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Copper Falls in London as Chile Strike and Metals Demand Slows

By Katy Watson and Millie Munshi


Sept. 1 (Bloomberg) -- Copper prices fell in London after workers at the world's largest copper mine ended a strike and a U.S. report showed construction spending declined the most in five years.

BHP Billiton Ltd. miners will return to work tomorrow, company spokeswoman Alejandra Wood said, paving the way for higher output. Builders, the biggest U.S. users of the metal, spent 1.2 percent less in July, the Commerce Department reported today. Prices are up 73 percent in London this year, partly from surging construction demand.

Copper was ``way above what it should be, partly on the risk that the strike would have gone on longer than it has,'' said Helen Henton, head of commodity research at Standard Chartered Plc in London.

Copper for delivery in three months dropped $90, or 1.2 percent, to $7,610 a metric ton at 7 p.m. on the London Metal Exchange. Before today, the metal dropped 3 percent since the strike began Aug. 7 as inventories jumped 22 percent and government reports showed the U.S. housing market slowed.

Copper futures for December delivery were little changed, up 0.5 cent at $3.461 a pound on the Comex division of the New York Mercantile Exchange. Prices that have more than doubled in the past year are down 14 percent since reaching a record $4.04 on May 11.

High costs for the metal, used in wire and pipe, may be hampering demand, said Jay Richman, owner of E.W. Berger & Brother Inc., a wholesale plumbing supplier in Weehawken, New Jersey.

Seeking Alternatives

Consumers are turning to alternatives such pipes made from plastic instead of copper, said Richman, who purchases about 10,000 pounds of copper a month for redistribution to plumbers, housing authorities and other industrial users.

``Unless copper prices drop, more and more people in our industry are going to be using plastic,'' he said. ``No one's buying enough copper.''

Growth in U.S. manufacturing also eased in August to a pace that's consistent with the recent cooling in the economy. The Institute for Supply Management's manufacturing index declined to 54.5 from 54.7 in July. A reading higher than 50 signals expansion.

``Slowing economies certainly threaten industrial metal demand,'' said Jimmy Quinn, a trader at A.G. Edwards Inc. in New York. ``If we hear any kind of hawkish tone'' from the Federal Reserve or other central banks, ``that could continue to slow the economy and hurt'' copper demand, he said.

European Slowdown

European manufacturing growth slowed more than expected in August as higher oil prices and a stronger euro cooled economic expansion.

Royal Bank of Scotland Plc said today its index compiled by NTC Economics Ltd. declined to 56.5 from July's 57.4. A reading above 50 indicates European expansion and the gauge, based on a survey of 3,000 purchasing managers, has been above that level since June 2005. The median forecast of 36 economists surveyed by Bloomberg News was for a decline to 57.

The drop in the index may indicate that the pace of economic growth is set to turn lower after it reached its fastest in six years in the second quarter. Investor confidence in Germany, the largest European economy, dropped to a five-year low in August, the Ifo institute said last week.

``The data is showing the rate of growth will decelerate this year,'' said Jim Lennon, a metals analyst at Macquarie Bank Ltd. in London.

The end of the strike at Escondida probably will send copper lower next week, snapping a two-week rally, a survey by Bloomberg News showed.

Copper Survey

Seven of 13 analysts, investors, traders and consumers surveyed yesterday and on Aug. 30 forecast copper will decline. Five expected a gain and one projected little change.

Still, funds may buy copper and other industrial metals in the fourth quarter of 2006.

``There potentially could be a new wave of index-fund money coming in, in the fourth quarter,'' Macquarie Bank's Lennon said.

Nickel for delivery in three months dropped $250, or 0.9 percent, to $28,550 a ton in London. Inventories monitored by the LME gained 186 tons, or 3.6 percent, to $5,358 tons. Still, stockpiles have plunged 85 percent this year.

Prices in the long term may fall by half from current levels as more mine production increases world supplies, David Brown, chief executive officer of Impala Platinum Holdings Ltd., said in an Aug. 30 interview. He declined to be more specific on when prices will fall.

The metal, used as an alloy in stainless steel production, jumped to $29,950 a ton Aug. 22, the highest since at least 1987. Prices have doubled this year amid declining stockpiles.

``Nickel pricing will stay quite firm in the short term, trending down as supply increases,'' Brown said. ``It will be closer to half of that in the long term.''

Impala owns the world's biggest platinum mine, which is in South Africa. Nickel is produced as a byproduct of platinum mining.

The Guardian - Saturday September 2, 2006 - Fiona Walsh

Copper price slides after Chilean strike settlement


The pay settlement at the huge Escondida mine, Chile, saw copper slide yesterday, although traders said the price will continue to be supported in the short-term by the prospect of contract negotiations at other mines.

After Thursday's 3% jump, the price of copper for three-month delivery slipped from $7,700 to $7,595 a tonne in London yesterday, although dealers said trading was thin ahead of the Labor Day holiday in the US.

The strike at Escondida, which is owned by BHP Billiton and Rio Tinto, lasted for four weeks. Full production is expected to be restored within a week.

Parallels Between Stockmarket in 2000 vs Commodity Market of Today

By John Lee - (www.maucapital.com)


As we predicted in a July market update to our clients, on August 8th the U.S Federal Reserve left interest rates untouched. The pause ended the streak of seventeen straight interest rate hikes that began in June of 2004. The Fed funds rate, which was at a forty-six year low of 1% at the start of the rate hike campaign, is now at 5.25%.

The Fed justified the pause by stating: Economic growth has moderated from its quite strong pace earlier this year. It also implicated a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices as factors slowing growth.

These statements make it seem like the Fed is calling the shots, however, with the real estate market slowing down, consumer loan rates precariously high, and a sagging stock market the Fed had no choice but to pause.

How will the pause affect the precious metals and equity markets? History might provide some insights here.

Interest Rates 1996 2001:

In 1996, the Fed Chairman Alan Greenspan claimed that the U.S economy was suffering from irrational exuberance in the stock market. In other words, too much money was being piled into the booming technology and internet sectors.

For a few months, the speech created a short lived downturn in the equity markets. Nonetheless, after issuing the warning Greenspan didnt touch interest rates and the S&P 500 continued to soar.

Beginning in October of 1998, two years after Greenspans infamous speech the S&P 500 exploded; rising from about 1000 to over 1400 by July of 1999. The Fed reacted to this 40% increase in the S&P 500 by hiking interest rates from 4.75% in June of 1999 to 6.5% in June of 2000.

Three months after the interest rate was lifted to 6.5%, the S&P 500 started to crash. The Fed had apparently overshot the interest rate and after a brief lag the S&P began to decline.

In reaction to the onset of the crash, the Fed reversed course and began a series of interest rates cuts in January of 2001. Nonetheless, the S&P 500 continued to decline and the Fed continued to cut interest rates. By June of 2002 interest rates were dropped to a historic low of 1%; yet this accommodative policy didnt seem to help S&P 500, which dropped 47%.

In April of 2003, five months after the Fed interest rate reached 1%, the bottom for the S&P 500 was established. Again, there was a lag between the conclusion of a series of Federal interest rates moves and the moves in the equity markets.

Since April of 2003, the S&P 500 is up more than 50% and has been rising almost non-stop. The un-naturally low 1% interest rate (negative real interest rate) created by the Fed in 2003 spurred a boom in equity and commodity markets. In turn, the rise in commodities was the driver behind the latest interest rate hike campaign that started in 2004.



Interest Rates 2004-2006:

Since June of 2004, in response to rising oil and commodity prices, the interest rate has been increased seventeen times and it currently stands at 5.25%. Like the stock market in 1999, which didnt react to the Feds tightening policy until months later, commodity prices have failed to respond to the recent rate hikes designed to dampen inflation. In fact, oil has risen from $22 a barrel in 2003 to over $70 a barrel today.

After all these rate increases, the Fed now has its hands tied behind its back. On the one hand, the Fed is still dealing with the pressures of rising commodity prices. On the other, the economy is increasingly showing signs that it is slowing down.

Its uncertain at this time whether rates are now high enough to clamp down commodity prices. A $100 a barrel oil price could force the Fed to tighten further. However, taking history as a guide, the Fed tends to overshoot on interest moves and equity and commodity markets usually react after a period of lag.

It is possible that the Fed has already overshot rates again. If this is the case, history shows us that the equities markets may begin to buckle within the next three to six months. Such an outcome could prompt the Fed to possibly ease rates by early next year.



How will the current interest rate situation affect the precious metals?

The pause signals a new era for the precious metals. Since 2004, gold and silver have been rising in tandem with rising interest rates. It remains to be seen whether the precious metals will continue to rise independent of interest rate hikes.

In April, Newmonts President Pierre Lassonde predicted that the $850 gold price of the 1980s could be challenged within 18 months. August and September will be critical in determining the future for the precious metals. If gold can hold above its 200 day moving average of $580, it will strengthen Lassondes case for a robust metals market for the next 6-9 months.

As the markets take the time to adjust to the Feds interest rate policy, metals investors must become more macro-aware and keep a close eye on the U.S equity markets as well as the metals markets.


John Lee, CFA

Thanks daiO.
Platinum is my particular interest. Diesel catalytic converters etc.
Very useful.

Times - Ambrose Evans-Pritchard - (Filed: 04/09/2006)

Monday view: Even the sophisticated are attracted by lure of autumn gold


Gold almost always rises in the autumn, sometimes a little, lately by leaps and bounds. Even when it churned ever-down from a peak of $850 an ounce in 1980 to $255 in March 2001, it usually managed to eke out a meagre counter-rally each September.

The seasonal cycle is anchored in the ancient habits of the Orient, where buying picks up after the Indian monsoon and reaches a climax with the Chinese New Year.

Speculators have noticed this, of course, so it has become self-fulfilling. Hedge funds programme their black boxes with triggers to catch the anticipated rally, giving the seasonal effect ever-more leverage.

Be careful, however. Gold tends to catch a nasty cold in mid-October before resuming its upwards march towards a New Year peak.

Gold took a battering in May, crashing 26pc from its quarter-century high of $730. It was scary for newcomers but not enough to reverse the five-year bull market. Gold bounced straight off the crucial 200-day moving average watched by chartists and is now forming a base around $620 technically undamaged.

Goldcorp's chief Ian Telfer predicts a surge to over $800 an ounce over the next two years, though perhaps he would say that to justify the outlandish premium offered in last week's $8.6bn bid for rival Glamis.

Yet there are sophisticated investors that seem to agree. UBS has seen growing demand for gold "call options" dated December 2006 at strike prices of over $1,000, and up to $2,500 by late 2007. The options expire worthless if the price falls short.

John Reade, UBS's precious metals strategist, said gold may churn sideways until a deadline passes on September 26 for European central banks to sell their annual quota of 500 tonnes.

"There is a lot of talk about selling, and where there is smoke there may be fire. But it will be a bullish signal if they fail to take up their quota," he said.

"We think gold could go up a lot this quarter if the dollar starts to fall fast," he said.

So far, the banks have sold just 340 tonnes, chiefly because the Bundesbank has clung to its bullion. "It's not a good idea to touch the stuff. Gold is an important factor for confidence in the euro," said Buba chief Axel Weber.

Quietly, Moscow is buying and Russia's foreign reserves ($258bn and rising at $12bn a month) will soon match those of the entire euro-zone.

And yet, and yet, I fret about those black clouds gathering over the United States, threatening to douse the world commodity boom with an icy downpour.

The resources cycle has been correlated for half a century with US monetary policy, peaking as the Fed Funds Rate peaks. That bell rang in July.

There can no longer be much doubt that the US housing market is crumbling. New home sales fell 21.6pc in July from a year earlier and average prices are following, down from $250,000 in February to $230,000 in July.

What will happen to the global economy when Americans stop drawing $600bn a year in pocket money from home equity, or when $2,700bn of floating rate mortgages come up for adjustment at much higher interest rates?

Gold will soon have to make up its mind whether it is a commodity like the rest of them or whether it is a safe-haven "currency" that shines in bad times a sort of AC/DC asset to hedge against both inflation and deflation.

The jury is still out on that big question. Gold passed the test in the dotcom recession when it parted company with its base cousins in the spring of 2001, pushing upwards as the Goldman Sachs index of industrial metals fell off a cliff. But it failed in the US recessions of 1975 and 1991, holding hands with copper and zinc all the way down.

Contrary to belief, gold is not always a good hedge against trouble. It fell during the French Revolution, again during the Napoleonic Wars, and in the First World War. But then it was the world's currency. Now it is the counter-currency, waiting in the wings to challenge an ever-more deformed and fragile dollar system.

I suspect that gold was already starting to explore this new role in 2001.

Which is not to say that the dollar will crash. It ought to fall, perhaps, to correct the world's vast imbalances but it cannot easily do so because there is no credible currency for it to fall against except gold.

America has only just started to slow, yet Japan is already showing ominous signs of stalling yet again with vehicle sales down 5.9pc in August and construction orders down 20.1pc.

China remains a small economy (one ninth of US consumption), over-dependent on exports for 35pc of GDP.

The eurozone's short-lived expansion has already peaked, with German retail sales dropping 1.5pc in July. Lehman Brothers is predicting an outright recession early next year.

Paris and Berlin both insist that the euro must not rise above $1.30. Should it do so, we can expect finance ministers to start threatening use of their Maastricht powers to dictate exchange policy to the European Central Bank.

No, the dollar cannot collapse because the Japanese and European governments will not let it happen, while the Chinese yuan is pegged in any case.

They will counter US devaluation with devaluation of their own, setting off a fresh cycle of negative real interest rates. Is that what gold is sniffing as a few very rich men and women buy their call options at $2,500 an ounce?

report BEIJING (XFN-ASIA) - 04 september 2006

BHP settlement at Chile's Escondida may raise other mines' labor costs - - The labor settlement at BHP Billiton's Escondida copper mine has made its workers the best paid in Chile and may raise costs at competitors' mines in the country, the Financial Times reported.

The report said Xstrata, Falconbridge, Antofagasta and Anglo American may be affected by the Escondida settlement but the most imminent impact could be on Codelco, which has pay negotiations by the end of the year at units Codelco Norte and Andina.

It said the Escondida salary hike was 8 pct with a cash bonus of 17,000 usd, putting pressure on Codelco, which has some of the lowest paid workers in Chile

"I think Codelco will be very worried about the increases at Escondida, because the unions will see that they are already paid less than other mine workers and they will want to narrow the gap," the FT quoted one person familiar with Codelco as saying.

The FT said Antofagasta will start renegotiating wages at its largest mine, Los Pelambres, in September next year, and at its smaller mines, El Tesoro and Michilla, in 2009 and late 2007.

Anglo American said there has been no significant industrial action at its copper mines in Chile for several years.

Copper Rises in Shanghai on Concern Supply Won't Meet Demand

By Feiwen Rong


Sept. 4 (Bloomberg) -- Copper in Shanghai rose for a second day on concern stocks of the metal held in Chinese warehouses may not be enough to meet demand.

Cash prices for the metal in Shanghai are commanding a premium over futures, an indication supply of the metal isn't meeting demand as the peak consumption season begins, said Li Rong, an analyst at Great Wall Futures Co. in Shanghai. Copper stockpiles fell to the lowest in two months last week.

``The strength in copper prices is mainly because of tight supply in China now,'' Li said. ``Stockpiles in Shanghai Futures Exchange were down by 12 percent in two weeks.''

Copper for October delivery on the Shanghai bourse rose as much as 1,140 yuan, or 1.7 percent, to 70,440 ($8,866) yuan a metric ton. The metal closed at 70,270 yuan a ton at the 11:30 a.m. break.

Copper for immediate delivery in Changjiang, Shanghai's biggest spot market, rose as much as 1.2 percent today to 71,100 yuan a ton. Futures for September delivery closed the morning session at 71,000 yuan a metric ton.

Deliverable stockpiles fell 1,424 tons to 48,193 tons in the week ended Sept. 1, based on a survey of six registered warehouses in the Shanghai Futures Exchange, the exchange said on its Web site.

September is usually the beginning of the peak copper consumption season, Li said.


Growing Economy

Chinese buyers reduced copper imports this year after the metal's price soared to a record $8,800 a ton in May. The nation imported 477,220 tons of copper during January-July, 42 percent less than a year earlier, according to data released by the China Customs General Administration Aug. 25.

July copper production dropped 3.8 percent to 236,000 tons from June, as concentrate imports fell 9.8 percent, according to calculations made by Bloomberg News on customs figures.

China, the world's largest user of copper, raised its estimate for growth in gross domestic product to 2005 to 10.2 percent from 9.9 percent, showing the fastest-growing major economy expanded at the quickest pace since 1995, the National Bureau of Statistics said Aug. 30. It was the third straight year of at least 10 percent expansion for the world's fourth- largest economy.

``The numbers highlight the remarkable stability of growth over this period,'' commodities analysts at Macquarie Bank Ltd. said in a report Sept. 1.

Copper for December delivery gained 2.9 cents, or 0.8 percent, to $3.49 a pound in after-hours trade on the Comex division of the New York Mercantile Exchange at 12:30 p.m. Shanghai time.

Copper for three-month delivery rose $92, or 1.2 percent, to $7,682 a ton on the London Metal Exchange at 12:23 p.m. Shanghai time.

Mon Sep 4, 2006
4-Nickel tumbles 4 percent by end of LME trading

By Anna Stablum


LONDON, Sept 4 (Reuters) - Nickel prices took a severe beating in late trade at the London Metal Exchange on Monday, falling over $1,000 from Friday's kerb close.

Three-months futures ended Monday's kerb at $27,600 per tonne, down $1,100, or 3.8 percent. Once selling began, the metal slipped into free-fall, traders said.


"It was around $28,500, then on the next trade -- which was half an hour later -- it had gone down $300, then another $300." Volumes were tiny and support practically non-existent.

"It was trading one lot, then two lots, then one. There was a void underneath it," the trader said.

Sellers may have been anticipating a large rise in stocks when figures are released at 0800 GMT on Tuesday, he said.

Earlier, traders had said that the longer nickel failed to break resistance at $30,000, the likelier it was to fall.

Nickel hit a record high of $29,250 on August 22, supported by low visible stock levels, and strong demand from stainless steelmakers.

Nickel's backwardation, the premium for cash settlement over three-month delivery, eased to around $2,200 per tonne from $3,400 on Friday.

None of the other LME metals were as active.

Copper prices rebounded slightly as demand was expected to pick up after the European summer holidays, but trading was light on Monday with U.S. markets closed for Labor Day, dealers said.

Copper for delivery in three months ended the kerb at $7,650 versus $7,590 on Friday.


The market had been buoyed by the apparent return of Chinese buyers to the physical market, a Macquarie report said.

"The market mood feels more and more bullish as the seasonally-stronger demand period approaches," it said.

