[brerwallabi]

Rederob
Hear hear, actually we should change the title of this thread to when will commodities recover.

 

[rederob]

Rederob
Hear hear, actually we should change the title of this thread to when will commodities recover.

Brother marsupial
Zinc bounced of its lower trend line a few days ago and held a few cents gain last night.
I expect a complete upside break will occur late August to early for base metals.
Until then we can cop a little more volatility as physical demand for metal is comparatively light and prone to get "rolled" by the odd speculator profit taking or going shorter still.
Escondida remains a wild card; if the strike goes beyond this week then the jigs up and copper prices will soar into next week - the supply chain shortfall simply cannot cope with about 5% of daily metals output being withdrawn in such a tight market.

 

[Freeballinginawetsuit]

I was speaking to a friend who is a BigKnob of one of the major mining companies up here in Geraldton today. We were talking about interest rates/real estate etc. when out of the blue, unsolicited from me, he starts talking about the mining boom.

(I never say say anything bearish around mining folk)

Anyways he says and I quote "I give another 12 months max before it falls on its ****". The reasons are to do with China and I would be betraying a confidence if I repeated (and much of it was over my head anyway) as it seemed to be sensitive info.

But there you go.

Cheers

Typical comment from a bear. 3 Years into a comodities boom fueled by a country with over a billion chinese and you think its over. If thats the case why don't the chinese keep on buying the hematite ore from BHP and RIO and forget about investing in the poor mans manganite ore of GBG etc thats up in your neck of the woods. They have to build expensive value added pellet/hbi plants for manganite and the Chinese are investing heavily in these mid cap ore companies.

The answer is they know they need commodities for many years to come and don't want to get ripped off any longer by the big boys.

Go the commodity bulls for sure, for a few more years yet

 

[wayneL]

Typical comment from a bear. 3 Years into a comodities boom fueled by a country with over a billion chinese and you think its over. If thats the case why don't the chinese keep on buying the hematite ore from BHP and RIO and forget about investing in the poor mans manganite ore of GBG etc thats up in your neck of the woods. They have to build expensive value added pellet/hbi plants for manganite and the Chinese are investing heavily in these mid cap ore companies.

The answer is they know they need commodities for many years to come and don't want to get ripped off any longer by the big boys.

Go the commodity bulls for sure, for a few more years yet

My My My! Why are permabulls so freakin' touchy....scared money?

Who said I'm a commodity bear anyway ffs?

I'm merely reporting what I was told from an INSIDER

Don't shoot the messenger mate.

For the record, I am longterm bullish on commodities. I am medium term bearish on some metals, but bullish on just about any other commodity you care to name.

SO GET OFF MY BACK!

 

[rederob]

My My My! Why are permabulls so freakin' touchy....scared money?

Who said I'm a commodity bear anyway ffs?

I'm merely reporting what I was told from an INSIDER

Don't shoot the messenger mate.

For the record, I am longterm bullish on commodities. I am medium term bearish on some metals, but bullish on just about any other commodity you care to name.

SO GET OFF MY BACK!

A bit "touchy", Wayne - not a bear with a beer headache, I hope!
Now you could have interpreted this message from your INSIDER and added your view to it.
All I know is that every bull market has come to an end, so repeating the bullish view is fraught with getting caught out.
The opposite, however, might see one as a market savant if the timing of a turnaround gets nailed by one's lucid post.
If, historically, you read the economic tea leaves then you will know interests rates are far to low at present to spell global economic doom. The Yanks would probably say we are just into the second innings - based on the Fed's intention to slow the pace of further increases due to an apparent contraction of inflationary pressures. Anyone following baseball will know it's a pretty dull game most of the time - you can walk away and come back an hour later and nothing has changed on the scoreboard. The "plays" change, however, and it is these subtleties that one needs to watch most closely, as they determine the final outcome. In a long waiting game, patience is a principal virtue.

 

[2020hindsight]

All I know is that every bull market has come to an end, so repeating the bullish view is fraught with getting caught out.
The opposite, however, might see one as a market savant if the timing of a turnaround gets nailed by one's lucid post.
If, historically, you read the economic tea leaves then you will know interests rates are far to low at present to spell global economic doom. The Yanks would probably say we are just into the second innings ...

Interesting posts here gents. Thanks. Philosophical to boot. I guess there are 7 innings in a full baseball game? So one could say we are just warming up(?) In general I think discussions on shares are generally bullish, reminds me of Pamploma - bulls chasing bulls, and newchums like me being caught up in the current. Meanwhile a handful of bears sleep through the whole thing.

As they say optimists are not always more correct than pessimists, but usually happier because they are "hooked on hope". Personally Ive got CBH up to my ears. Not that I know what Im doing.

Speaking of baseball, it would be intersting to know the strike rate for typical posts here - when viewed in hindsight. Is there a bullish bias?

 

[rederob]

Speaking of baseball, it would be intersting to know the strike rate for typical posts here - when viewed in hindsight. Is there a bullish bias?

2020
"Bullish" to a "t".
That's what I usually see.