Zinc the metal for 2006

[rederob]

MS and YT
You are not looking at the picture from the best angle.
It is true that the rate of decline of total LME inventory is decreasing, but it is still decreasing.
The causes are several fold. Most important is the re-warranting of "cleaned" stock back into New Orleans. That is, damaged stock from Katrina is being made good for sale, so we have had a lot of metal coming and going from New Orleans and muddying the gross data. My estimate is that we are very close to the end of this re-warranting cycle and the LME zinc data hereonin is likely to be much more reliable.
Note that New Orleans accounts for over 70% of LME's warehouse zinc stock and over 80% of cancelled warrants (ie the zinc ready to leave the warehouse).
Buying of base metals this time of year is always cyclically weak - don't lose sight of this very, very important fundamental driver of price.
The good news is that inventory drawdowns are relatively well balanced across the globe at present, so while New Orleans is the key to market direction, we need to open our eyes to wider market action as it occurs.

Lowest low of inventory in past 5 years: 16 May 2005 - LME nickel ends the day at $7.33lb. LME nickel inventories slipped to stand at 4,926 tons.

 

[YOUNG_TRADER]

LME Warehouse Stocks 11 Jul 2006
Close In Out +/- On Warrant Cancelled

Zinc 203575 0 2250 -2250 150650 52925


Hmmmmm On warrant dropped by 5k t's overnight!


Also Red I am super bullish on Zinc, I was just commenting on how total stockpiles had decreased significantly while On-Warrants hadn't as much,


Monday should see Zinc below 200kt's!

 

[YOUNG_TRADER]

So Close to that 200k t level


LME Warehouse Stocks 13 Jul 2006
Close In Out +/- On Warrant Cancelled

Zinc 201825 0 1750 -1750 149150 52675

 

[YOUNG_TRADER]

This is strange, while there was a large sized add in halting the total zinc stock level just above 200kt's, the On Warrant Figure has dropped down to 145kt's from 155kt's last week,



LME Warehouse Stocks 17 Jul 2006
Close In Out +/- On Warrant Cancelled
Zinc 202700 3550 1425 2125 145075 57625

 

[michael_selway]

This is strange, while there was a large sized add in halting the total zinc stock level just above 200kt's, the On Warrant Figure has dropped down to 145kt's from 155kt's last week,



LME Warehouse Stocks 17 Jul 2006
Close In Out +/- On Warrant Cancelled
Zinc 202700 3550 1425 2125 145075 57625

Yeah On Warrant went down which is a good thing!

But "In" went up which is a bad thing, but maybe the 3550 "In" was Cancelled straight away? Compare 17/07/06 and 14/07/06?

 

[rederob]

Lads
Keeping zink in the pink with the missing link:

 

[michael_selway]

Lads
Keeping zink in the pink with the missing link:

hehe thx red

Btw where did you get that info below that shows cancelled today seperate from total cancelled

thx

MS

 

[YOUNG_TRADER]

Lads
Keeping zink in the pink with the missing link:

Truely poetic, I am to think, the way you rhymed zink, link and pink, twas a marvel I am to say, tis a pity it shall still be a nervous day

 

[rederob]

hehe thx red
Btw where did you get that info below that shows cancelled today seperate from total cancelled
thx
MS

That would be telling!
My tables are better than the ones I use to get the info from, so a "variety of sources" is the correct answer.
Tracking the fundamentals is plain hard work!

 

[Kipp]

LME Warehouse Stocks 11 Jul 2006
Close In Out +/- On Warrant Cancelled

Zinc 203575 0 2250 -2250 150650 52925


Hmmmmm On warrant dropped by 5k t's overnight!


Also Red I am super bullish on Zinc, I was just commenting on how total stockpiles had decreased significantly while On-Warrants hadn't as much,


Monday should see Zinc below 200kt's!

So... by you maths if there's 145K "on warrant" and LME drops ~2000 tonnes/day. Then theres ~75 trading days (i.e. weekdays till 0?) so 15 weeks... mid October?

 

[michael_selway]

So... by you maths if there's 145K "on warrant" and LME drops ~2000 tonnes/day. Then theres ~75 trading days (i.e. weekdays till 0?) so 15 weeks... mid October?

2000 tonnes/day is quite optimistic one woudl think

1000+ tonnes/day more conservative

Also higher prices may slow cancellation rate naturally

thx

MS

 

[rederob]

So... by you maths if there's 145K "on warrant" and LME drops ~2000 tonnes/day. Then theres ~75 trading days (i.e. weekdays till 0?) so 15 weeks... mid October?

Kipp
The metal cupboard is seldom emptied: Higher backwardations as exchange warehouse stocks decline means opportunists "find" spare metal anywhere and everywhere.
So the last 20,000 tonnes of metal is hard to lower, quickly, as there is a nice premium selling into spot.
I concede that by October we are likely to see zinc tighter than copper is currently, and likely to do what copper did earlier this year: It's all good!