Also, funds tended to allocate fresh money at the start of each month and looming supply disruptions supported sentiment.

"These factors will continue to underpin copper prices for the remainder of the year and, as such, we expect a strong fourth quarter for the red metal," a Standard Bank report said.

As a result, it raised its 2006 cash price forecast to $6,725 from an earlier forecast of $6,600.


MINING STOCKS

Director John Meyer at Numis Securities said the mining sector looked set for further gains after the sell-off in May that took at least 15 to 20 percent off values.

"A generally more positive outlook for equity markets, combined with increasing earnings potential across the mining sector should continue to attract interest," he said in a note.

Three months aluminium ended the day at $2,489, down $1. Zinc was at $3,470, up $30.

Tin was at $9,050, up $150 from its close on August 31, while lead ended the kerb at $1,257, up from $1,225 on Friday.

Copper in Shanghai Rises to Seven-Week High Amid Supply Concern

By Chia-Peck Wong


Sept. 5 (Bloomberg) -- Copper futures in Shanghai rose to their highest in seven weeks amid concerns that stockpiles held in Chinese warehouses may not be able to meet demand.

Copper in London, the world's biggest metals market, soared to a record in May, leading Chinese users to cut imports and rely on domestic stockpiles. Inventories monitored by the Shanghai Futures Exchange fell 17 percent this year to 48,193 metric tons on Aug. 31. That also marks a 40 percent decline from a 19-month high of 75,264 tons reached on Dec. 1.

``Stockpiles are still contracting, leading to rising prices for cash and front-month deliveries, which is lifting prices for all contracts,'' Cai Luoyi, a metal analyst at China International Futures (Shanghai) Co., said by phone today.

Metal for delivery in November rose by as much as 1,340 yuan, or 1.9 percent, to 71,660 yuan ($9,026) a ton on the Shanghai Futures Exchange, the highest since July 17. It traded at 71,210 yuan at 10:44 a.m. local time.

Copper for three-month delivery rose $40, or 0.5 percent, to $7,690 a ton on the London Metal Exchange at 10:42 a.m. Shanghai time.

China, the world's biggest copper user, reduced imports of the metal this year after the price soared to a record $8,800 a ton on May 11. The nation imported 477,220 tons of copper from January through July, 42 percent less than a year earlier, according to data released by the China Customs General Administration on Aug. 25.

Copper for delivery in December rose 2.9 cents to $3.49 a pound in after-hours trade on the Comex division of the New York Mercantile Exchange at 10:41 a.m. Shanghai time.

Tuesday, September 05, 2006 - Dow Jones Newswires

Gold Eyes $645 On Strong Physical Buying


0656 GMT [Dow Jones] Physical buying interest in gold in Asia likely to remain feature over next couple of months as market enters period of traditionally strong physical interest, says James Moore at TheBullionDesk.com; "While softer energy prices are curbing some of gold's price potential, the recent rallies in platinum and silver suggest sentiment is gradually turning more bullish." Gold could potentially move towards $645 once resistance around 100-day moving average of $633.60 is cleared; spot gold last up $2.75 at $629.25/oz. (GLS)

Doing a good job daiO.
Keep 'em coming.

Copper in Shanghai Soars to 3-Month High as Stockpiles Rebuilt

By Chia-Peck Wong

Sept. 6 (Bloomberg) -- Copper futures in Shanghai rose to their highest in more than three months on speculation cable and wire makers in China may continue buying to replenish stockpiles.

These buyers cut their purchases when copper prices soared to record levels in May, preferring to rely on inventories, traders such as Wang Zheng said. They have stepped up buying recently, as seen in the widening premium commanded by the nearest futures contract over more distant ones, he said.

``They can't keep relying on stockpiles, they had to start buying,'' Wang, a metal trader at Shanghai Dalu Futures Co., said by phone today.

Copper for delivery in November, the most actively traded contract, rose as much as 2,850 yuan, or the maximum allowable daily limit of 4 percent, to 74,120 yuan ($9,323) a metric ton on the Shanghai Futures Exchange. That's the highest since May 30. It traded at 73,960 yuan by the market's midday break.

The November contract is cheaper than the so-called front- month contract, for September delivery, a condition known as backwardation in commodity markets that signals that current supply may not be enough to meet demand. The September contract traded at 74,100 yuan by the midday break.

The front-month contract has commanded a premium over the most actively traded contract since Aug. 18, coinciding with a 12 percent drop in copper stockpiles monitored by the exchange since Aug. 17.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, rose as much as 3.4 percent today to 74,300 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Copper for three-month delivery on the London Metal Exchange rose $90, or 1.1 percent, to $8,010 a ton at 12:35 p.m. Shanghai time.

Metal for delivery in December rose 1.35 cents, or 0.4 percent, to $3.638 a pound in after-hours trade on the Comex division of the New York Mercantile Exchange at 12:25 p.m. Shanghai time.

Business (smh.com.au) - September 6, 2006

BHP and Rio Tinto hot to trot with India - The big two have noted how fast this economy is growing - and acted, Jamie Freed reports.


IF INVESTORS were to place bets on the fastest-growing market for BHP Billiton's commodities, it seems likely that nearly all would place China at the top of the list.

After all, for the past few years Australians have heard endless stories about the China-led resources boom which has proven a huge boon to miners.

But as BHP chief executive Chip Goodyear noted after reporting a record-breaking $US10.5 billion profit last month, the Indian market is growing faster than that of China.

"We haven't talked about India in the past, but it is a growing percentage of our sales," he said. "It's growing faster than China, actually, but it's coming off a much lower base.

"Economic growth has been progressing solidly in India and it is continuing to outperform the expectations we see."

BHP sold $US1.24 billion of products into the Indian market last year - primarily coking coal and copper concentrate - which was nearly triple the $US425 million it sold the previous year. That's still only about one-sixth the amount it sells to China, but given that India's population is expected to be higher than China's by about 2030, the subcontinent is proving to be an increasingly important market for BHP.

And for BHP, India is more than just a destination for its products. The company has three offices in India and is exploring there for commodities including diamonds, bauxite and iron ore. There are also reports it might bid in India's latest petroleum block offering.

"We see India as a good opportunity for us," BHP spokeswoman Samantha Evans said.

Rio Tinto has taken a similar view. India has long been a huge market for rough diamonds from the company's Argyle mine in Western Australia. About 250,000 workers in the Mumbai and Gujarat areas are directly employed in cutting or polishing diamonds from Rio's mines.

But Rio isn't content to just ship diamonds to India anymore. Since 2001, the company has spent about $US21 million ($27 million) on diamond exploration in the country, and it is also looking for iron ore.

"We believe the Indian minerals sector has a bright future ahead of it," said Rio chief financial officer Guy Elliott in a speech to the UK-India Business Leaders' Forum in London in June. "With the right business environment and in partnership with experienced global mining companies, India can unlock its wealth and the country could be a major player in the world minerals markets.

"This sets it apart from China, whose intensity of minerals use is in any case very different and whose mineral resources are less abundant."

A PricewaterhouseCoopers report on the world mining industry this year said India had the potential to be an excellent investment destination.

"When compared to other competing emerging mining markets, the expenditure outlay in India seems low compared to its prospects," the report said. "This gap is likely to be met by the private sector, providing exceptional opportunities for those who are bold enough to invest."

But although India might be more prospective from an exploration point of view, there are some steep hurdles to overcome before a company can build a world-class mining operation.

Austrade's senior trade com-missioner for India, Mike Moignard, says it now takes a "long, long time" to receive government approvals and few mining leases had been granted in the last few years. For example, Rio has been working for about a year to gain a prospecting licence to accelerate its evaluation work in diamonds, so far without success.

Following a recent Indian Government review of the nation's mining policy, the timetables could be sped up.

"That review is with the prime minister and we are hopeful the Government will put forward some changes to make the going easier for foreign investment," Moignard says.

"I think that India is awake to the realisation they've got to expand their mining sector, which a few years ago they really weren't."

It's understood BHP and Rio both made submissions to the government committee reviewing the mining legislation, and that the Australian Government provided some informal advice.

But even if it becomes easier to gain exploration and mining licenses, challenges will persist.

Unlike China, India's recent economic boom has been based more on services and technology rather than manufacturing and infrastructure.

The New York Times last week noted that China invests $7 on roads, ports, electricity and other infrastructure for every $1 spent by India. So obtaining the power, water, and supplies needed to build a large-scale mining operation on the subcontinent could prove especially difficult.

"In short, investing in large resource projects in India is not for the faint-hearted," Rio's regional vice president of India, Nik Senapati, said earlier this year.

Austrade's hope is that Australian companies such as BHP and Rio - but also engineering, construction and contracting firms - can provide some of the expertise needed to improve India's infrastructure. The government agency is sponsoring the International Mining & Machinery Exhibition in Kolkata in November and has also arranged a tour of Indian iron ore and coal mining operations for interested Australian business leaders in tandem with the conference.

BHP is exploring the possibility of providing raw materials and infrastructure to a proposed steel plant which would be built by Korea's Posco.

As Moignard notes, India's gross domestic product is expected to grow by about 9 per cent a year for the next several years, and a lot of that will be dependent on steel production.

"The Government has to look very seriously at both its mining policy and infrastructure program to enable that growth do occur without bottlenecks," he says.

India has large reserves of iron ore - it even exports some to China on the spot market - but it lacks high-quality coking coal and is forced to import some of it from Australia.

Rio and BHP are both interested in helping out the burgeoning Indian steel industry, but they would prefer to remain upstream suppliers. Unfortunately, some states are trying to require miners to build downstream operations to provide additional jobs to aid economic growth.

BHP says it is willing to investigate downstream "value additions" where applicable, but Rio's Elliott thinks the requirement - along with a huge amount of bureaucratic red tape - has proven a disincentive for foreign mining investment.

"In my job, a great many investment proposals cross my desk," he said.

"Attracting mining investment is a competitive business. As a result its of administrative processes, India may be missing out on a potential boom.

"This is certainly the risk it runs in the minerals sector."

Aluminum Jumps to 7-Week High in London; Copper, Nickel Gain

By Chanyaporn Chanjaroen


Sept. 6 (Bloomberg) -- Aluminum jumped to a seven-week high in London, while nickel and copper gained as investors speculated that an expanding world economy will spur demand for the metals, creating a supply shortfall.

The global economy will grow in line with an April forecast of 4.9 percent, the International Monetary Fund's managing director Rodrigo de Rato said yesterday at a speech in Washington. Economic growth spurs demand for industrial metals including copper and aluminum.

``The underlying demand for all metals is very strong,'' Kona Hague, an analyst at London-based Economist Intelligence Unit, said today by phone. `` Aluminum, nickel stocks are falling and what you see now reflects the general bullishness in metals.''

Aluminum for delivery in three months rose $61, or 2.4 percent, to $2,634 a metric ton as of 7:06 p.m. on the London Metal Exchange, after earlier touching $2,640.25, the highest since July 14. The contract has gained 15 percent this year, trading at record $3,310 a ton May 11.

Nickel for delivery in three months gained $500, or 1.8 percent, to $28,400 a ton. The metal has more than doubled this year.

``We see prices of metals peaking in 2007 on delay of supply response'' to soaring metals prices, Haque said.


Inventory Increase

Nickel inventory tracked by the London Metal Exchange rose 474 tons, or 8.1 percent, to 6,360 metric tons today, the biggest increase in a month, according to daily report from the exchange today. The stockpiles have plunged 82 percent this year amid soaring demand from Chinese steelmakers and are sufficient for about two days of global usage.

``You wouldn't say we're out of the woods in terms of not running out of any stocks,'' said David Thurtell, a metals analyst at BNP Paribas in London. ``It's still critically tight.''

Stockpiles of aluminum dropped 1,600 tons, or 0.2 percent, to 713,200 tons, the exchange said today. That is adequate for less than eight days of global consumption.

Aluminum will be in a supply shortfall of 187,000 tons this year, according to a Citigroup report released yesterday. Analysts Alan Heap and Thomas Price revised down their aluminum- price forecasts 7.2 percent, estimating aluminum for immediate delivery to average $1.114 a pound ($2,455 a ton) in the second half of this year. Prices averaged $2,534 a ton in the first half of the year.

The global nickel market is likely to see a supply shortfall through next year as demand climbs about 10 percent this year, and 7 percent in 2007, the analysts said.


Copper Demand

Demand for copper will outpace supply by 101,000 tons this year due to mine disruptions, following a shortfall of 102,000 tons last year, the analysts said. The deficit will widen to 229,000 tons next year, a fifth straight year of shortfall. Prices of copper will average $3.247 a pound ($7,158 a ton) in the second half, they said.

``The copper market still is vulnerable to a lot of hot spots, strikes,'' said Edward Meir, an analyst at Man Financial Ltd. in Darien, Connecticut. ``Chinese demand seems to be picking up after a few months of a decline. The market still looks like it's going to be in a deficit next year.''

Copper for delivery in three months on the LME gained $120, or 1.5 percent, to $8,040 a ton, gaining for a third straight day. The contract has more than doubled in the past year, trading at a record $8,800 a ton May 11.

Copper for December delivery rose 3.5 cents, or 1.5 percent, to $3.6795 a pound at 1 p.m. on the Comex division of the New York Mercantile Exchange. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Lead soared $62, or 4.8 percent, to $1,343 a ton, the highest since the close of Feb. 6.

Gold Falls in London, N.Y. as Gains May Have Been Exaggerated

By Pham-Duy Nguyen and Julie Tay


Sept. 6 (Bloomberg) -- Gold declined in London and New York as investors sold the precious metal on speculation gains in the past two weeks have been exaggerated.

The seven-day relative strength index of spot gold rose to 70 yesterday, a signal the metal may drop. Gold futures have had two straight weekly gains and yesterday rose the most in eight weeks in New York.

``With the market up $14 yesterday, there had to be a pullback today,'' said Mike Sander, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California.

Gold futures for delivery in December dropped $2.50, or 0.4 percent, to $644.40 an ounce at 10:26 a.m. on the Comex division of the New York Mercantile Exchange. Bullion for immediate delivery in London fell $1.50, or 0.2 percent, to $636.80 an ounce at 3:26 p.m. local time.

The seven-day relative strength index on spot gold, a gauge of the momentum for the metal's gains or losses, rose above 70 yesterday for the first time since July 14. A reading above 70 indicates prices are poised to fall. The relative strength index for gold futures was 67 yesterday. Readings are derived from averaging gains or losses over seven days.


Central Bank Sales

Gold also fell on speculation central banks in Europe may sell the metal before a Sept. 26 deadline. Under an accord known as the Washington Agreement, European central banks agreed to limit sales to 500 tons a year. They haven't reached their target yet.

``People are watching closely'' to see if central banks are selling, said Matthew Turner, an analyst at Virtual Metals Consulting in London. ``Over the medium term, we expect gold to trade a little lower.''

The European Central Bank said two member banks last week sold gold worth 28 million euros ($35.8 million). Before yesterday, the banks had sold about 340 tons of the metal in the past year.

Gold may gain on speculation demand from jewelers and investors will recover this month. Gold has risen during every September since 2000 as jewelers stocked up on the metal for the winter holidays.

Jewelers, the biggest buyers of the metal, have slashed purchases for the first half of this year, according to the producer-funded World Gold Council.

``This is a time when gold seasonally goes higher,'' said John Licata, chief investment strategist at Blue Phoenix Inc., an energy and precious metals consulting firm in New York. ``You have money going back into the market that has been on the sidelines.''

Among other precious metals, platinum for October delivery dropped $2.50, or 0.2 percent, to $1,277 an ounce, after touching $1,281 yesterday, the highest since May.

Lonmin Plc, the world's third-largest platinum producer, said it may shut its refinery for five to seven days after a fire. The South African miner said the blaze may reduce its production forecast of 950,000 ounces to 960,000 ounces this year by as much as 2.6 percent.

Dow Jones - 6 September 2006

LME Review: Extends gains; fund buying, bullish sentiment


London Metal Exchange extended gains Wednesday on fund buying as bullish sentiment reasserted itself across the board, lifting copper prices to a fresh four-week high, traders said.

Other LME contracts also performed strongly, with systematic fund buying lifting LME three-month aluminium to a near-two month high of $2,643 a metric ton, up 2.4% on the previous PM kerb and above the the 100-day moving average.

"After a strong morning session holding gains, lead, aluminium and zinc attracted fresh fund buying," a trader said.

The end of the summer lull and expected rebound in industrial production during the fourth quarter have resulted in fresh investment inflows to the base metal market, analysts said.

Strength in the metal markets despite a falling oil market could indicate a shift within commodities away from "petroleum-based products and toward metals," HSBC analyst James Steel said.

"The relative size differences between the metals and oil means that even a modest reallocation out of energies and into metals can have a pronounced effect on the metals complex," he said.

For copper, supply issues continue to simmer just below the surface given that labor contract negotiations at the world's largest copper producer Codelco were just around the corner at the end of September, JP Morgan metal analyst Jon Bergtheil said.

Codelco produces around 12% of the world's copper.

"The strength in copper prices is reflective of tightening copper market fundamentals as we approach the end of the seasonal low-activity summer period and we believe that markets are underestimating the combined impact on copper supply of recent production losses and also expect a significant upturn in Chinese buying of copper to emerge before too long," Barclays Capital said in a report.

LME lead was the LME's strongest performer Wednesday, rising to a four-month high of $1,345/ton, up 4.8% after a break above $1,300 triggered technical buying, traders said.

A break above chart resistance for zinc produced similars results, pushing the metal to rose to a near four-month high of $3,715/ton, up 2.8%.

Copper Rises in Shanghai for 5th Day on Supply Concern in China

By Chia-Peck Wong


Sept. 7 (Bloomberg) -- Copper prices in Shanghai rose for the fifth straight day amid concerns that supply in China, the world's biggest user of the metal, may not be meeting demand.

Stockpiles monitored by the Shanghai Futures Exchange have fallen 17 percent this year as prices soared to records, prompting cable and wire makers to use more domestically- produced and scrap copper. The drop in inventories has led these buyers to return to the market, said trader Li Ling.

``Supply on the cash market is tightening, and there's a limit as to how much longer the buyers can rely on existing stockpiles,'' Li, a futures trader with Star Futures Co., said by phone from Shanghai today.

Copper for the most-actively traded delivery in November rose as much as 1,250 yuan, or 1.7 percent, to 75,200 yuan ($9,467) a metric ton on the Shanghai Futures Exchange. It traded at 74,860 yuan by the midday break.

The so-called front-month contract, for September delivery, traded at 75,030 yuan, signaling that immediate supply may not be able to meet demand.

