Base metals rose strongly as the US$ weakened. Commodity market participants were encouraged by the first rate hike by a industrialised G20 country (Australia) since the world financial crisis. Economic data did not offer much in the way of market direction. Of concern was the news that workers at the Andina unit, of the world’s no.1 copper producer Codelco, voted to reject a preliminary wage offer from the company.

Additionally, an ongoing spectre haunts the Copper Market. Renewed rumors that the greenback will be dropped from energy contract settlements sent currency markets into a negative spin, helping copper futures regain lost ground. Much remains to be seen before a dramatic shift such as this takes hold. Stay tuned.

Uncertainty remains ever present in the Manufacturing Sector near term. Recent communication within in the distribution market indicates that while automotive is busy near term; the housing sector is subdued. Although a bounce has been seen in the past 60 days by some housing participants; it seems confined to after market products. Mill producers are reticent to reduce the currently extended lead times, when doing so would require increased fixed costs near term. If the current build in demand continues into the 1st Qtr, confidence should begin to return to the material production sector, with the resultant reduction in mill lead times.   

Copper rose again yesterday, reaching gains of over 6% for the week. Zinc rose too.  The Metals Complex moved up on positive May data regarding the following: Durable Goods up 1.8% vs an expected small dip.   Demand for non-defense capital goods up 4.8%, machinery demand was up 7.7% and PC’s and related products rose 9.4%.

We saw the dollar begin to rally late in the day yesterday but that rally seems to have fizzled near term today. Commentators are unsure that the rally in the dollar is over, leading some to speculate that pressure on  commodities is more downward than up.  No major US Economic numbers are due for release today except for weekly jobless claims. We will watch the dollar’s activity and keep you posted.

Copper prices have recently climbed by approx 10% in two weeks. Why? Many comments are available and many are viable so I will share my perspective and let you the reader decide whether or not my comments today are valuable.

We have seen a general trend downward in the US Dollar as it has fallen recently again several major currencies specifically the EURO. A result of the US Fed pumping billions of $$ into the system. Additionally, we have seen a shift in copper demand in China. China has been stockpiling copper in increasing amounts making one wonder if they see commodities as a better investment than US ‘T’ bills.

However, in spite of the above comments speaking to reasons for a rise in copper. factors remain pressuring future copper prices down. The Exchange Warehouse inventories though having declined, current levels remain comfortable and are not seen as worrisome with the LME at 303,200 tons and COMEX up to 56,814 short tons. When one considers the massive stockpiling by China and continued bad (as opposed to bad, BAD!) economic data coming out; it hardly seems likely that there is a near term shortage of copper. So why the climb?  Could it be investor driven?

ABC Metals continues to maintain a secure supply base, maintaining a multi-faceted channel for the purchase and supply of copper and copper alloy products to our Supply Chain partners. Our strategies shield our customers from much of the downside risk associated with a volatile commodity market. You can be confident that we will maintain your supply of metal during the gyrations of our current economic storm. Give us a call and ‘Uncoil the Power’ of ABC Metals.

Metal prices closed higher yesterday following a sharp rally in the price of crude oil; near $66 bbl. The dollar also weakened adding to the commodity movement.  Economic data out of the US was mixed yesterday as Durable Goods order rose a nice 1.9% in April, but prior numbers were revised down.  New Weekly Jobless claims data did not surprise, but continuing claims rose; an indicator of how quickly the unemployed are finding jobs or rather not finding jobs.

China’s economy is expected to expand by 7.5% this year up from a 1st Qtr of 6.1%. It appears China’s massive stimulus plan is having some positive effects. Its stimulus strategy is much different than the US with their plan being front-loaded. Thus the near term positive effects are not unexpected. As for the long term.. time will tell.

As of this writing, the author of this blog continues to look in vain for the ‘green shoots of recovery’ spoken of by Fed Chairman Bernanke in the labor and housing sectors. Still, it seems we have pulled out of the economic dive we were in…for now we seem to be ’skimming the treetops.’  No room for error as companies endeavor to avoid a financial crash. I would really like to get some room…altitude between me and the ground right now. Also known to some as a recovery.