 

[Kipp]

Kipp
The metal cupboard is seldom emptied: Higher backwardations as exchange warehouse stocks decline means opportunists "find" spare metal anywhere and everywhere.
So the last 20,000 tonnes of metal is hard to lower, quickly, as there is a nice premium selling into spot.
I concede that by October we are likely to see zinc tighter than copper is currently, and likely to do what copper did earlier this year: It's all good!

I guess I can wait 3 months...

 

[nizar]

I concede that by October we are likely to see zinc tighter than copper is currently, and likely to do what copper did earlier this year: It's all good!

Agree

And then next year it will do what nickel is doing right now

And with respect to wats happening with nickel right now, theres about 180million dollars worth of nickel left according to LME data, so if u buy the lot, could u effectively make a squillion by slowly selling into the spike?

Of course, buying 100million dollars or so worth of nickel-mining stocks would also help your cause...

Surely this would be a good idea for someone cashed up like Jim Rogers for example ?

 

[michael_selway]

Agree

And then next year it will do what nickel is doing right now

And with respect to wats happening with nickel right now, theres about 180million dollars worth of nickel left according to LME data, so if u buy the lot, could u effectively make a squillion by slowly selling into the spike?

Of course, buying 100million dollars or so worth of nickel-mining stocks would also help your cause...

Surely this would be a good idea for someone cashed up like Jim Rogers for example ?

hehe could be, btu 1 thing u have to remember, as you buy up fast, price will be higher and higher, so in reality u cant buy all of it at 180mil in one go

Consider shares and market depth, the sell orders get higher and higher

thx

MS

 

[dubiousinfo]

Zinc shortfall was 120 000 t in first 5 months
--------------------------------------------------------------------------------

Zinc supply fell short of demand for the first five months of the year, because of higher consumption of the metal used to galvanize steel, the International Lead and Zinc Study Group said.

Zinc production was 120 000 tons less than demand, compared with a shortfall of 98,000 tons a year earlier, the Lisbon-based group said in a report on its Web site today. The group is funded by the governments of producing and consuming countries.

Demand rose 2,4% to 4,47-million t, the group said. Production grew 1,9% to 4,35-million t.

Lead production outpaced consumption in the first five months by 76 000 t, the group said. Demand rose 6,2% to 3,29-million t and supply jumped 10% to 3,36-million tons.

 

[YOUNG_TRADER]

So Close to that 200k t level


LME Warehouse Stocks 13 Jul 2006
Close In Out +/- On Warrant Cancelled

Zinc 201825 0 1750 -1750 149150 52675

Well we are below 200kt's Hooray!!!!!!!!

LME Warehouse Stocks 21 Jul 2006
Close In Out +/- On Warrant Cancelled
Copper 96325 2225 425 1800 89025 7300
Aluminium 732875 0 3350 -3350 662750 70125
Nickel 5718 42 426 -384 1788 3930
Zinc 196650 0 2050 -2050 142525 54125

Zinc demand/supply deficit is no boubt supporting its $1.35-$1.50 price level, as declines continue in stock levels I'd expect Zinc to start firming up to around the $1.60-$1.70 level,


As stated previously I wasn't that bullish on copper and its supply surplus is now dragging the price down, however if a LT price of $3 lb prevails it will be amazing profits for the Copper boys!

 

[rederob]

As stated previously I wasn't that bullish on copper and its supply surplus is now dragging the price down, however if a LT price of $3 lb prevails it will be amazing profits for the Copper boys!

What supply surplus YT?
There is no copper at LME warehouses in Europe, very little in the US, and even Shanghai had a declining inventory last week.
There is half the amount of copper at warehouses as there is zinc, and daily copper use is significantly greater than zinc's.
Zinc is yet to hit "tight supply", but copper has been there for 2 years to date.
I like zinc's fundamentals but copper and nickel can go ballistic quickly: Zinc is just a comparatively "safe" play for now.

 

[michael_selway]

What supply surplus YT?
There is no copper at LME warehouses in Europe, very little in the US, and even Shanghai had a declining inventory last week.
There is half the amount of copper at warehouses as there is zinc, and daily copper use is significantly greater than zinc's.
Zinc is yet to hit "tight supply", but copper has been there for 2 years to date.
I like zinc's fundamentals but copper and nickel can go ballistic quickly: Zinc is just a comparatively "safe" play for now.

Is Copper& Nickel really that bullish?

nothing in warehouses doesnt mean anything, its the "ins" vs "cancelling" thats is a better picture of underlying demand/supply

thx

MS

 

[rederob]

nothing in warehouses doesnt mean anything, its the "ins" vs "cancelling" thats is a better picture of underlying demand/supply
thx
MS

That's a bit silly.
If there is nothing coming in, and nothing going out, because there just is nothing available, then what better picture do you want?
Get with the program lad!