Copper for immediate delivery in Changjiang, Shanghai's biggest spot market, rose as much as 1 percent today to 75,050 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

``The strength in copper prices is reflective of tightening copper market fundamentals,'' Barclays Capital analysts led by Kevin Norrish said in a report yesterday.

``We believe that markets are underestimating the combined impact on copper supply of recent production losses and also expect a significant upturn in Chinese buying of copper to emerge,'' the analysts said.

Copper for three-month delivery rose $50, or 0.6 percent, to $8,090 a ton on the London Metal Exchange at 11:53 a.m. Shanghai time.

Metal for delivery in December rose 0.55 cent, or 0.2 percent, to $3.685 a pound on the Comex division of the New York Mercantile Exchange at 12:03 p.m. Shanghai time in after-hours trade.

www.voanews.com - 06 September 2006

IMF Warns Metals Prices Likely to Plummet - By Barry Wood


The International Monetary Fund, which on September 19 and 20 holds its annual meeting in Singapore, Wednesday released portions of its economic outlook at a briefing in Washington. While the IMF sees impressive overall growth continuing, it believes surging commodity prices will fall back.

Raghuram Rajan, the IMF's outgoing chief economist, says the world economy is in good shape but faces increasing risks of slowdown. In April the IMF slightly boosted its projections of world growth to 4.9 percent this year and 4.7 percent in 2007. In advance of its updated projections being released in two weeks, Rajan is optimistic.

"We now are in the fourth year of very strong world growth, growth that has been maintained in the face of headwinds, such as higher commodities prices, oil prices, and so on," said Raghuram Rajan.

Rajan, who later this year will return to his teaching position at the University of Chicago, says the prices of industrial metals have risen even faster than oil, which has more than doubled in the past three years. Metal prices, particularly copper, reached multi-year highs earlier this year before falling back sharply in May. Since then they have recovered most of their losses. Rajan believes metals prices are likely to fall.

"Our models, as well as futures prices, suggest that metals prices are likely to decline in the future," he said. "Non-oil, commodity dependent economies should anticipate this risk by being more cautious on expenditures that are hard to reverse, such as public sector salaries, and instead focus on expenditures that help build diversified productive capacity for the future."

MarketWatch - 6 September 2006

Gold loses $5 on strong dollar, lower oil prices


Gold futures closed with a loss of more than $5 an ounce Wednesday as dollar strength and renewed weakness in the oil market prompted traders to cash in on the metal's prior-day climb to a nearly one-month high

"Lower crude-oil values and a bouncy U.S. dollar dented bullion prices," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.

Gold for December delivery finished the day down $5.10, or 0.8%, at $641.80 an ounce on the New York Mercantile Exchange.

The contract closed at an almost four-week high near $647 Tuesday, buoyed by physical demand as the Asian jewelry season approaches. That trend should continue in the coming weeks, according to James Moore, analyst at TheBullionDesk.com.

"While the combination of firmer dollar/softer oil have the potential to trigger profit taking, the recent pick-up in physical, investor and fund interest, coupled with more fundamental issues such as low mining output, should see gold test back towards $650-$655 and our year-end target of $700 an ounce," he said in a note to clients.

"The season of gold is underway," said Julian Phillips, an analyst at GoldForecaster.com, and the Indian market has been "good buyers of gold as the price has remained stable."

But what gold needs most is "that steady flow of tonnage into baubles a flow that accounts for more ounces of gold than all of the mines can normally produce, year on year," according to Nadler.

Key Indian and Chinese buyers will "consume" gold as the "giving season approaches, but only if they deem that prices will not head significantly lower," he said.

Given that, he warned that "cautious optimism would be preferable at the moment, not irrational exuberance."

Strength in the dollar put some pressure on the precious metal's prices Wednesday, with the greenback climbing against its major foreign-exchange counterparts after a U.S. government report showed accelerating wage inflation.

Revisions to quarterly nonfarm business productivity data show unit labor costs rose 5% in the past year, the fastest pace since 1990, the Labor Department reported.

Against this backdrop, December silver closed up 6 cents at $13.20 an ounce, logging its strongest close since May 23. October platinum closed down $4.50 at $1,275 an ounce while December palladium rose $4.15 to close at $359.55 an ounce. December copper ended at $3.6795 a pound, up 5.5 cents, or 1.5%.

On the supply side, gold inventories were down 47,934 troy ounces at 7.93 million as of Tuesday evening, according to Nymex data. Silver inventories were unchanged at 104.2 million troy ounces, while copper supplies fell by 246 short tons to 11,542 short tons.

Gold in Asia Falls on Concern Federal Reserve May Raise Rates

By Feiwen Rong


Sept. 7 (Bloomberg) -- Gold in Asia fell on concern the Federal Reserve may raise interest rates to curb inflation, reducing the metal's appeal as an alternate investment.

Labor costs in the U.S. rose at a 4.9 percent pace in the second quarter after gaining 9 percent in the previous three months, a government report yesterday showed, the biggest back- to-back increase since 2000. Rising interest rates boost the appeal of the dollar and pressure the dollar-denominated gold.

``This is so-called 'second-round effects' where people may increase their wage demand because of inflation concern and that leads into inflation,'' Andrew Harrington, an analyst at Australia and New Zealand Banking Group Ltd., said from Sydney. ``If the Fed raises rates, one would probably see slowing economies, decreasing risks of inflation and a stronger U.S. dollar, all three of which will impact the gold price downwards.''

Gold for immediate delivery fell as much as $1.50, or 0.2 percent, to $632.20 an ounce, and traded at 632.92 at 12:05 p.m. Singapore time. The metal fell 0.7 percent yesterday.

Gold for December delivery fell as much as $2.10, or 0.3 percent, to $639.70 an ounce on the Comex division of the New York Mercantile Exchange. The contract traded at $640.50 at 12:03 p.m. Singapore time.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.


Jeweler Demand

Gold also fell on speculation jewelers may delay buying the metal on expectations prices may extend declines amid talk central banks in Europe may conduct sales before a Sept. 26 deadline.

Jewelers, the biggest buyers of the metal, have slashed purchases for the first half of this year, according to the producer-funded World Gold Council. Gold has gained every September since 2000, partly because jewelers stock up for the Indian wedding season.

``There are also reports saying that Indian jewelers' demand is 50 percent of the usual amount this time of year when they normally build up inventories in preparation for the upcoming festival season,'' the bank's Harrington said. ``There's an expectation that prices may come down and they are delaying purchases and inventory buildup.''

Under an accord known as the Washington Agreement, European central banks agree to limit sales to 500 tons a year. They have only sold around 340 tons by Sept. 1, according to analysts at Barclays Capital who estimated the amount in a report yesterday.

Sept. 8 (Bloomberg)


The price of copper used to make wires and pipes may resume rising as output disruptions may cut supply, he said.

Workers at BHP Billiton Ltd.'s Spence copper mine in Chile are expected to vote Sept. 15 to strike. An almost four-week stoppage at BHP's Escondida mine in Chile that cut copper output by about 45,000 tons ended Sept. 2.

A strike at Spence will postpone the start of copper production at the mine, scheduled for October, Andres Ramirez, president of the union at Spence, said yesterday from the Chilean city of Antofagasta.

BHP Billiton's Union at Spence Expects to Reject Wage Offer

By Heather Walsh

(Bloomberg) -- BHP Billiton's union at its Spence copper mine in Chile expects to vote next week to strike, saying that the company refuses to meet its demands for wage increases.

The union plans to vote on Sept. 15 to reject a company wage offer to increase salaries to keep pace with inflation, said Andres Ramirez, president of the union, which wants salaries to rise by 7 percentage points above inflation.

``We aren't asking for anything out of this world,'' Ramirez said in an interview from the Chilean city of Antofagasta. ``They are pushing us to a strike.''

A strike would postpone the start of copper production at the mine, scheduled for October, Ramirez said. The wage dispute would be the second this month in Chile for BHP Billiton, the world's largest mining company. A union at Escondida, the world's biggest copper mine, returned to work Sept. 2 following an almost four-week strike that halved the mine's output and led to a loss of about 45,000 metric tons of copper production.

Mauro Valdes, a spokesman for BHP Billiton in Santiago, today declined to comment on whether a strike at Spence would postpone production.

Workers at Spence earn on average between 350,000 pesos ($647) and 400,000 pesos per month, less than the average for Chilean miners, Ramirez said. He said workers also want to the company to share its profit after prices for copper jumped 70 percent this year.

BHP Billiton, along with Codelco, the world's biggest copper supplier, and Falconbridge Ltd. will negotiate additional wage packages this year or in 2007 with unions at mines in Chile. The country produces 36 percent of the world's copper.

Engineering News

Miner predicts big zinc shortfall


ASX-listed Mount Burgess Mining said that world zinc output would have to grow by 22% on this year's production estimate of 10,6-million tons to meet expected demand by 2010.

Speaking an African-focused mining conference in Perth, on Thursday, chairperson Nigel Forrester said that new mine start-ups, production upgrades and mine closures would have to fill the expected shortfall of 2,38-million tons.

He said that China would remain the driver for higher zinc production globally.

"If China increases consumption by an average 345 000 t/y to 4,8-million tons total by 2010, and the rest of the world increases consumption by a modest 2%, total world production within three years must reach 13-million tonnes," Forrester said.

Forrester said that stocks and output would be at critical levels by early in 2008.

"The decline has been evident over recent years with London Metals Exchange stocks of 780 000 tons in April 2004 dwindling 606 500 tons in just 27 months to 173 500 tons by just a few weeks ago."

He said it represented an average daily decrease of 728 t/d over the 27 months and that it would worsen to 907 t/d this year.

Dow Jones Newswires - Friday, September 08, 2006

Copper May Rise On Restocking, Strikes - World Bank


0115 GMT [Dow Jones] Copper prices could rise on reemergence of strong Chinese demand after now-complete period of de-stocking, says World Bank in monthly commodity review. Notes global stocks of red metal remain critically low and after 25-day strike at world's largest copper mine, Escondida in Chile, "other labor contracts in Chile and Canada expire this year which could prop up prices." LME 3-month copper last at $8,030/ton, up $20 vs London PM. (JAD)

8 Sept 2006 - Bloomberg - By Chanyaporn Chanjaroen and Dale Crofts


Mine Strikes

A decline in copper prices may be limited by speculation that unionized workers at BHP Billiton Ltd.'s Spence mine in Chile will strike next week, cutting supply.

Workers will probably vote in favor of a stoppage on Sept. 15 to demand higher wages, Andres Ramirez, president of the union, said yesterday in Antofagasta, Chile. A 25-day strike at BHP's Escondida mine in Chile cut output in half at the world's largest copper mine. The walkout ended Sept. 2.

A strike at Spence ``would add to the tightness in copper,'' Neil Buxton, managing director of London-based GFMS Metals Consulting Ltd., said today by phone. Strikes are ``a reason why copper prices will stay at high levels.''

Eight of 16 analysts, investors, traders and consumers surveyed by Bloomberg News today forecast copper will rise next week for a fourth consecutive week. Four expected a drop and four predicted little change.

Copper stockpiles monitored by the LME fell 2,525 tons, or 2 percent, to 125,150 tons, the exchange said. That's less than three days of global consumption.

``Copper is still pretty well supported,'' said Donald Selkin, director of equity research at Joseph Stevens & Co. in New York. ``There is some tightness.''

Source: AFP - September 9

BHP faces second Chile strike threat


Anglo-Australian mining group BHP Billiton says it has made an offer to workers at its Spence copper mine in Chile in a bid to avoid another damaging strike.

Last month, protesting workers at its Escondida copper mine in Chile crippled production during a 25-day strike over pay.

"We did table an offer to the union yesterday," a BHP spokesman said in London.

"It's a very reasonable offer, given the stage of the project and the experience of the team."

The company has declined to detail the wage proposal.


BHP has invested about $1 billion in the Spence mine in northern Chile, which is due to start production next month at the earliest, with a capacity of 200,000 tonnes of copper cathode per year.

The company faces wage demands from its highly unionised work force, which is seeking a 7 per cent pay increase, according to Chilean news reports.

BHP, which bought the mine in 2000, says it has yet to receive the union's response to the offer.

Media reports in Chile say workers are not happy with the proposed package, which is below their wage hike demands.

The union reportedly rejected the offer and will vote on September 15 on whether to proceed with a strike.

The strike at Escondida, the world's largest copper mine, ended last week after BHP and the union agreed to a 40-month contract, which included a 5 per cent wage rise and one-time bonus of about $21,000 for each worker.

The strike was an effort by the workers to secure a greater share of the mine's profits, which have surged in line with a near-tripling of copper prices in the last three years.

BHP, the world's largest miner, posted a record annual net profit of $13.9 billion in August and said prospects were good for the sector amid unprecedented global demand for commodities.

The international credit ratings agency Fitch Ratings had warned in a report published on August 24 that the Escondida strike could spark copycat action across the globe as miners seek a bigger share of their employers' record earnings.

Saturday September 9

Chile hard-pressed to avert more copper strikes - By Pav Jordan


SANTIAGO, Chile, Sept 8 (Reuters) - Chile's government would likely pay a high political price if negotiators fail to cut a deal with thousands of union workers at state-owned Codelco, the world's largest copper-producing company.

Codelco faces contract negotiations at three divisions before the end of the year, and must reach deals with some 7,000 workers to avert a strike.

A work stoppage by the biggest union in the country could rattle confidence in the center-left administration of Chile's first woman president, Michelle Bachelet.

"I don't envy Codelco's negotiators, because I think they have a very difficult task before them," said Joseph Ramos, an analyst and economy professor at the University of Chile in Santiago.

"If this bubbles (into a strike) it will work against the government because the public will interpret it as a failure of the government to achieve its goals."

The negotiations follow an intense, nearly month-long strike at Chile's Escondida, the world's largest copper mine, by 2,052 workers demanding higher salaries and benefits.

In negotiations with workers, Codelco must juggle the need to protect profits that go directly to the state, and workers' rights to share in booming copper revenue.

Chile is the world's largest producer of copper, and profit from the red metal is the backbone of the local economy.

"Everything the workers win from these negotiations comes out of the pockets of Chileans," Ramos said.



MORE EQUALITY ACROSS THE BOARD

The copper market has zoomed to record heights over the past three years -- jumping nearly fivefold -- and will likely stay strong until the end of the decade at least.

Copper revenues have helped Chile become one of the region's healthiest economies, and Bachelet's government says some of the windfall must be set aside for leaner times.

For many the debate runs deeper than dollars and cents and is more about equality in a democratic Chile that is barely a generation out of the 1973-1990 military dictatorship.

Chile's Mining and Energy Minister Karen Poniachik said last week the Codelco talks should not be turned into a political issue.

But Fabian Pressacco, a political science professor at the Alberto Hurtado University in Santiago, said the subject is political by nature because it touches on campaign promises by Bachelet to improve the lives of average Chileans.

"And Chileans are demanding more equality across the board, between men and women, between bosses and employees," Pressacco said.



GOVERNMENT, ESCONDIDA DENY PRESSURE

At Escondida last week, workers approved a new 40-month contract for a 5 percent wage hike and a special bonus equal to some $17,000 per worker, compared to initial demands for a 13 percent raise and a $30,000 bonus.

Escondida union chief Luis Troncoso said the government intervened in the Escondida strike by urging the company not to give in too much to the union, and pushed the union to be more flexible in its demands.

"There was pressure (on Escondida) from the government not to make the best offer, because of serious upcoming negotiations at Codelco," Troncoso said.

The government and Escondida, majority-owned by global miner BHP Billiton , said there was no pressure.

From October to December, the three divisions at Codelco responsible for some 1.3 million tonnes of copper output will negotiate new three-year contracts.

"Negotiations must reflect the market, as it is and as it will be for the 36 months of the (next) contract," said Raimundo Espinoza, president of Codelco's 14,000-strong copper union and who is also on the Codelco board.

Monday, September 18, 2006 - Dow Jones Newswires

Gold May Recover On IMF Rebuke


Gold's almost 2-week retreat expected to find floor from which to stage some kind of recovery later this week on anticipated scathing IMF statement on various economies frittering away opportunity to rectify imbalances while global growth still strong, says Westpac Australia chief currency strategist Robert Rennie; "that should bode well for USD alternatives and it should see a bit more stability coming back into gold through the week." Adds extent of recovery depends largely on physical demand. But for now views gold as paying price for overly pessimistic view on U.S. economy, dollar. Spot trades last $581.10/oz, up $3.15 on NY close, but down from $640 early this month.(JAD)

Sep 17, 2006 (The Australian Financial Review - ABIX via COMTEX)

Citigroup, JPMorgan and JBWere analysts are among those recommending base metals in September 2006. Although there was a sharp fall in commodity prices and resources stocks in the week ending 15 September 2006, many analysts argue that the fall reflected sentiment more so than fundamentals. There are differences between the recommendations of investment houses, such as Citigroup reducing aluminium forecasts while raising zinc, nickel and copper forecasts. Predictions about supply and demand are also influencing forecasts, especially with zinc.

Sept. 18 (Bloomberg)

Shanghai Copper Futures Increase on Supply Concern in China - By Helen Yuan


Copper in Shanghai rose on concern supplies won't be enough to meet demand in China, the world's biggest consumer of the metal used in power cables and plumbing.

Copper for November delivery on the Shanghai Futures Exchange rose as much as 990 yuan, or 1.4 percent, to 69,630 yuan ($8,766) a metric ton, and traded at 69,440 yuan at 11:30 midday break. The contract fell 7.4 percent last week.

Copper for immediately delivery in Changjiang, Shanghai's biggest copper market, rose as much as 0.6 percent to 70,150 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Copper for three-month delivery rose as much as $130, or 1.8 percent to $7,400 a ton on the London Metals Exchange and traded at $7,390 at 11:51 a.m. Shanghai time.

Copper for delivery in December increased 3.85 cent, or 1.2 percent, to $3.3500 a pound on the Comex division of the New York Mercantile Exchange at 11:25 a.m. Shanghai time in after- hours trading.

Wed 20 Sep 2006

Oil marks biggest 1-day decline in 10 years


LONDON (SHARECAST) - Oil prices continued its sharp decline, marking its biggest drop in over ten years on Tuesday amid strong supplies and as concern over problems in the Middle East ease.

US light crude oil for October delivery dropped $2.14 to settle at $61.66 a barrel on the New York Mercantile Exchange.

Oil prices have sunk more than 20% in the last two months, from its high in mid July, as the market cheers rising US inventories.

The latest government data showed crude inventories in the US are around 6% higher than a year ago.

Among precious metals COMEX gold for December delivery fell $9.60 to $583.20 an ounce ahead of this week's US Federal Reserve meeting.

Silver tracked the yellow metals decline, marking a 2.9% slide. Its safe haven qualities failed to come in demand despite the staging of a military coup in Bangkok.