Initial opening numbers in the metal markets indicate a gentle nudge higher today. Stay current by visiting our website @ www.abcmetals.com.

Copper futures moved upward 5% or 10 cents to $2.19/lb on the Comex division of the NYME. This surge followed positive economic news released today- ADP released figures indicating US employment fell by just under 500,000 jobs- the lowest decline in 6 months. Additionally mortgage applications grew by 2%. It seems that the overall economic sentiment might be turning in a more positive direction; even on the heels of GM’s announcement to idle most of their assembly plants for up to 11 weeks this summer. Still, Gold’s climb is leading to some concerns regarding inflationary fears; we will watch and see.

Scrap remains tight as China continues to purchase scrap at a near term premium.

http://www.marketwatch.com/news/story/story.aspx?guid=%7BEE26A69E%2D7080%2D4401%2D95E8%2D4A765DD0617E%7D&siteid=rss

Since we broke out of the $1.40-$1.60/lb COMEX trading range we have seen Copper brush $2.20/lb. Published comments regarding, ‘Why?’ point to a seasonal spring rally, improved sentiment and results in the financial sector, and Chinese policy practices of hedging their dollar portfolio by commodity conversion.  Lastly, rumors of Chinese restocking of strategic reserves has fueled the current spike in the metals market.

In spite of the current Copper uptick, there is concern here at ABC that prior (weeks old) dismal commodity price forecasts remain hard to dismiss. We likely will see these current prices fizzle by late summer. Still, the new average price will be higher as the Global Economy improves.

Aluminum prices are depressed. While Carbon Steel, Stainless, and Aluminum scrap prices remain low and flat.

Weds April 15th AMM (American Metal Markets) featured an article disclosing that a growing number of copper and brass servicenters are pulling in their credit terms as they fight to survive. One Servicenter Executive commented, “We’re having to tell more and more people they’re on COD–it’s not worth selling if you’re not going to get paid.”

Although some servicenters are trying to work with their customers; taking them to court remains an option. Court is always a last resort, but with the demise of Guardian Metals and the closure of AJ Oster’s Allentown, PA facility, it is apparent; cash is king and key to survival.

The article continues, ” …many red metal distributors are returning to square one and denying credit from the get-go if they catch even a whiff of default.” With a GM Bankruptcy becoming more likely and Delphi’s credit arrangement expiring in June; the supply base is increasingly vulnerable and prone to failure.

My advice: Protect your current term arrangements with your suppliers. First- Pay on time and in full. Second-If you must be tardy- communicate! They will likely work with you to manage through these tough times.  Third-Convert old/obsolete raw material inventory into cash. The copper scrap market is up 43% from Feb EOM. Turn your inventory and get the cash. Lastly- only order material that you can turn quickly- flip your inventory in 1 week or less- don’t stock- you may pay more but your cash flow will be much lower.

Copper surged 3 percent to hit 4-1/2 month highs on Thursday, boosted by a rise in U.S. durable goods orders and a jump in new home sales which lifted the outlook for the economy and demand (as noted by Reuters 3/26/09.)

We have seen a slight retreat today less than 2 cents/lb. It appears this might be in response to Industry News that 2009 will see a worldwide surplus in copper production of 500,000 tons. Continued uncertainty regarding the macro US economic outlook and a falling dollar all served to nudge Copper down. Recent data from analysts  have copper exchange prices dropping to an average of $1.30 in 2010.

From my perspective until US demand steadies and the general economic outlook improves I see price pressure on the downside for base metals especially copper. However, given the current markets volatile tendencies any efforts toward restocking would seem premature. http://www.forbes.com/feeds/reuters/2009/03/26/2009-03-26T172656Z_01_LQ244746_RTRIDST_0_MARKETS-METALS-UPDATE-6.html?loomia_ow=t0:s0:a41:g29:r2:c0.001800:b23294074&partner=loomia

Effective today- ABC Metals, Inc has begun our own blog. Please return to our site often as you will find pertinent content and comments related to our industry- nationally and globally.