Platinum and palladium also fell on Tuesday.

Copper Falls on Concern U.S. Housing Slowdown May Curb Growth

By Xiao Yu

Sept. 20 (Bloomberg) -- Copper prices fell in London and Shanghai after a U.S. report showed housing construction dropped to a three-year low last month, indicating economic expansion is slowing and demand for the metal may decline.

Housing starts in the U.S. plunged 6 percent last month to an annual rate of 1.665 million, the Commerce Department said yesterday, a steeper slide than economists had estimated. The average home in the U.S., the world's biggest copper user after China, contains about 400 pounds of copper.

``We are concerned the U.S. economy is lacking momentum for growth as the real estate market has been a key supporter of the economy,'' Wang Zheng, a Shanghai-based trader with Dalu Futures Co. said by phone today. ``Slowing economic growth may prompt hedge funds and other investors to short copper.''

Copper for November delivery on the Shanghai exchange fell as much as 2,050 yuan, or 2.9 percent, to 68,920 ($8,692) yuan a metric ton. The contract traded at 69,120 yuan a ton at 11:05 a.m. local time.

Copper for delivery in three months on the London Metal Exchange dropped $135, or 1.8 percent, to $7,360 a ton as of 10:52 a.m. Shanghai time.

Copper has dropped almost 20 percent from a record $8,800 on May 11. The world's economy ``may be turning'' down, International Monetary Fund Managing Director Rodrigo de Rato said yesterday in Singapore. The IMF last week said the strongest economic expansion in three decades will cool next year.


Short Positions

Hedge-fund managers and other large speculators increased their net-short position in New York copper futures in the week ended Sep. 12, the U.S. Commodity Futures Trading Commission data showed on Sept. 16.

Speculative short positions, or bets prices will fall, exceeded long positions by 9,394 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-short positions rose by 671 contracts, or 8 percent, from a week ago.

``There are very divided views on copper prices -- on the one hand, we see signs of a slowing economy; on the other hand, we see supply disruptions of major copper mines worldwide and sound demand in China,'' Dalu's Wang said.

Copper in Shanghai have been risen in the past two days as cable and electric wire producers began to store the metal so they are able to maintain output during a weeklong national holiday next week, traders including Li Ling said yesterday.

FT - By Kevin Morrison - September 18 2006

Investors pull out of commodities


Up to $12bn may have been taken out of commodities by investors over the past month, JPMorgan said on Monday.

The outflows came amid a retreat in commodity prices as concerns increased about a slowing US economy and the knock-on effect of easing demand for raw materials.

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The investment bank said the gold price could be the most vulnerable to further selling, while crude oil prices were showing signs of support at current levels.

John Normand, global currency, commodity and fixed-income strategist at JPMorgan, said the $12bn of outflows was small relative to the total inflows into commodity index products over the past five years about $100bn.

But he said it was high relative to the amount that had entered through retail mutual funds this year $19bn, according to JPMorgans internal database of about 250 funds.

JPMorgan said about $4.7bn has been sold by speculative investors in crude futures since May, and about $4bn in US gold futures over the same period.

The estimates are based on speculative investment activity measured in the weekly Commitment of Traders report, released by the Commodity Futures Trade Commission, the US regulator. Retail investor activity reflects the assets under management in various commodity-backed ex-change traded funds, it said.

From its peak early last month to its recent trough on Thursday, Brent crude futures tumbled more than 21 per cent, US natural gas has fallen to two-year lows, gold hit a three-month low last week and copper has fallen about 10 per cent in the past month.

The most popular commodity index product, Goldman Sachs Commodity Index, is down this year, in spite of a rise in underlying commodity prices.

An attraction for investors in indices is the ability to earn a roll yield from futures prices being lower than the prevailing spot, or current, price. Investors tend to roll their index trade over each month, just ahead of expiry of the contract.

Traditionally, this trade has been profitable, with investors selling at a higher price and buying at a lower price on the roll. But the roll yield has disappeared in energy futures.

The collapse in commodity prices over the past six weeks has raised the fear of more sustained liquidations, given the sizeable new money flow into this market over the past five years and the negative roll on index products, said Mr Normand.

The Times - September 20, 2006 - By David Robertson

West could lose out to China over aluminium resources


WESTERN mining companies risk handing a substantial prize to China if they fail to commit billions of dollars to developing the aluminium industry of a West African republic.

The Government of Guinea has told Western miners that it will no longer allow them to exploit its vast natural resources unless they also commit to building a domestic refining and smelting industry.

While Western companies, beholden to their shareholders, are reluctant to make the large investment required, Chinas state-owned industries have no such constraints and are looking to get fully involved.

Guinea has 26 per cent of the worlds known reserves of bauxite, the raw material used to make aluminium. Nearly all its ore, which is of very high quality, is exported for processing. Some of the worlds biggest miners have bauxite concessions in Guinea, including BHP Billiton, Alcoa and Alcan.

Ousmane Sylla, the Mines Minister, told The Times yesterday that companies would be encouraged to set up refineries in Guinea to convert the raw bauxite into alumina. He also wants them to build smelters, in which the alumina can be turned into aluminium. Each process significantly increases the value of the raw material.

Dr Sylla, in Moscow for the aluminium industrys annual conference, said: Guinea is a very rich country in terms of resources but a very poor country economically. I believe that can change only if we develop our industry. Through this, Guinea will fight poverty.

The biggest hurdle is power. Refineries and smelters are energy-intensive processes and tend to be located where cheap power is available. Guinea wants miners to invest in hydroelectric power schemes, but senior industry executives have told The Times that they are unwilling to commit themselves to a multibillion-dollar investment in what they see as a politically unstable country.

China appears willing to cooperate. Dr Sylla was in Beijing last month to talk to Chalco and the China Aluminium Group, and Chinese engineers are expected in Guinea soon. Sino Hydro, the Chinese power company, is sending a delegation.

One industry source said: The Chinese need access to more high-quality bauxite, and Guinea is the obvious place for them to go. Chinese state-owned companies . . . are the only ones that will buy into Guineas new policy, which means China may end up controlling 26 per cent of the worlds bauxite supply.

MarketWatch - 20 September 2006

Gold falls in electronic trade after Fed decision


Gold futures prices closed higher for Wednesday's regular trading session, then fell in electronic trading, while metals-mining shares cut their gains or retreated shortly after the Federal Reserve decided to leave interest rates unchanged

The Fed held overnight interest rates steady at 5.25% and left the door open for further increases if inflation does not come down. This was the second straight meeting with no change in monetary policy. It follows rate hikes at an unprecedented 17 consecutive policy-setting meetings.

The news came less than an hour after the regular metals trading session ended on the New York Mercantile Exchange.

Gold for December delivery ended the regular session with a gain of $3 to close at $586.20 an ounce. It briefly touched a high of $592.50 during the day, after spending two sessions gaining and then losing nearly $10 an ounce.

In electronic trading, prices traded between a low of $585.10 and a high of $587.40, with the contract down 50 cents at $585.70, about 15 minutes after the Fed announcement.

"The Fed states there is moderation in economic growth reflecting a cooling housing market, crude-oil price declines should temper inflation but added inflation risks remain," said John Person, president of National Futures Advisory Service.

"Gold should stabilize and trade lower for the remainder of the week to re-test the July lows near the $558 level," he said.

The dollar continued to trade slightly weaker against its major foreign rivals following the news, but failed to offer support for gold.

Concerns about weak jewelry demand in the first half of the year and a sharp selloff in the oil pits pushed gold prices lower Tuesday. Oil prices fell again Wednesday to below $61 a barrel after U.S. government data showed that crude supplies remained ample despite a third-weekly decline.

Peter Grandich, editor of The Grandich Letter, believes gold is rapidly approaching a bottom, blaming much of its recent weakness on central bank selling.

"Strong physical demand and a whole host of positive technical divergences strongly suggest the next $100 move is up, not down," he said in comments emailed Wednesday morning.

However, the outlook for copper is less upbeat, with London Metals Exchange inventories up again for a 32% gain since June.

"Copper is on the verge of a major breakdown." he said. "A $2 copper price in 2007 is a realistic target."

December copper closed nearly unchanged in Wednesday's regular session, up 0.05 cent at $3.376 a pound.

December silver futures climbed 19.5 cents to end at $11.14 an ounce, October platinum fell $14.90 to close at $1,140 and December palladium fell $2.70 to finish the day at $306.35 an ounce.

On the supply side, gold inventories were down 64 troy ounces at 7.79 million troy ounces as of late Tuesday, according to Nymex data. Silver supplies fell by 126,199 troy ounces to 105.6 million and copper supplies rose by 2,260 short tons to 17,523 short tons.

Copper Rises in Shanghai as Producers Buy After Price Decline

By Chia-Peck Wong

Sept. 21 (Bloomberg) -- Copper in Shanghai rose as cable and electric wire makers in China, the world's biggest user of the metal, resumed purchases after yesterday's price declines.

Copper prices fell 2.6 percent yesterday, the biggest drop since Sept. 12, to settle at 69,100 yuan a metric ton, a level which may prompt buying by producers keen to store the metal to maintain output during a weeklong national holiday next month.

``Below 70,000 yuan, we see some buying from copper users,'' Li Rong, a metal analyst at Great Wall Futures Corp., said by phone today from Shanghai.

Copper for delivery in November rose as much as 1,090 yuan, or 1.6 percent, to 70,190 yuan ($8,857) a metric ton on the Shanghai Futures Exchange. It traded at 69,470 yuan by the market's midday break.

In the past week, the metal has twice settled above 70,000 yuan and then settled below that figure for the following two days, indicating resistance, or levels where selling orders cluster, on charts some traders use to predict prices.

The exchange will be closed from Oct. 2 to Oct. 6 for the annual National Holiday, and is due to reopen on Oct 9.

Copper for immediately delivery in Changjiang, Shanghai's biggest copper market, rose as much as 0.9 percent to 70,860 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Copper for three-month delivery fell $49, or 0.7 percent, to $7,400 a ton on the London Metal Exchange at 11:44 a.m. Singapore time.

Metal for delivery in December fell 2.1 cents, or 0.6 percent, to $3.355 a pound on the Comex division of the New York Mercantile Exchange at 11:45 a.m. Singapore time in after-hours trade.

By Chanyaporn Chanjaroen and Dale Crofts


Sept. 22 (Bloomberg) -- Copper prices rose in New York, capping a 3.9 percent gain this week, on speculation that supplies will lag behind demand because of mine disruptions and dwindling stockpiles.

Inventories monitored by the London Metal Exchange fell 1.7 percent today to 121,275 metric tons. That's equivalent to less than three days of global use. Stockpiles have dropped 3.3 percent this month. Copper prices have doubled in the past year.

``All types of copper stocks will be at critically low levels, and the market from mine to consumer will remain tight,'' Simon Toyne, a London-based metals analyst at Numis Securities, said today in a report.

Copper futures for December delivery gained 0.85 cent, or 0.3 percent, to $3.44 a pound on the Comex Division of the New York Mercantile Exchange. Prices tumbled 7.2 percent last week after climbing for three straight weeks.

A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

On the LME, copper for delivery in three months fell $15, or 0.2 percent, to $$7,545 a metric ton. Prices still gained 3.8 percent this week. The metal reached a record $8,800 a ton on May 11.

Six of 13 analysts, investors and traders surveyed by Bloomberg yesterday forecast copper will rise next week. Four expected a drop and three predicted little change.

Demand will exceed supply by 52,000 tons in 2006, compared with a shortfall of 360,000 tons last year, Goldman Sachs Group Inc. analysts led by London-based James Gutman said in a Sept. 18 report. The bank raised its average price forecast in 2006 by 18 percent to $6,617 a ton.



Chile, Indonesia

A strike last month at BHP Billiton Ltd.'s Escondida site in Chile reduced production. Grupo Mexico SA also lost output this year due to a labor dispute. Freeport-McMoRan Copper & Gold Inc. has reported declining output at Grasberg in Indonesia because of ore containing less metal. Escondida is the world's biggest copper mine, followed by Grasberg.

Canadian nickel miner Inco Ltd. has suspended delivery of copper concentrates from its Voisey's Bay mine in Labrador, Canada, to three customers in Europe, Inco spokesman Steve Mitchell said by phone from Toronto today. Workers at the mine have been on strike there for about eight weeks.

Copper in London has traded in a range of $7,035 to $8,080 a ton since July.

``There's a lack of consensus'' on whether there will be oversupply or a shortfall next year, said Andrew Silver, a London- based trader at Natexis Commodity Markets Ltd.

When prices of copper fall by $200 to $300 a ton, consumers buy the metal, minimizing losses, Silver said. Producers start selling when prices rise, capping gains.



Housing Data

Prices may decline next week should data in the U.S. indicate economic growth is slowing, eroding demand for copper by the world's second-largest user of the metal.

The National Association of Realtors, the U.S. industry's largest trade group, may say sales of existing homes fell in August to the lowest rate in almost three years, according to a Bloomberg survey of economists. Housing accounts for 37 percent of U.S. copper demand, according to Citigroup Inc.

``As the market looks ahead to next week, it's anticipating more bad news,'' said Ronald Goodis, retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``Stocks are coming down, and bonds are moving higher, indicating that all markets are focusing on the health of the economy.''

The realtor group predicts U.S. home prices may dip below year-earlier levels in coming months and said on Sept. 8 that record home supplies may erode prices for the first time in 13 years.

FT - September 23 2006 - By Christopher Brown-Humes


Times are tough for the bulls on oil and commodity stocks. The sharp falls in oil prices since July have coincided with fresh bouts of trouble for sector heavyweights BP and Shell. That has raised doubts about one of the biggest and most successful trades of the past few years - overweight oils and miners. But the bulls should hold on. The story is not yet over, even if the ride is going to get bumpier.

It is a call which has ramifications for the wider UK market. London has been underperforming, precisely because resources stocks have been falling and because there is a greater weighting of these in London than in other European markets. While the FTSE All Share is nearly 5 per cent below its April 21 peak, the FTSE Eurofirst 300 index was at four-month highs on Thursday. Its close yesterday was only 2.5 per cent below the five-and-a-half-year peak in May.

Resources stocks have succumbed to profit-taking after the big gains of recent years. The FTSE All Share Oil and Gas index is down 11.5 per cent since April 21, while the Mining index is down 11 per cent. The heaviest falls have taken place in the past month. Given that mining accounts for six per cent of the All Share - it was less than two per cent in 2000 - and that oil and gas is 15 per cent, it is not hard to see why London shares have been struggling to make progress. This is despite the fact that many sectors of the economy are potential beneficiaries of lower oil prices.

US oil prices have fallen 20 per cent to $61 a barrel since early August, gold is down by the same amount since its 26-year peak in May, and copper has fallen 13 per cent since May. One of the reasons for the falls is that slowing US demand has become a greater worry for markets than rising inflation now that there is evidence of a drop in US housing activity and that the Federal Reserve has stopped raising interest rates. If fewer new homes are built in the US, there won't be as much need for copper piping, for example. At the same time, a US slowdown could have an impact on the wider global economy, particularly the Chinese one, because of the importance of US exports to China.

But lower oil prices are not the only reason oil and gas shares have been falling. BP has become mired in all sorts of difficulties in the US following a blast at one of its Texas refineries, pipeline corrosion problems in Alaska and production delays at its Thunder Horse oil field in the Gulf of Mexico. These issues are clearly taking their toll on BP's share price, which has underperformed Exxon Mobil's by 10 per cent this year. Royal Dutch Shell also faces company-specific issues, including interference by the Russian authorities in the Shell-led Sakhalin-2 project.

The question is whether oil and gas stocks are now undervalued, with ABN Amro noting this week that the oil and gas sector was trading at a record discount to the market. The oil and gas index price/earnings ratio is 9.11 compared with 12.87 for the FTSE All-Share. That's probably fair if you think oil is heading back towards $40 a barrel and believe oil and gas earnings have been heavily inflated by oil price strength.

But there are many reasons for believing that the oil price drop is temporary. The US driving season is over, so demand for gasoline is lower. But soon demand for heating oil will start to increase as winter approaches. Hurricanes have been notable by their absence, while concerns about Iran have temporarily dissipated. It is all too easy to imagine new geopolitical tensions. As for BP's US problems, it is far too early to say that it is out of the woods, but its share price is already probably discounting many of the problems it is experiencing there.

Mining stocks are also trading on a low price/earnings ratio of about 8.5. That suggests the market believes earnings are heading for a sharp fall as commodities prices drop. There are concerns about corporate governance at some big international mining groups that have joined the London stock exchange in the past few years.

Yet commodities demand remains robust in China and India, corporate balance sheets are strong even if commodity prices fall further, and there is every prospect of increased dividends and further share buy-backs. Moreover, there are good reasons for expecting consolidation in the mining sector to continue, because it can be cheaper to buy companies than spend money on exploration and development. Anglo-American - in which Chinese investors were this week rumoured to be building a stake - is only the latest mining company to feature in the regular consolidation gossip surrounding the sector. On balance, resources shares are attractive, providing you believe that global demand will slow rather than collapse next year.

FT - By Kevin Morrison

Investors pull out of commodities


Up to $12bn may have been taken out of commodities by investors over the past month, say JPMorgan.

The outflows came amid a retreat in commodity prices as concerns increased about a slowing US economy and the knock-on effect of easing demand for raw materials.

The investment bank said the gold price could be the most vulnerable to further selling, while crude oil prices were showing signs of support at current levels.

John Normand, global currency, commodity and fixed-income strategist at JPMorgan, said the $12bn of outflows was small relative to the total inflows into commodity index products over the past five years about $100bn.

But he said it was high relative to the amount that had entered through retail mutual funds this year $19bn, according to JPMorgans internal database of about 250 funds.

JPMorgan said about $4.7bn has been sold by speculative investors in crude futures since May, and about $4bn in US gold futures over the same period.

The estimates are based on speculative investment activity measured in the weekly Commitment of Traders report, released by the Commodity Futures Trade Commission, the US regulator. Retail investor activity reflects the assets under management in various commodity-backed ex-change traded funds, it said.

From its peak early last month to its recent trough on Thursday, Brent crude futures tumbled more than 21 per cent, US natural gas has fallen to two-year lows, gold hit a three-month low last week and copper has fallen about 10 per cent in the past month.

The most popular commodity index product, Goldman Sachs Commodity Index, is down this year, in spite of a rise in underlying commodity prices.

An attraction for investors in indices is the ability to earn a roll yield from futures prices being lower than the prevailing spot, or current, price. Investors tend to roll their index trade over each month, just ahead of expiry of the contract.

Traditionally, this trade has been profitable, with investors selling at a higher price and buying at a lower price on the roll. But the roll yield has disappeared in energy futures.

The collapse in commodity prices over the past six weeks has raised the fear of more sustained liquidations, given the sizeable new money flow into this market over the past five years and the negative roll on index products, said Mr Normand.

ABC News - By Stephen Long

IMF issues warning on commodities boom


High commodity prices are driving Australia's economic growth, but the International Monetary Fund (IMF) says those prices are set to fall.

The IMF warns that some of the buoyant demand from China may be temporary.

It is tipping that over the next four years, prices for aluminium will fall by more than a third and for copper by more than 50 per cent.

The IMF's head of research, Tim Callen, says the IMF is expecting global growth of 5.1 per cent this year, and then slowing slightly to 4.9 per cent next year.

"I mean, the basis for this forecast is we're still seeing data, generally at the global level, coming in pretty strongly, and we expect that largely that'll continue going forward," he said.

"But we do see some risk to the outlook, particularly the US housing market is a concern, that the activity there is clearly slowing, and there are questions about the strength of that impact on US activity going forward.

"If the US slows more than expected, clearly that would have an impact on global growth."

He says the US housing market downturn will impact on growth.

"We could certainly imagine a scenario, if house prices slow more sharply than we have in our central forecast, of US growth maybe being one percentage point lower than we have in our forecast next year," he said.

"We're currently expecting 2.9 per cent growth next year."

Mr Callen says the IMF estimates that slowing would probably reduce growth in the rest of the world by about a quarter to half a percentage point.

"We certainly do see the downside risks I think as being slightly more skewed than we would normally, because basically we've had four years of very strong global growth," he said.

"The output gap at the global level is now, you know, closing in to where the global economy's operating near full capacity.

"In that situation it's certainly true the number of risks that are out there. If we get a combination of those risks in particular, we could see a considerable downside impact in our view."



Commodities drop

Mr Callen says it is very hard to predict commodity prices in the short-term, but the research points to "quite a substantial decline in aluminium and copper prices" over the next five years.

The IMF has predicted a 50 per cent fall in copper prices over the next four years.

Australia is more reliant on iron ore and coal, but this must raise worries about Australia's growth, given this country's reliance on commodity exports.

"I think the two things to consider here, right, first of all clearly there's a lot of investment going on into the commodity sector," he said.

"So there's going to be an increase in the volume of exports of these metals as well. At the same time, prices are declining.

"While demand for commodity prices will continue to increase strongly over the next few years, in good part because of China's strong growth, it's actually the investment that's going into the supply side that will bring a lot of capacity on to meet that demand, at declining prices, over the next five years."


US wage pressure

He says that on a three-month annualised basis, core CPI in the US is running in the 3 to 3.5 per cent range.

"But the expectation is that as growth in the US continues to slow a little bit, and as oil prices have declined, that this should begin to take some of the pressure off inflation," he said.

"But clearly in the US, there's a delicate balance that the Fed is trying to get at the moment.

"What we expect is that as growth slows we will see some easing of inflationary pressures going forward.

"Of course, the risk on this side is more that if productivity growth slows more than expected, we could see slowing growth against a background of continued upward pressure on inflation."

He says the Chinese economy is growing very strongly, "but China would not be unaffected by a slowdown in US consumption growth.

"So we would see, if the US economy does slow, this is certainly going to have implications for the global economy as a whole."

Dow Jones Newswires - Monday, September 25, 2006

Copper Looks Trapped In $7,600-7,200 Range


LME 3-month copper $7,560/ton, up just $10 on Friday's London PM, expected to continue encountering firm resistance at 100-day moving average at $7,600, says Standard Bank. On downside, $7,200 remains important support with sustained move below possibly triggering extended downward spiral. Fundamental newsflow mixed, as LME warehouse stocks continue to shrink, gold firmer Friday night while energy markets softer, threatened strike at Spence project in Chile apparently averted.

Daily Telegraph - 25/09/2006 - By Peter Foster in New Delhi and Harry Wallop

Indian court blasts 400m Vedanta refinery


Vedanta Resources, the mining giant, has been accused of a ''blatant violation" of planning and environmental guidelines during the construction of a 400m aluminium refinery in the Indian state of Orissa.

An Indian Supreme Court committee set up to review the Lanjigarh alumina refinery project found environmental clearances were granted on the "wrong premise" that the refinery and a proposed open-cast mine would not encroach on protected forests.

The 60-page report criticises Vedanta, which floated in London three years ago, and recommends that the court should "consider revoking" clearances given to the company by New Delhi in September 2004.

The massive Lanjigarh project, which was begun in 2003, has attracted fierce protests from tribes who claim the refinery and a proposed mine will be an environmental disaster.

The scheme is the most important expansion project Vedanta is investing in across India. Any moves to derail the plans would be a blow to the ambitious company, which entered the FTSE 100 earlier this year.

The two-phase project was conceived as a refinery that would be fed by a bauxite mine spread over 660 hectares of the nearby Niyamgiri Hills, linked to the refinery by a conveyor whose pylons are partly constructed.

Ecologists say the hills contain rare species of plant as well as populations of elephant, wolf, giant squirrel and pangolin as well as endangered species such as leopard, tiger and a rare antelope.

Though construction on the refinery is complete, permission for the mine, which was to supply 3m tonnes of ore a year to the refinery, is awaiting the outcome of fresh environmental impact studies ordered by the Supreme Court.

However, the report by a Centrally Empowered Committee of the court said Vedanta should never have been given permission to build the refinery because it failed to apply for the mine at the same time.

Under planning guidelines work on constructing the refinery, should not have started because the mine was situated on land protected under India's Forests (Conservation) Act of 1980.

"The [Lanjigarh] Alumina Refinery construction work has been started and continued in blatant violation of the above said guidelines," the committee said.

The committee added further that Vedanta should not have built the refinery before conducting an "in-depth study" into the impact of the mine on flora, fauna and water regime of the Niyamgiri Hills.

A two-day visit by the court in December 2004 found tribes had been denied adequate grazing and agricultural land.

Vedanta is trying to find alternative sources of ore for the Lanjigarh plant which raises questions about the economic success of the refinery without the planned mine to supply it. Sources within the company insist getting ore from elsewhere would only have a "minimal" effect on the profitability of the project. The report, submitted in September last year, shows Vedanta being forced into a U-turn over whether the Lanjigarh refinery plant was or was not - dependent on the mine for its commercial viability.

In an affidavit of February 2 2005, Vedanta stated the Lanjigarh refinery considered the proximity of bauxite deposits. "A situation of the Lanjigarh deposits not being available to the refinery has never been envisagedand therefore the suggestion to source bauxite from alternative sources is not apprehendable [sic]...", it said.

However the company rapidly changed its position when told by the committee that, if the mine was integral to the refinery, they should have sought permission for both projects at the same time.

In a second affidavit issued a month later, Vedanta sought to ''clarify" the position, saying the mine was not ''integral" to the refinery and that the company would obtain ore from other sources if necessary.

The committee replied that, if the mine were not "absolutely necessary" for the refinery, then, under the conservation law, it would "probably not be approved" by the Indian government.

Having apparently fatally undermined its own case, Vedanta changed its mind yet again, submitting a third affidavit in April 2005 reverting to its original position that mine was necessary if the refinery was to be successful.

Vedanta said: "The proximity of mine would be an important factor for the successful functioning of the refinery and the production of aluminium at competitive prices."

Vedanta must now await the outcome of two environmental studies on hydrology and wildlife impact before a decision is made as to whether the Niyamgiri Hills can be mined or not.

However, leaked reports of a Wildlife Institute of India study conducted in May did not appear favourable to the mine, citing "irreversible" impact on the ecology. Activists, who plan to demonstrate next week, fear political pressure will be applied to secure the mining rights to the site.

Last month, Anil Agarwal, the chairman of Vedanta who started as a scrap metal dealer in Mumbai, announced he would spend 550m of his personal wealth to open a new university in Orissa state.

Srikanta Jena, a senior Congress Party leader who opposes the project, told The Daily Telegraph that he believed Vedanta should cut its losses and wind up the plant. "Without the mine, this plant is a white elephant," he added, "it is an illegal project which will damage the environment and bring little or no development to this area."

The company refused to comment on the details of the Supreme Court investigation, but said: "Vedanta's investment is set to transform Orissa, providing thousands of jobs. Vedanta supports a number of projects in the region on health, education and the environment, directly benefiting a huge number of people."

Sept. 25 (Bloomberg) - By Chanyaporn Chanjaroen

Copper Falls as U.S. Housing Data Signals Metal Demand May Slow


Copper fell in London as lower home sales and prices in the U.S. signaled demand for the metal used in wires and pipes may slow.

Copper has plunged 16 percent from a record in mid-May on signs the economy is slowing. The median price of previously owned homes in the U.S., the world's second-biggest copper consumer behind China, fell 1.7 percent in August, the first decline in 11 years and the lowest since early 2004, the National Association of Realtors said. Purchases dropped 0.5 percent to an annual rate of 6.3 million.

``The market is becoming more concerned about slower economic growth in the U.S., which means slower demand for metals,'' said Michael Widmer, head of metals research at Calyon in London. Calyon is among 11 companies that trade on the floor of the London Metal Exchange.

Copper for delivery in three months fell $35, or 0.5 percent, to $7,510 a metric ton on the London Metal Exchange, the world's largest metals market. Prices have quadrupled in the past five years, reaching a record $8,800 on May 11, as demand growth outpaced mine output, eroding inventories.

The median price of a previously owned U.S. home declined to $225,000 last month from $228,000 in August 2005, the first decrease since April 1995, the realtors group said. Home sales haven't increased since February. As much as 400 pounds of copper is used in the average U.S. house.

The data ``confirms the relatively sudden landing in the U.S. housing market, and suggests that both selling prices and construction are set to fall further in the next six months,'' John Kemp, a London-based metals analyst at Sempra Metals, said in a report.



Copper Stockpiles

Dwindling demand for the metal may increase inventories, Calyon's Widmer said. Stockpiles monitored by the LME increased 350 tons, or 0.3 percent, to 121,625 tons today. That's still less than three days of global consumption.

BHP Billiton Ltd., the world's largest miner, avoided a strike at its Spence copper mine in Chile. Workers voted to accept a three-year contract that includes a wage increase and a bonus, Andres Ramirez, union president, said yesterday. Workers had planned a strike tomorrow. Spence is scheduled to start production in the fourth quarter.

Hedge-fund managers and other large speculators increased their net-short position, or bets prices will fall, by 18 percent to 11,042 Comex copper contracts in the week ended Sept. 19, according to the Commodity Futures Trading Commission. Net- short positions rose by 1,648 contracts, or 18 percent, from a week earlier.



Pared Losses

Copper in New York pared losses in late trading as oil prices rebounded.

``The losses started to come off when the energy market turned around,'' said Tom Hartmann, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``Some of the bears may have capitulated in the short term with the rally in oil.''

Copper for December delivery rose 0.4 cents, or 0.1 percent, to $3.4475 a pound on the Comex division of the New York Mercantile Exchange, after dropping as much as 9.85 cents, or 2.9 percent, to $3.345. Before today, prices had gained 69 percent this year. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Demand will exceed supply by 52,000 tons in 2006, compared with a shortfall of 360,000 tons last year, Goldman Sachs Group Inc. analysts led by London-based James Gutman said in a Sept. 18 report. The bank raised its average price forecast in 2006 by 18 percent to $6,617 a ton.

Platts Metals Alert - 09/25/06

Copper was stuck in a tight range during Monday's premarket session on the London Metal Exchange, while market players were continuing to closely watch out for further action on fund favorites--aluminium and zinc. Three-months copper was bid down $120 at $7,430/mt at 0901 GMT from Friday's kerb close of $7,550/mt. The red metal would need to hold first line support at $7,250/mt or risk falling further, warned an LME trader. On the upside, copper would need to close above $7,600/mt to cement a new drive higher, he added. Copper's current range of $400 was deemed to be rather small, he said. "It [copper] seems to be fairly indifferent to the usual influences like gold, oil etc....and the short term guys don't have a position at the moment," he suggested, adding that even the funds weren't currently active in the red metal either. "The long term guys didn't get strong enough signals on copper [to be able to make any new positions]," he added.

In contrast, aluminium and zinc have been very well traded of late with large volumes seen done on the exchange, he said. Aluminium has a good "base of business" and very active fund buying, he added. The metal was trading an extremely wide range sandwiched between support at $2,400/mt and overhead resistance at $2,680/mt. Although in the short term the range was seen at $2,480/mt to $2,550/mt, suggested the trader. With fundamentals for aluminium in equilibrium, the metal seemed to be drifting. "It needs an outside influence to move it...some money flying around for example...at the moment it's anyone's guess which way it will go," he added. Total aluminium stocks were up a net 2,300 mt at 695,350 mt, according to LME data Monday. Zinc prices were markedly lower at $3,310/mt, off over $100 from its previous kerb close. The metal would need to hold on to support at $3,320/mt, he said.

"Zinc is more prone to bigger downside corrections...the way it is traded--it is more prone to setbacks," the trader explained. Meanwhile, in the rest of the base metals complex nickel was bid $250 lower at $27,350/mt, down from Friday's close of $27,600/mt. Stock-watching remained the theme of the nickel market, he said, adding: "If the nickel stocks stabilize or creep up then the price will come off." The trader suggested that if the short stock situation eased sufficiently and nickel didn't have the fundamentals to prop it up, then three-months nickel prices could easily see as much as $5,000/mt sliced off. "Many in the market have been using the LME stocks as a visible indicator on nickel," he added. LME-registered nickel stocks were barely moved Monday, showing a 6 mt rise to a total 6,036 mt with just 3,288 mt available on warrant. Tin was off $25 at $8,900/mt, while lead was off $12 at $1,350/mt. Aluminium alloy was bid at $2,220/mt with the NASAAC at $2,190/mt.

Mumbai, Sep 25, 2006 (Asia Pulse Data Source via COMTEX)

Led by nickel, metal prices declined on the non-ferrous metal market here today on lack of industrial demand.

Nickel dropped by Rs 20 per kilo to Rs 1720 from Rs 1740 previously, followed by copper utensils scrap by Rs 3 per kilo to Rs 322, copper cable scrap to Rs 380 per kilo, copper scrap heavy to Rs 371 per kilo, copper Armeture to Rs 355 per kilo, copper wire bar to Rs 408 per kilo, copper sheets cutting to Rs 343 per kilo, brass utnensils scrap to Rs 226 per kilo, brass sheets cutting to Rs 263 per kilo, aluminium utensils scrap to Rs 103.50 per kilo, tin to Rs 515 per kilo and zinc to Rs 189 per kilo.

Daily Telegraph - Market report - By Simon Goodley - (Filed: 26/09/2006)


London's reliance on Big Oil and metals caused a gloomy session for traders, as the price of a barrel of crude dropped below $60, provoking investors to re-evaluate their positions.

BP, one of the FTSE's biggest losers on the day, dropped 10 to 563p, despite news that the company had moved to restore output at Prudhoe Bay earlier than expected. Rival Shell lost 19p to 17.40. Meanwhile Tullow Oil dropped 7 to 350p after the company said it had agreed to acquire Australian oil and gas company Hardman Resources, up 25 to 78p, in a deal worth $1.11bn (584m).

Mining stocks were also caught up in the fall as base metals slipped on growing nervousness about falling demand. Vedanta, which has been suffering problems at one of its projects in India, was the main casualty, down 81p to 11.12. Elsewhere in the sector Xstrata was off 23p to 20.36, BHP Billiton down 34 to 853p, Anglo American 74p cheaper at 20.60 and Rio Tinto down 55p to 23.52.

Oil and mining sectors account for around 40pc of the FTSE, meaning that the sell-off was particularly keenly felt in London, pushing the benchmark FTSE 100 down 24 points to 5798. The mid-cap FTSE 250 lost 28.2 to close on 9755.8, while in New York the Dow Jones was trading off about 15 points at 11492 as City traders went home.

"The FTSE has given up its support at 5820 and has remained the weakest index in Europe," said Angus Campbell, a market strategist at spread betting group Finspreads. "With so much of the rally in the past 18 months coming from high expectations of increased earnings for oil and mining companies, the reversal of crude and metal prices has really caused investors in these stocks to reconsider their positions. Our clients are becoming defensive, being largely short of the FTSE with the expectation that equity prices will fall further in the weeks ahead."

Traders added that the market has broken its two week downside - a worry considering we are approaching October, traditionally a weak month.

Dow Jones Newswires - Tuesday, September 26, 2006

UBS Lowers Iron Ore Forecast


UBS cuts its iron ore forecasts and reduces earnings for BHP Billiton and Rio Tinto as result. Now expects 5% drop in iron ore prices in 2007, where previously forecasting 10% rise. Lowers Rio earnings forecast for CY07 by 6% and BHP by 3%. Cites growing iron ore production in China as well as slowing materials consumption.

The Canadian Press via COMTEX - Sep 26, 2006

Bull run for commodity market broken and will remain under pressure, BMO says


A 4 1/2-year bullish trend for commodity markets has been broken and they will remain under serious pressure in the near term, according to a Bank of Montreal economist.

While the long-term trend remains positive, the recent downward move in commodity prices differs from earlier corrections in the market, senior economist Bart Melek suggested Tuesday in a report.

"Earlier corrections showed that a strong underlying trend can overcome minor negative developments in the fundamentals, but the 'trend is your friend' strategy is unlikely to prove successful as 2007 unfolds," Melek wrote in his report.

"Given oil prices are down 22 per cent from their cyclical highs, lumber 26 per cent lower and sharp declines in copper (15 per cent), aluminum (22 per cent), zinc (13 per cent) and nickel (14 per cent) prices, this smells like a break in trend and not just a temporary sell-off."

The Toronto Stock Exchange has post strong gains over the last two years due to strength in metal and energy prices. However, Melek suggested this may not be sustainable with the erosion of commodity prices and the corresponding lower profits in the coming quarters.

"There are increasing worries that the U.S. economy will hit a few speed bumps due to a hard landing for the housing market," Melek wrote.

"If the U.S. economy slumps, the impact on base metals, oil and lumber prices will be fast and relatively furious."

The U.S. National Association of Realtors reported Monday that sales of existing U.S. homes fell for the fifth consecutive month in August as the once-booming housing market slowed further.

Existing home sales slipped by 0.5 per cent to a seasonally adjusted annual rate of 6.30 million units, the association said.

The slowdown in sales was weighing on home prices, with the median price of an existing home sold in August dropping to US$225,000, 1.7 per cent below August 2005. It marked the first year-over-year price decline in more than 11 years.

Sept. 27 (Bloomberg) - By Helen Yuan

Shanghai Copper Falls on Speculation Prices Discouraging Buyers


Copper in Shanghai fell on speculation prices haven't declined enough to attract buying from makers of cables and wire in China, the biggest user of the metal.

Copper for immediate delivery in Changjiang, Shanghai's biggest copper market, fell as much as 0.5 percent to 71,040 yuan ($8,987) today. Prices exceeding 70,000 yuan are discouraging buying from the metal users, said Li Rong, metals analyst at Great Wall Futures Co. in Shanghai.

``Although there isn't much supply on the cash market, prices over 70,000 are keeping some buyers staying sidelines,'' said Li by phone today.

Copper for delivery in November, the most actively traded contract, fell as much as 320 yuan, or 0.5 percent, to 70,000 yuan a ton on the Shanghai Futures Exchange. It traded at 70,180 yuan at the 11:30 a.m. break local time.

Copper demand growth in China may slow to 5.6 percent this year, as record prices prompt makers of cables, wires and air conditioners to switch to cheaper substitutes, said Yang Changhua, senior analyst at Beijing Antaike Information Development Co., today at a conference in Nanjing.

The increase in production of copper products such as tube, wires and rods slowed to less than 7 percent in the seven months to July, Yang said. Air conditioner production growth fell to 1.1 percent in July from 15 percent early this year, he said.

Electric wire and cable production growth slipped to 0.34 percent in June from 10 percent earlier this year, he said. Copper tube, wire and rod producers are the biggest buyers of refined copper. Tube is used in air-conditioners and wires are used in electric equipments.

Copper for delivery in three months on the London Metal Exchange fell $55, or 0.7 percent, to $7,595 a ton.

Bloomberg - Sept. 27

Copper Futures Drop in New York, London, Wiping Earlier Gains


Copper declined in London and New York, erasing earlier gains.

Copper for delivery in three months dropped $80.25, or 1.1 percent, to $7,569.50 a metric ton at 4:16 p.m. on the London Metal Exchange. It earlier gained as much as $120, or 1.6 percent, to $7,770 a ton.

Copper for delivery in December lost 1.6 cents, or 0.5 percent, to $3.45 a pound at 11:16 a.m. on the Comex division of the New York Mercantile Exchange.

Copper Rises in Shanghai as Teck Cominco Workers Set to Strike

By Chia-Peck Wong

Sept. 28 (Bloomberg) -- Copper in Shanghai rose after workers at Teck Cominco Ltd.'s Highland Valley mine said they would strike on Oct. 1 if a new labor agreement isn't reached before then.

A strike will disrupt output at the mine, which produced about 1.2 percent of the 14.9 million tons of copper mined globally in 2005. Copper prices have doubled in the past year amid walkouts at mines in Chile and Mexico.

``A stoppage at Highland Valley would push prices higher,'' Yuan Fang, a metal futures trader at Shanghai Dongya Futures Co., said by phone today.

Copper for delivery in November rose as much as 400 yuan, or 0.6 percent, to 70,740 yuan ($8,956) a metric ton on the Shanghai Futures Exchange. It closed the morning session at 70,580 yuan.

Metal for immediate delivery in Changjiang, Shanghai's biggest copper market, rose as much as 0.6 percent to 71,490 yuan. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

The United Steelworkers, which represents 812 workers at Highland Valley, last night gave Teck Cominco a 72-hour notice of intent to strike, Richard Boyce, president of union local 7619, said in a statement.

``The company refused to put another offer on the table,'' Boyce said yesterday after talks in Kamloops, British Columbia, stalled. ``They have made it obvious they are unwilling or unable to bargain.'' Greg Waller, a spokesman for Vancouver- based Teck Cominco, wasn't immediately available to comment.

Copper for three-month delivery on the London Metal Exchange rose $65, or 0.9 percent, to $7,675 a ton at 11:44 a.m. Shanghai time.

Metal for delivery in December fell 0.5 cents to $3.482 a pound in after-hours trade on the Comex division of the New York Mercantile Exchange at 11:52 a.m. Shanghai time.

NEW YORK (Dow Jones) - 28 September 2006

DJ Comex Copper Review: Faces Selling Pressure To End Lower


Comex copper futures dropped Thursday at the New York Mercantile Exchange as the red metal faced downside pressure while sellers were aggressive in the London copper market.

At settlement, most-active Dec copper was down 590 points at $3.4280 per pound. During the session the contract was unable to push through stiff resistance seen around the $3.50 level. It dropped to a session low of $3.40 - its weakest level since Monday.

Floor traders said copper also faced pressure from a firm dollar and weaker euro.

At 2 p.m. EDT, the Nybot U.S. dollar index is trading at 85.77, up from Wednesday's close of 85.66.

While news of a strike threat at Teck Cominco's (TCK) Highland Valley Copper mine in Canada provided earlier support for copper, it failed to elicit upside momentum.

The union served a 72-hour strike notice and will be in a legal position to take job action at 12:01 a.m. on Oct. 1.

A union official said a mediator has adjourned the talks and requested that both parties return to the table on Sept. 30.

"We will make a last ditch attempt to get a deal and avoid a strike," the union official said.

Bloomberg - Sept. 28

Copper Falls Most Since Sept. 15 as U.S. Economic Growth Slows - By Dale Crofts



Copper prices fell the most in more than a week on signs of a slowing economy in the U.S., the world's second-largest user of the metal.

The U.S. economy grew at an annual rate of 2.6 percent in the second quarter, less than previously estimated, as business spending, consumer demand and homebuilding slowed, the Commerce Department said today. The price of copper, used in wire and pipe, is down 15 percent since reaching a record high on May 11.

``There's some concern about today's low GDP numbers and the slowing housing market in the U.S.,'' said Donald Selkin, director of equity research at Joseph Stevens & Co. in New York. ``The macro factors are restraining any sustained uptrend in prices.''

Copper futures for December delivery were down 5.9 cents, or 1.7 percent, to $3.428 a pound on the Comex division of the New York Mercantile Exchange, the biggest decline for a most- active contract since Sept. 15. Prices are still up 96 percent from a year ago.

Home construction fell at an annual rate of 11.1 percent last quarter, the biggest decline since the second quarter of 1995, the Commerce Department's report showed. That compares with a 9.8 percent drop reported last month and a 0.3 percent decline the first three months of 2006. Housing accounts for 37 percent of U.S. copper demand, Citigroup estimates.

The gain in gross domestic product, the value of all goods and services produced in the country, compares with the Commerce Department's previous estimate of 2.9 percent, and 5.6 percent in the first quarter.

Reports this month suggest the housing slump is deepening as the supply of unsold homes swells. Sales of previously owned homes in the U.S. fell in August to the lowest since early 2004, and prices fell from year-ago levels for the first time since 1995, the National Association of Realtors said this week. Housing starts fell to a three-year low in August.

Bloomberg - 28 September 2006

Codelco to raise copper charge in Europe, people say


Codelco, the world's largest copper producer, plans to raise charges paid by metal buyers in Europe to a record, boosting costs for producers of wires and pipes, according to two people with knowledge of the industry.

European copper consumers will pay between $120 and $125 a metric ton above cash prices on the London Metal Exchange next year, up from a $105 a ton premium now, according to the people, who asked not to be identified because customers have yet to be told. The extra charge includes freight and insurance.

Copper prices have soared 68 percent this year as supplies from Santiago-based Codelco and other mining companies lagged behind demand, forcing consumers to drain inventories. Stockpiles tracked by metal exchanges in London, New York and Shanghai have dropped 81 percent in the past three years, leaving inventories sufficient to meet four days of global use.

"We're still in a position of low inventory and that will carry on through next year," Adam Rowley, a London-based analyst at Macquarie Bank Ltd., said yesterday by phone.

The charge Codelco makes for delivery to Rotterdam, Europe's biggest port, acts as a global benchmark. The Chilean company usually informs customers of the proposed charge in the first week of October, before telling users in Asian countries including China, the world's largest copper user. The charge is for deliveries made under contracts for each calendar year.

Copper buyers also attain metal on the so-called spot market, filling needs not met under the annual contracts. The premium of copper for spot delivery rose to the highest ever at $160 a ton in Europe in April, and eased to around $100 a ton weeks ago, according to Macquarie data.
Costs feed through

Copper for delivery in three months on the London Metal Exchange rose $70, or 0.9 percent, to $7,680 a metric ton as of 9:21 a.m. local time today. Copper traded at record $8,800 a ton on May 11.

Copper consumers can pass on the cost of the increased charges to end-users, said Bo Samuelsson, president of Elektrokoppar AB, a wire manufacturer in Helsingborg, Sweden, who said he is waiting to hear of Codelco's new charges. Increased prices may prompt end-users to buy cheaper alternatives such as aluminum or plastic.

"In the long term, it could be a problem, as a risk of substitution already exists because copper prices are high," Samuelsson said.

Demand growth for copper in China already has slowed due to record copper prices, according to the Beijing Antaike Information Development Co., which advises the government on industry policies.

"Some copper processors that were unable to bear the higher cost have closed down," Yang Changhua, an Antaike analyst, said yesterday at a conference in Beijing. China's copper demand may grow 5.6 percent this year to 3.8 million tons, from a 9 percent rate last year, Changhua said.

Bloomberg - Sept. 29

Copper Falls in Shanghai on Signs the U.S. Economy Is Slowing - By Feiwen Rong


Copper in Shanghai declined for a first day in three on signs of a slowing economy in the U.S., the world's second-largest user of the metal.

The economy grew at a less-than-expected annual rate of 2.6 percent in the second quarter as housing construction slowed, the Commerce Department said yesterday. U.S. economy grew at 5.6 percent in the first quarter.

``It's pretty obvious that the U.S. economy is slowing,'' Yu Mengguo, a metal futures trader at Jinpeng Futures Co., said by phone from Beijing today. ``If the demand for copper slows in the U.S., it's not clear who can pick up the slack right now.''

Copper for delivery in November fell as much as 760 yuan, or 1.1 percent, to 69,830 yuan ($8,832) a metric ton on the Shanghai Futures Exchange. It traded at 70,240 yuan at midday closing.

Home construction fell at an annul rate of 11.1 percent last quarter, the biggest decline since the second quarter of 1995, the Commerce Department's report also showed. That compares with a 9.8 percent drop reported last month and a 0.3 percent decline the first three months of 2006. Housing accounts for 37 percent of U.S. copper demand, Citigroup estimates.

Reports this month suggest the U.S. housing slump is deepening as the supply of unsold homes swells. Sales of previously owned homes in the U.S. fell in August to the lowest since early 2004, and prices fell from year-ago levels for the first time since 1995, the National Association of Realtors said this week. Housing starts fell to a three-year low in August.


Tight Supply

Tight physical supply helped Shanghai copper narrowed earlier loss, because end users kept buying before the national holiday in China next week at a time of low stockpiles. The Shanghai Futures Exchange will remain closed from Oct. 2 through 6 for annual National Day holiday. It will reopen on Oct. 9.

Metal for immediate delivery in Changjiang, Shanghai's biggest copper market, fell as much as 0.9 percent to 70,880 yuan. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

``Copper's basically trading in a range-bound pattern, with potential supply disruptions and low inventories in Europe and Asia supporting the prices while bearish economic picture capping any gains,'' Jinpeng's Yu said.

Metal for delivery in December fell 1 cents to $3.4180 a pound in after-hours trade on the Comex division of the New York Mercantile Exchange at 11:33 a.m. Shanghai time.

Bloomberg - Sept. 29

Gold Falls Most in a Week as Oil Prices Slide, Dollar Gains - By Julie Tay


Gold fell the most in a week as low energy prices and a rallying dollar eroded the appeal of the precious metal as an alternative to U.S. stocks and bonds.

Bullion prices are down 18 percent from a 26-year high in May of $732 an ounce in New York as oil slid from a record high, easing the risk of accelerating inflation. Oil fell early today as a slowing U.S. economy hurt fuel demand. Gold also fell as the dollar rose to a two-week high against the euro and yen.

``Gold has been following oil back and forth,'' said Frank Lesh, a futures trader at FuturePath Trading LLC in Chicago who handles mostly speculative money. ``The stronger dollar is also limiting gold today.''

Gold futures for delivery in December fell $6.70, or 1.1 percent, to $604.20 on the Comex division of the New York Mercantile Exchange, the first decline for a most-active contract since Sept. 19. In London, gold for immediate delivery fell $1.80, or 0.3 percent, to $599.50 at 7:36 p.m.

Gold is down 4.5 percent this month in London, the first time since 2000 that it dropped in September. Prices fell 2.7 percent in the quarter that ended today, the first drop since the first quarter of 2005.



Jewelry Demand

Demand for gold jewelry plunged 29 percent in the first half of this year to 1,069 tons as higher prices restrained purchases, according to data GFMS, a precious metal consultant. Gold futures in New York are still up 27 percent from a year ago and have more than doubled in the past five years.

``Demand from the Far East tends to pick up in September but high prices have been a limiting factor this year,'' Lesh said.

Some buying has resumed as prices fell from this year's highs.

``Gold at $600 looks like a bargain and people are coming back to buy,'' said Bernard Sin, chief trader at Geneva-based MKS Finance, one of Switzerland's four gold refiners.

Bullion has risen 1.7 percent this week and is headed for its biggest weekly advance since early August. Jewelers bought the precious metal in preparation for the coming holiday season, analysts said.

``Many refineries are blocked till November,'' said Sin, who has been a precious-metals trader for 16 years and recommended investors buy gold next week. ``There is a shortage of physical gold. We are seeing actual demand, rather than speculative demand, and that is a healthy sign.''



India

Indian jewelers started buying two weeks ago to stock up for sales during the country's wedding and festival season that begins next month, James Moore, a Kettering, U.K.-based analyst with TheBullionDesk.com. said Sept. 22.

Physical demand is still very strong because of Deepavali and the wedding season,'' Ng Cheng Thye, head of the precious metals market desk at Standard Bank Asia, said from Singapore. ``There are so many orders.''

Hoovers - 29 September 2006

Copper at risk of substitution, analyst says


Around 3.5 million metric tons of copper are at risk of substitution in all forms by 2010, industry consultant Simon Hunt said Thursday.

Speaking at the International Copper Study Group Environmental Committee Meeting in Lisbon, Hunt said even just half of this forecast would cut the global refined copper consumption growth trend to 1.3% a year from 3% a year currently.

"Deficits, however real today, will be replaced by large surpluses; prices will fall," Hunt said. "The euphoria that has in effect made copper a precious metal will see it return to its status as an industrial commodity but one with diminished growth prospects."

Hunt said the "exalted prices" enjoyed by producers over the last two years will destroy much of the market that they serve.

Key commodities benefiting from the competition, technology, price and availability issues affecting copper are aluminium and plastics, Hunt said.

"Copper is a high-energy intensive material in whatever form it is used and on a volume basis, it is significantly more energy intensive than all plastics and even aluminium," he told the meeting.

In this way, copper starts with disadvantages in a number of its applications, he said.

"Moreover, in common with all other metals, it requires a high-energy input in its transformation and fabrication into a finished product, unlike many plastics, which due to their low melting points and ease of forming, require significantly less energy at this stage," Hunt said.

And copper, unlike aluminium and plastics, has a high density three times that of aluminium and 8-9 times that of plastics.

The substitution will come from a number of areas, including wires and cable. Hunt estimated that assuming a global wires and cable market of around 11 million tons in 2005, around 1.43 million tons could potentially be at threat from aluminium by 2010.

This includes a loss of 480,000 tons in power cables, 420,000 tons in telecom, 450,000 tons in magnets and 85,000 tons in other sectors including fibre optics and transformers.

Substitution is also affecting the airconditioning sector, which had a global annual production of around 100 million units in 2005 and used around 900,000 tons of copper.

As specifications change in favor of thinner wall thickness and smaller tubes, around 25% of copper used per meter of tube will be lost by the end of next year, Hunt said.

"This means a copper loss for the inner tubes of 120,000 tons by the end of 2007 and 140,000 tons in 2010, assuming a trend growth in aircon production of 5% a year," he added.

Chinese airconditioning manufacturers are, meanwhile, experimenting with using aluminium for external tubes, with one million units produced in this way so far. China accounts for around 65% of the total airconditioning units produced.

"If they are technically competent, with no leakages in the joints, for example, the potential global loss will be around 300,000 tons of copper in 2010," Hunt said.

According to Hunt, U.S. aluminium producer Alcoa Inc. (AA) has developed an all-aluminium air-conditioning unit, which would require a copper price of at least $7,000 a metric ton over the next two years to justify writing off existing equipment.

"So far, as we understand it, two small U.S. airconditioning makers have adopted the aluminium technology. The risk is that these and others with limited capital to write off will compete aggressively price-wise with existing large aircon makers, perhaps forcing them to adopt the aluminium technology," he told the meeting.

"We will see a loss of at least 140,000 tons by 2010, but possibly as much as around 450,00 tons in 2010, if the external tubes switch to aluminium," Hunt said.

Chinese refridgerator makers are switching to using Bondi tubes, which are sateel tubes with a thin copper coating, generating a loss of around 27,000 tons a year currently. This will rise to around 35,000 tons by 2010.

And outside China, steel and aluminium will replace copper for the loss of around 60,000 tons in 2010, Hunt said.

"The total loss in refridgerator tubing will be some 100,000 tons in 2010," he added.

Plastics are gaining share over copper in the loose wire and cables market, continuing a trend that's been in place for some time.

Copper boiler markets, guttering and roofing as well as alloy strip and brass rod will also face losses from substitution, as well as brass mill products, Hunt said.

He noted that this suggests around 200,000 tons of copper is being lost to substitution in China this year and that this could well rise to over 900,000 tons in 2010.

"In effect, this implies that China's refined copper consumption would increase by an average of under 5% a year," Hunt added.

Bloomberg - Sept. 29

Copper May Decline Next Week as Production Increases - By Chanyaporn Chanjaroen


Copper may fall next week on speculation rising production in Chile, the world's biggest producer of the metal, will create a surplus through the rest of this year.

Chilean output rose 1.9 percent in the first eight months of the year even after a four-week strike at BHP Billiton Ltd.'s Escondida, the world's largest copper mine, and disruption at the Chuquicamata works, Chile's National Statistics Institute said yesterday. Zambia and other nations are also producing more metal, according to Sempra Metals Ltd. analyst John Kemp.

Supply is ``probably enough to keep the market running in a small surplus of perhaps 1,000 metric tons a day though the end of this year and 2007,'' Kemp, who's based in London, said in a report.

Five of 11 analysts, investors, traders and consumers surveyed yesterday and Sept. 26 by Bloomberg News said copper will fall. Four said it will rise and two forecast little change.

Copper for delivery in three months on the London Metal Exchange rose $80, or 1.1 percent, to $7,550 a metric ton as of 7:24 a.m. local time. It was unchanged this week.

On the Comex division of the New York Mercantile Exchange, copper for September delivery increased 0.4 percent to $3.44 a pound in after-hours electronic trading. On the Shanghai Futures Exchange, copper for November delivery slid 0.2 percent to close at 70,390 yuan ($8,906) a ton. Chinese prices include 17 percent tax and a 2 percent duty.

Copper, used in wiring and plumbing, has doubled in the past year, with the metal for three-month delivery trading at a record $8,800 a ton May 11.


Buyers Deterred

Rising prices have deterred buyers of the metal, especially in China, the world's largest consumer. Demand growth for copper in China already has slowed, the Beijing Antaike Information Development Co., which advises the government on industry policies, said two days ago.

``Some copper processors that were unable to bear the higher cost have closed down,'' Yang Changhua, an Antaike analyst, said at a conference in Beijing. China's copper demand may grow 5.6 percent this year to 3.8 million tons, down from a 9 percent rate last year, Changhua said.

``There are no shortages,'' said Mark Lewon, a vice president at Utah Metal Works Inc. in Salt Lake City.


Looming Disputes

Stockpiles of the metal have been curbed by increased demand. Inventory tracked by metal exchanges in London, New York and Shanghai have dropped 81 percent in the past three years to a level sufficient to meet no more than four days of global use.

Labor disputes are looming at other mines. Workers at Teck Cominco Ltd.'s Highland Valley mine, Canada's largest production source of copper, will strike Oct. 1 unless a new labor agreement can be reached, Richard Boyce, president of union local 7619 of the United Steel Workers of America, said yesterday.

Highland Valley produced 179,000 metric tons (394.6 million pounds) of copper in 2005, about 1.2 percent of the 14.9 million tons the London-based International Copper Study Group estimates companies mined around the world last year.

Oct. 2 - Bloomberg

By Saijel Kishan and Pham-Duy Nguyen


``The correction in commodities has only just begun,'' Stephen Roach, the chief economist at Morgan Stanley in New York, said last week in an e-mail response to questions. ``As always, there will be fits and starts and possibly some tradable rebounds along the way. But a China slowdown, in conjunction with a downturn in commodity-intensive U.S. homebuilding activity, will challenge the widely held belief in the commodity super cycle.''

Speculative long positions, or bets prices will rise, have declined the past two months on exchanges from New York to Chicago that trade the 19 commodities in the CRB. The cumulative net-long position fell to 264,000 futures contracts as of Sept. 22 from 635,104 on July 21, trading commission data show.

A 50 percent drop in natural gas, the worst-performing commodity this year, cost Greenwich, Connecticut-based Amaranth Advisors LLC at least $6 billion, the biggest hedge fund loss in history. Mild weather and ample inventory discouraged purchases of the gas by utilities.

In London, copper has tumbled 14 percent since reaching a record $8,800 a metric ton on May 11. Oil in New York has retreated 20 percent from a record $78.40 on July 14, and gold slid 17 percent from a 26-year high of $732 an ounce May 12. MotherRock LP, a $400 million fund based in New York, shut down because of bad bets on commodities.

Declines in energy prices are ``80 percent down to funds selling positions and 20 percent down to fundamentals,'' said Edward Morse, chief energy economist at New York-based Lehman Brothers Holdings Inc.

Commodity prices may still fall another 20 percent over the next three to six months, says Herve Prettre, head of equity and commodity trading research at Zurich-based Credit Suisse Group. The biggest annual decline for the CRB Index was in 1998, when it dropped 16.5 percent.

Source: Hoovers - 2 October 2006

Global copper surplus expected at 240,000 mt in 2006


The global refined copper market is expected to have a modest surplus of 240,000 metric tons in 2006, falling to 180,000 tons in 2007, according to data released by the International Copper Study Group, or ICSG, Monday.

In 2005, a 100,000 tons deficit was seen, the ICSG added.

The ICSG noted that preliminary projections indicate the potential for a larger surplus in 2008 due to expected new production coming on stream.

According to the ICSG projections, world copper mine production is expected to rise to 15.17 million tons in 2006, an increase of about 290,000 tons or 1.9% compared with 2005.

Mine output is seen up at 16.2 million tons in 2007, an additional increase of about 6.8%.

World production of refined copper (both primary and secondary) is projected to increase to 17.40 million tons in 2006, an increase of about 880,000 tons or 5.4% compared with 2005, ICSG said.

Refined copper production in 2007 is projected to increase to 18.06 million tons, an increase of about 660,000 tons or 3.8% compared with 2006. Copper concentrates production in 2007 is expected to restrain the growth of refined production, with concentrate inventories having been largely drawn down during 2006.

World refined copper usage decreased by 0.7% in 2005 to 16.61 million tons, but is expected to rise in 2006 by about 550,000 tons or 3.3%, to 17.16 million tons. World copper use in 2007 is projected to grow by 4.2% or about 725,000 tons, to 17.88 million tons, ICSG noted.

The refined copper balance calculation doesn't take into account changes in China's State Reserve Bureau stocks, which are unreported.

Oct. 2 - Bloomberg

Gold Declines for 2nd Day in New York After Oil Prices Tumble - By Pham-Duy Nguyen


Gold in New York fell for a second straight session as energy costs tumbled, reducing the appeal of the precious metal as a hedge against inflation.

Gold has dropped 18 percent from a 26-year high of $732 an ounce on May 12, partly because crude oil has declined 21 percent from a record in July. Oil fell below $62 a barrel today on speculation a slowing U.S. economy will leave ample supplies. Gold is still up 16 percent this year.

``Oil is the primary driver for gold now,'' said Mike Sander, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California.

Gold futures for December delivery fell 90 cents, or 0.2 percent, to $603.30 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier rose to $609.20. The metal dropped 1.1 percent on Sept. 29.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Some investors buy gold when energy expenses climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in the inflation rate.

``I see no rush to re-enter,'' said William O'Neill, a partner at commodity research firm Logic Advisors LLC in Upper Saddle River, New Jersey. ``Obviously, oil has been and will remain an important influence, not only for gold, but commodities in general. We have advised our clients to stay sidelined.''

Prices opened higher on speculation demand may pick up in the fourth quarter. Physical demand accounted for 73 percent of purchases last year, according to the producer-funded World Gold Council.

Jewelers, the biggest buyers, reduced purchases in the first half of this year because of higher prices.

``The gold price is always driven by physical demand,'' said James Turk, founder of GoldMoney.com, which had $155 million worth of gold and silver in storage for investors at the end of August. ``Physical demand for gold under $600 will keep the market above this level.''

Purchases from India may also boost prices, some analysts said. Demand typically rises in the wedding season, which runs from late September to December. Jewelers also buy the metal for the Hindu Festival of Light, which starts at the end of the month.

India is the biggest purchaser of gold, accounting for 23 percent of demand last year. India's economy, Asia's fourth- largest, expanded at a faster-than-expected 8.9 percent last quarter, according to the Central Statistical Organization in New Delhi.

``We're seeing a lot of buying interest from India,'' said James Moore, a Kettering, U.K.-based metals analyst with TheBullionDesk.com.

Gold dropped 1.9 percent in the third quarter, the first drop since the first quarter of 2005.

Oct. 2 - Bloomberg

Copper Falls as Manufacturing, Housing Data Signals Less Demand - By Dale Crofts


Copper prices fell as U.S. manufacturing in August expanded less than analysts' forecast and spending on home construction dropped for a fifth straight month, suggesting demand for the industrial metal may ease.

The price of copper in New York has declined 15 percent from a record $4.04 a pound in mid-May. The Institute for Supply Management's manufacturing index fell to 52.9, below forecasts of 53.5 to the lowest since May 2005. Private residential construction spending dropped 1.5 percent, the Commerce Department said.

``Today's soft economic data raises new fears that we are moving toward an economic recession and diminished demand for commodities,'' said Chip Hanlon, president of Delta Global Advisors Inc. in Huntington Beach, California.

Copper futures for December delivery fell 3.1 cents, or 0.9 percent, to $3.4295 a pound on the Comex division of the New York Mercantile Exchange. Prices earlier gained as much as 1.4 percent. The metal still has surged 95 percent in the past year, partly because of production disruptions in Chile, Mexico and Indonesia.

On the London Metal Exchange, copper for delivery in three months fell $25, or 0.3 percent, to $7,520 a metric ton.

A futures contract is an obligation to buy or sell a commodity at a specific price and date.

The reports on manufacturing and housing added to signs that demand for copper, used in wiring and pipes, may slump.

Home construction fell at an annual rate of 11 percent in the third quarter, the most since the second quarter of 1995, the Commerce Department said Sept. 28. The economy grew at an annual rate of 2.6 percent in the second quarter, slower than forecast, the agency said last week.

Oct 03, 2006 (BRW - ABIX via COMTEX)

Commodity boom over?


Australia's economy has thrived in the past five years on the back of high commodity prices. The high prices for commodities such as coal, copper and gold have fed into Australia's corporate profits and the strong sharemarket. However, some economists believe that commodity prices have peaked and will fall again. They foresee that the cycle will turn and commodity prices will fall steeply. The bulk of economists surveyed in 2006 predict a fall in commodity prices, with bad news for the price of nickel and copper.

Bloomberg - Oct. 3

Gold Falls Most in Three Months as Crude-Oil Prices Plummet - By Pham-Duy Nguyen


Gold in New York tumbled the most in three months as plunging energy costs reduced the appeal of the precious metal as a hedge against inflation.

Gold is down 21 percent from a 26-year high of $732 an ounce on May 12, partly because the price of oil has dropped 24 percent from a record in July. Crude oil fell below $60 a barrel to a seven-month low on speculation fuel inventories are big enough to counter production cuts by Nigeria and Venezuela.

``Everybody is getting out of their positions,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``Crude came off almost $3 this week, and gold is following.''

Gold futures for December delivery fell $21.80, or 3.6 percent, to $581.50 an ounce on the Comex division of the New York Mercantile Exchange. The percentage drop was the biggest since June 13. Gold is still up 12 percent this year.

Some investors buy gold when energy expenses climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in the inflation rate.

``With no sign of a turnaround in oil, gold is going to track it down further,'' said Frank McGhee, head metals trader at Integrated Brokerage Services Inc. in Chicago.

Losses accelerated after gold fell below $600.

``That was a big number,'' Ruggiero said. ``We had a lot of sell stops for long positions.''



Fewer Speculators

Hedge-fund managers and other large speculators decreased their net-long position in Comex gold futures in the week ended Sept. 26, Commodity Futures Trading Commission data showed on Sept.29.

Speculative long positions, or bets prices will rise, outnumbered short positions by 71,244 contracts. Net-long positions fell by 6,624 contracts, or 8.5 percent, from a week earlier to the lowest since August 2005, the data showed.

``All the funds are hitting the door at the same time,'' McGhee said.

Dennis Gartman, gold trader, economist and editor of the Suffolk, Virginia-based Gartman Letter, yesterday advised clients to reduce even their ``insurance'' position in gold.

``We moved to cut our insurance position in gold by half, given that the geopolitical situation seems almost daily to be less and less onerous,'' Gartman said in his report today. ``We fear that the rally of the last week was but another rally in a bear market and that it was wise to stand down.''



Slumping Quarter

Gold had gained as much as 39 percent this year on speculation that conflict over Iran's nuclear research program would cut oil supplies. The United Nations Security Council has yet to impose sanctions against Iran after an Aug. 31 deadline to suspend enrichment of uranium.

Gold fell 1.9 percent in the third quarter, the first drop since the first quarter of 2005. The Reuters/Jefferies CRB Index fell 12 percent, the biggest drop since at least 1956, data compiled by Bloomberg show.

Gold still may reach $700 this year and climb to the spot record of $850 next year as the dollar weakens, Citigroup Inc. analyst John H. Hill said in a report yesterday.

The end of the Federal Reserve's cycle of 17 interest rate increases in August ``may spark renewed bouts of dollar weakness,'' Hill said. ``Higher interest rates are a headwind for gold.''

Gold generally moves in the opposite direction of the dollar, which is down 6 percent this year against a basket of six major currencies.

Gold's recent decline is a correction within a bull market, said Phillips Baker, chief executive officer of Hecla Mining Co. in Coeur D'Alene, Idaho. The company mines gold and silver in the U.S., Mexico and Venezuela.



`Long-Term Bull Market'

``We're in a long-term bull market for gold,'' Baker said. ``You're going to have volatility. It's just the nature of the metals.''

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Silver for December delivery fell 59.5 cents, or 5.1 percent, to $11.045 an ounce. Palladium for December dropped $12.15 or 3.9 percent, to $302 an ounce. Platinum for January declined $35.20, or 3 percent, to $1,124 an ounce.

Silver may rebound faster than gold because of its industrial component, Baker said.

``Certainly, it has volatility, but it has a lot more upside than it does downside,'' Baker said. ``I could see another $5 or $10 in the price of silver.''

Bloomberg - Oct. 3

Copper Drops to Three-Month Low on Concern U.S. Demand May Ease - By Chanyaporn Chanjaroen


Copper in New York tumbled more than 4 percent to the lowest in three months on speculation a slowdown in the U.S. economy may reduce demand for industrial metals.

The price of copper is down 19 percent from a record $4.04 a pound in mid-May. U.S. manufacturing expanded less than analysts estimated in September and spending on home construction dropped for a fifth straight month in August, reports showed yesterday.

``Any negative U.S. figures would have a knock-on effect on metals,'' said Michael Widmer, an analyst at Calyon in London. The reports ``were quite weak. They give an indication as to the health of the manufacturing sector. What we are seeing is prices actually start to reflect that,'' he said.

Copper futures for December delivery fell 14.7 cents, or 4.3 percent, to $3.2825 a pound on the Comex division of the New York Mercantile Exchange, the lowest since June 28. The percentage decline was the most since Aug. 11.

Prices still were up 61 percent this year. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Copper for delivery in three months dropped $180, or 2.4 percent, to $7,340 a metric ton on the London Metal Exchange. Prices are up 92 percent from a year ago.

The Institute for Supply Management's manufacturing index fell to 52.9. The gauge was expected to fall to 53.5 from 54.5 the prior month, based on the median of 64 forecasts in a Bloomberg News survey. Private residential construction spending dropped 1.5 percent, the Commerce Department said yesterday.



`Concern Far From Over'

``The concern on the U.S. economy is far from over,'' said Roy Carson, a London-based analyst at Triland Metals Ltd. Triland is one of 11 companies that trade on the floor of the LME.

The International Copper Study Group yesterday forecast usage of the metal in China, the world's biggest consumer, will drop 1.8 percent this year.

Investors sold copper along with oil and other commodities today, said Edward Meir, an analyst at Man Financial Ltd. in Darien, Connecticut. Crude oil fell to a seven-month low on speculation that a government report will show that U.S. fuel inventories jumped.

The oil slump is ``exerting a spillover influence on the metals,'' Meir said in a report. ``Look for energy to influence the markets in the short-term.''

The Reuters/Jefferies CRB Index of 19 commodities fell 1.9 percent to 295.77, led by declines in silver, sugar and copper.

Industrial metals have dropped in the past four months after interest-rate increases worldwide spurred speculation that investment and consumer demand for the metals may dwindle.

The outlook for metals, including copper and nickel, is ``very strong'' in the next six months because miners are not producing enough to meet demand, Xstrata Plc Chief Executive Officer Mick Davis said today in an interview in London.

``I would be somewhat surprised if we ended up with a surplus next year'' of copper and nickel, Davis said.

Copper supplies from mines and scrap yards will outpace demand in 2007 by 176,000 metric tons, down from a surplus of 239,000 tons this year, the Copper Study Group said yesterday.

Bloomberg - Oct. 4 - By Tan Hwee Ann and Kazue Somiya


Crude oil fell the most in almost 14 months to below $59 a barrel on expectations a U.S. government report today will show a jump in fuel stockpiles. The falling oil prices reduced the need for investors to hold gold bullion as an inflation hedge.

``There's a little bit of bargain buying now, and hopefully the physical buyers will return at these gold prices,'' Jonathan Barratt, a founder of Commodity Broking Services, said in Sydney. ``But if crude oil is to continue the decline, so will gold.''

Gold for immediate delivery rose as much $3.00, or 0.5 percent, to $577.50 and traded at $577.00 at 11:51 a.m. Sydney time. It fell 3.7 percent yesterday, the most since June 13.

Gold for delivery in December fell as much as $3.00, or 0.5 percent, to $578.50 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. It traded at $581.80 at 11:51 a.m. Sydney time.

Gold ``is tracking the downward trend in crude oil prices,'' said Mikikaru Amano, an analyst at Taiheiyo Bussan Co. in Tokyo. Oil prices ``are likely to keep declining as members of the Organization of Petroleum Exporting Countries, except for Nigeria and Venezuela, haven't cut production. Prices will head toward $55 a barrel.''

Supplies of distillate fuel in the U.S., which includes heating oil and diesel, and of gasoline, probably rose last week, according to the median of 12 responses in a Bloomberg News survey before the U.S. government report later today.

Crude oil for November delivery was at $58.38 a barrel, down 30 cents, or 0.5 percent, in after-hours electronic trading on the New York Mercantile Exchange at 11:51 a.m. Sydney time.

Yesterday, oil fell 3.9 percent to $58.68, the lowest close since Feb 16. It was the biggest one-day decline since Aug. 17, 2005.

Dow Jones Newswires - Wednesday, October 04

Oil May Send Gold As Low As $550 - Investec


Likely further oil retreat to around $55/bbl later in year expected to extend gold's pullback as inflation, geopolitical drivers continue to dissipate, says Investec Australia's Darren Heathcote; "it wouldn't surprise me to see gold suffer even more and possibly head toward targets at 560 and 550 dollars." However, $550 to find strong support; "based on fundamentals I think investors would be happier buying around those levels (and) the impetus would be more likely for a push up rather than down."

Dow Jones Newswires - Wednesday, October 04

Silver Charts Suggest More Selling Ahead


Silver looking technically weak after succumbing to gold, oil pressure overnight to close below key 200-day moving average level; last $10.85/oz, down another 11 cents. Needs to bounce back above $11.12 immediately or faces further weakness, says ScotiaMocatta in technical note. Pegs next support at $10.72, then $10.45.

Oil May Send Gold As Low As $550 - Investec

Dow Jones Newswires - Wednesday, October 04, 2006


Likely further oil retreat to around $55/bbl later in year expected to extend gold's pullback as inflation, geopolitical drivers continue to dissipate, says Investec Australia's Darren Heathcote; "it wouldn't surprise me to see gold suffer even more and possibly head toward targets at 560 and 550 dollars." However, $550 to find strong support; "based on fundamentals I think investors would be happier buying around those levels (and) the impetus would be more likely for a push up rather than down." Spot trades last at $575.80, down $1.10 on NY close.

Bloomberg - Oct. 4

Gold Falls on Signs Commodity Slump May Ease Inflation Pressure - By Pham-Duy Nguyen


Gold futures fell to the lowest since June on speculation a 16-month low in commodity prices will reduce the metal's appeal as a hedge against inflation.

The Reuters/Jefferies CRB Commodity Price Index dropped 2.1 percent yesterday and today touched 292.72, the lowest since June 2005. The index's 12 percent drop in the third quarter was the biggest in 50 years. Gold is down 23 percent from a 26-year high of $732 an ounce on May 12, partly because of a 26 percent drop in oil prices from a record in July.

``There's a liquidation in the commodities world that's brought on by moderating inflation,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. ``That's not good for gold.''

Gold futures for December delivery fell $14.80, or 2.6 percent, to $566.70 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier touched $563.50, the lowest since June 15. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Oil yesterday touched a seven-month low, triggering a 3.6 percent decline, the biggest percentage drop since June 13.

Gold's losses accelerated today after crude fell below $58 a barrel for the first time since February following an Energy Department report that showed an unexpected gain in U.S. inventories.



`Following Oil'

``Gold is definitely following oil around,'' said Lesh. ``Right now, that's the main driver.''

Some investors buy gold when energy expenses climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in the inflation rate.

Prices may plunge further after falling below the 200-day moving average, according to analysts who look at historical charts.

``The price action looks extremely poor,'' John Reade, an analyst at UBS AG, said in a report to clients.

Technical charts show a bearish trend forming for gold and other metals, said Dan Chesler, an independent analyst in Wellington, Florida, who studies historical price patterns.

Peter Grandich, publisher of the Grandich Letter, a financial newsletter in Perrineville, New Jersey, told clients in a report today that prices may fall to the June low of $546.40, and may even reach $500 before resuming their long-term rally.

``Gold is in one of its more defensive positions since the bull market began several years ago,'' Grandich said. ``There's not only been significant technical damage done short term, but the next few trading sessions are likely going to impact where we head for much of the balance of 2006.''

Silver for December delivery fell 25 cents, or 2.3 percent, to $10.795 an ounce on the Comex. Palladium for December delivery fell $9.80, or 3.2 percent, to $296.65 an ounce on the Comex, and platinum for January delivery fell $46.60, or 4.1 percent, to $1,082.40 an ounce.

Bloomberg - Oct. 4

Copper Prices Fall as Growth in U.S. Service Industries Slows - By Choy Leng Yeong and Claudia Carpenter


Copper fell to a three-month low after a report showed U.S. service industries expanded last month at the slowest pace in more than three years as a housing slump deepened.

The Institute for Supply Management's index of non- manufacturing businesses fell to 52.9 in September, the lowest since April 2003, from 57 in August. Readings above 50 indicate expansion. Copper has slumped 21 percent from a record $4.04 a pound in mid-May as the housing market in the U.S., the world's second-biggest user of the metal, weakened.

``Funds are selling metals on anticipation of an economic slowdown in the U.S.,'' said Chris Brodie, who manages Krom River Partners LLP, a commodity hedge fund in London. ``We've not been long on metals since July.''

Copper futures for December delivery fell 7.7 cents, or 2.4 percent, to $3.2055 a pound on the Comex division of the New York Mercantile Exchange, after reaching $3.185, the lowest since June 29. Prices are still up 57 percent this year.

On the London Metal Exchange, copper for delivery in three months fell $310, or 4.2 percent, to $7,030 a metric ton, the biggest one-day drop since Sept. 11.

The Institute for Supply Management's manufacturing index dropped to 52.9 in September, the lowest since May 2005, the institute said Oct. 2.

``All the manufacturing, ISM numbers have been pretty crummy,'' said Michael Purdy, a trader at ABN Amro Bank in New York.



Home Construction Slows

U.S. home construction fell at an annual rate of 11 percent in the second quarter, the biggest drop since 1995, Commerce Department figures last week showed. As much as 400 pounds of copper is used in the average U.S. house.

``As the U.S. slows, demand for Chinese exports is going to slow,'' said William Adams, an analyst at Basemetals.com in Saffron Walden, England.

Copper usage in China, the biggest user of the metal, will drop 1.8 percent this year, the Lisbon-based International Copper Study Group said this week.

The price decline may be limited on speculation that producers of wire and pipe will resume purchases to replenish falling stockpiles. Inventories tracked by metal exchanges in London, New York and Shanghai are down 81 percent in the past three years as supplies lagged behind demand.

``There are bound to be consumers short of material who think the price is better than it was the last couple of weeks,'' said David Thurtell, a London-based analyst at BNP Paribas, an associate broker and clearing member of the London Metal Exchange.

Elsewhere on the LME, aluminum fell $90 to $2,475 a ton, nickel plunged $675 to $28,075 a ton, zinc dropped $86 to $3,304 a ton and lead declined $23 to $1,352 a ton. Tin rose $25 to $8,900 a ton.

A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

FT - October 4 2006 - By Chris Flood

Gold failed to rally in response to news of North Koreas planned nuclear test, falling fell 1.4 per cent to $566.10 a troy ounce. Traders said a test of the March low about $541 an ounce was possible if sentiment towards commodities continued to deteriorate.

The European Central Bank said about 2.5m tonnes of gold were sold in the final week of the Central Bank Gold Agreement, which allowed signatories to sell 500 tonnes in the year to September 26. Total CBGA sales were estimated at betwen 400 to 405 tonnes, well short of the 500 tonne quota allowed.

Fears that central banks would rush to sell gold approaching the deadline as the quota cannot be rolled over to the next year have cast a shadow over the market in recent weeks.

GFMS, the precious metals consultancy said under the remainder of the GBGA arrangements were are unlikely to reach quota either on an annual basis or for the full ve year agreement.

We are perhaps on the threshold of an era of more moderate net ofcial sector selling, said GFMS.

Silver eased 0.9 per cent to $10.67 a troy ounce. Platinum retreated 3.2 per cent to $1,079 while palladium and palladium fell 2.3 per cent to $293 a troy ounce.

Copper led a retreat across base meals as the red metal lost 3.5 per cent to $7,080 a tonne, its lowest level for three months.

Nickel fell 1.7 per cent to $28,200 a tonne while zinc fell 2.6 per cent in spite of continued reductions in LME stocks down a further 900 tonnes yesterday. Aluminium was 3.5 per cent weaker at $2,475 a tonne.

Reuters - Wed Oct 4, 2006

COMEX copper ends down 2 pct, slowdown fears weigh


Copper futures in New York ended down over 2 percent on Wednesday, in sympathy with steep declines in the energy and precious metals markets, sources said.

"It was not copper-specific selling today. Everything took a hit today. Oil slid below $58 and gold started to slide, so we just followed suit," said one COMEX floor dealer.

Copper for December delivery ended the day down 7.70 cents, or 2.3 percent, at $3.2055 a lb on the New York Mercantile Exchange's COMEX division, after dealing from a new 10-1/2 week low at $3.1850 to $3.3550.

Dealers now placed new support in December copper at the July 24 low at $3.1450 all the way down to $3.00, while resistance continued to be seen at around $3.50.

Spot October slipped 8.85 cents to its session low at $3.1980, while back month contracts closed down 5.05 to 7.70 cents.

COMEX final copper volume was estimated at 21,000 lots, more than the 15,354 lots recorded on Tuesday.

COMEX copper futures opened with modest gains on some light bargain buying and short-covering following the previous session's sharp losses. But they failed to build on early gains and began their descent after weaker-than-expected U.S. economic data reinforced concerns over a slowing economy.

The Institute for Supply Management said its gauge of the services sector, which accounts for about 80 percent of the U.S. economy, slipped in September more than economists had expected.

"Concerns of macro-slowdowns will continue to limit the interest in this market. Until we see a change in the economic outlook, we will likely continue to trade in this recent range and testing new lows if data continues to come in weaker than expected," said one commodity broker.

Meanwhile, Chile's Codelco, the world's largest copper producer, set European annual copper premiums at a record $125 a tonne for 2007, up $20 from 2006, and U.S. premiums at 4.50 cents/lb ($100 a tonne) versus 4.25 cents for 2006.

LME three-months copper plummeted $310, or 4.2 percent, to settle Wednesday at $7,030 a tonne.

physorg.com - 4 October 2006

Less expensive fuel cell may be possible


Scientists at Los Alamos National Laboratory have developed a new class of hydrogen fuel-cell catalysts that exhibit promising activity and stability. The catalysts are made of low-cost nonprecious metals entrapped in something called a heteroatomic-polymer structure, instead of platinum materials typically used in fuel cells.

In research published recently in the scientific journal Nature, Los Alamos scientists Rajesh Bashyam and Piotr Zelenay describe tests conducted on a cobalt-polypyrrole-carbon (Co-PPY-XC72) composite. The composite, consisting of cobalt, polymer and carbon, was developed in research aimed at developing low-cost non-platinum catalysts for the polymer electrolyte fuel-cell (PEFC) cathode.

While the electrical energy producing activity of the catalyst is lower than that of platinum-based catalysts used in polymer electrolyte fuel cells, the new material shows exceptional performance stability for over one hundred hours of continuous testing, a result never before obtained with non-precious metal catalysts in PEFCs.

"Besides being made of inexpensive and environmentally benign materials," said Zelenay, "the chief advantage of these composite catalysts for oxygen reduction is that they can operate in the acidic environment of the polymer electrolyte fuel cell."

Bashyam and Zelenay are investigating the nature of catalysts in a variety of composites. They are also part of a larger Laboratory effort aimed at developing new catalyst and electrode structures that could increase the current output from fuel cells.

According to Ken Stroh, program manager for the Los Alamos fuel-cell effort, "The two biggest obstacles in making a commercially viable fuel cell have traditionally been high cost and inadequate durability. Our focus at Los Alamos is to attack those obstacles as a system in which you simultaneously strive for lower costs and higher durability."

Source: Globe and Mail - 4 October 2006

Commodity bear market begins now: Merrill


Commodity prices are due for a "protracted bear market" after speculators drove prices artificially high in recent months, Merrill Lynch & Co.'s chief investment strategist said Wednesday.

"We commented early last month that the level of speculation in commodities was at an all-time high," said Richard Bernstein in a report. "Despite September's pullback in overall commodity prices, the level of speculation has actually risen!"

Merrill was not the only brokerage betting that the commodity space is getting riskier. An RBC Dominion Securities analyst turned bearish on the Canadian oil field services sector Wednesday, urging investors to view companies working in the field with caution, given the sharp drop in natural gas prices.

"In light of further risks to gas prices, exploration and production spending, and pressures on service pricing and margins created by potentially lower activity levels and more capacity, defensiveness and caution should continue to be the main theme over the next 6-9 months," RBC's Angela Guo wrote in a note.

Merrill's Mr. Bernstein measured the level of speculation in the market by comparing spot prices of commodities that trade exchange-listed futures with spot prices of commodities that do not. He believes that speculation is more likely to occur in the futures markets than in the physical markets.

"By our reckoning, commodities' prices are now about 60 per cent above what could be explained by fundamental supply and demand," the Merrill report said.

Its research suggests that September's drop in commodity prices might "only be the beginning" of a long-term drop in prices.

"We find it amusing that a consensus has now formed that housing is speculative and overdue for an extended pullback, yet many commodities have appreciated much more than housing has, and have done so in a shorter period of time," Mr. Bernstein said.

"Housing is speculative, but commodities are purely a fundamental story? We disagree."

The report comes a day after Merrill's U.S. sector strategist Brian Belski downgraded the U.S. energy sector to "underweight." He predicted the energy sector will underperform the stock market over the coming months.

RBC took a closer look at investing in the companies that provide products and services for the major oil and natural gas companies. The sector has provided another way for investors to profit from the boom in the resource sector.

But the price of natural gas the most common U.S. home heating fuel has dropped nearly 25 per cent since August 1 to its lowest level in nearly two years as North American inventories swelled on the extended warm weather. The drop in natural gas has forced some companies such as Canadian Natural Resources Ltd. to slash their natural-gas drilling plans.

RBC's Ms. Guo said a new look at the risk-reward profile of companies in the oil-field services sector triggered wide-spread downgrades in the sector.

Akita Drilling Ltd., Trinidad Energy Trust, Mullen Group Income Fund, Pason Systems Inc., CHC Helicopter Corp., and Flint Energy Services Ltd. were all downgraded to 'underperform.' Ensign Energy Services Inc., Precision Drilling Trust, Calfrac Well Services Ltd., Trican Well Service Ltd., Cathedral Energy Services Income Trust, and Total Energy Services were all cut to 'sector perform.'

Although the sector looks cheap now, there is no compelling reason to pick up the stocks, Ms. Guo said, nothing that a lack of near-term positive catalysts and continued uncertainty on earnings estimates will likely keep the sector depressed.

"As a dramatic measure of maximum risks should the oil price fall significantly due to macro economic reasons, while the gas price dips further due to a warm winter, applying the historical trough trailing multiples to the stocks would imply an average downside of 24 per cent for the sector from current levels."

Ms. Guo left her 'outperform' recommendations on Savanna Energy Services Corp., Enerflex Systems Ltd., CCS Income Trust and ShawCor Ltd., saying the stocks were already either oversold or more defensive in nature.

The last four companies have a more "favourable" relative risk-reward profiles when compared with the rest of their peer group and could be purchased by "value-oriented investors seeking exposures to the sector," she said.

Daily Telegraph - 05/10/2006

Angry copper users force inquiry into metal exchange - By Ambrose Evans-Pritchard


The London Metal Exchange is to face an European Union investigation over alleged monopoly practices after receiving a dossier of complaints from angry copper users. The International Wrought Copper Council has accused the LME and its network of warehouses of exploiting a stranglehold on the market to push up charges and boost profits for brokers.

The EU's competition directorate is examining whether the LME breached Articles 81 and 82 of EU treaty law banning the restriction of the free market and abuse of dominant position. A Commission spokesman confirmed the investigation but said the details were confidential.

Simon Payton, the IWCC's secretary-general, said the complaint stemmed from a long-running battle with the LME over warehouse practices and had nothing to do with the soaring price of copper, which has quadrupled in four years. The LME handles 90pc of copper and almost 100pc of aluminium traded across the world at its raucous sessions, where traders bark orders inside a ring of leather seats. Turnover last year as the commodity boom reached fever pitch was a staggering $4,500bn (2,390bn).

The exchange has been locked in conflict for years with the IWCC, a group top-heavy with European industrial users said to resent the dominant role of London. This year the IWCC issued a thinly-veiled threat to take its business elsewhere, complaining that hedge funds and speculators had driven copper prices far above its value in a "feeding frenzy".

In a letter to the Financial Services Authority, it said industrial users were struggling to finance deliveries as prices gyrated wildly, sometimes rising and falling as much as $500 a tonne in a single day. "This market, where speculators can buy what does not exist, is doing serious damage to our industry and will bring into question whether the LME copper price should continue to be the recognised reference price," it said.

The LME said it was baffled by the EU complaint, insisting that it set the overall standard of warehouses but did not fix the fees. "We don't own the warehouses and we cannot tell them what to charge. It's a free market with completely free competition," said a spokesman.

Robin Bhar, a base metals analyst at UBS, said the copper users were alone in their fury. "They seem to have a real gripe with the LME even though charges have come down. I've not heard protests from aluminium or zinc users, or trade associations," he said.

The copper price was trading at $7,391 a tonne yesterday. Although down 8pc from its peak in May, it has held up better than oil and most other commodities as economic growth continues to steam ahead in China and India.

However, the high price is leading to a steady switch to fibre optic and wireless technologies that use less metal, while air-conditioner manufacturers, who account for 5pc of the global market, are learning to use much thinner tubes.

Chinese copper enterprises cut production to resist raw material price hike


Some of China's copper melting enterprises have begun to cut their production in an effort to resist price hikes of imported raw materials, according to sources from the copper industry.

A senior manager of a Chinese copper company said this move is in response to BHP Billiton's cancel of price participation article and suppress of copper processing fees.

He said over the past more than 30 years, raw material suppliers and melting companies have always pursued the price participation article. But recently the BHP Billiton not only largely suppressed the processing fees, but also unilaterally proposed to cancel the PP article in a bid to solely enjoy the huge profits brought about by copper price hikes.

"This is unprecedented in international negotiations, it is harmful to the mutually-beneficial cooperation and friendship between suppliers and melting companies, and is a malicious damage to long-term contract structure," he said.

Head of the China Smeltery Purchase Team (CSPT) Yang Jun said if there is no PP article, what smelting enterprises get can not even meet their production cost.

In a CSPT meeting held on Sept. 26, the nine member enterprises all demanded to raise processing fees to a reasonable level, he said. The nine enterprises account for over 80 percent of China's imported copper raw materials.

AFX News Limited - 10.06.2006

China's copper smelters cut output after BHP abrogation of price deal - report


BEIJING (XFN-ASIA) - Some copper smelters have begun to reduce output as a result of a key offshore supplier BHP Billiton abrogating an agreement which has pushed up the cost of processing the metal, the China Daily reported, citing sources from the copper industry.

One manager from a local smelting company told the newspaper that the production cuts follow BHP Billiton's unilateral decision not to follow a price participation agreement and its decision to cut its copper processing payments.

The manager said for more than 30 years, raw material suppliers and smelting companies have abided by the PP agreement. But recently he claimed Billiton decided it would no longer follow the agreement and would also cut copper processing payments in order to maximise income from the present high global price for the metal.

'This is unprecedented in international negotiations, and is harmful to the mutually-beneficial cooperation and friendship of copper suppliers and melters,' the manager was quoted as saying, adding it would damage long term contracts.

The report also cited the head of the China Smeltery Purchase Team, Yang Jun, as saying without the PP agreement smelters will not even be able to meet the cost of production.

Oct. 6 (Bloomberg)

Gold Drops in Asia as Oil Slips, Investors Deem Gains Overdone - By Tan Hwee Ann and Thomas Kutty Abraham


Gold fell in Asia as oil prices declined and some investors deemed yesterday's rally in the precious metal overdone.

Gold, which is seen as a hedge against inflation, has dropped 20 percent from a 26-year high of $732 an ounce on May 12, falling in line with oil's 23 percent drop since it reached a record July 14. Gold, which rose 1.3 percent yesterday, is heading for a fall of 4.6 percent this week.

``It continues to be influenced by the oil market,'' said Mark Pervan, head of research at Daiwa Securities SMBC, in Melbourne. ``It's been volatile and sentiment is swinging day to day.''

Gold for immediate delivery fell as much as $5.10, or 0.9 percent, to $569.20 an ounce and was trading at $571.20 at 11.10 a.m. Mumbai time.

The metal's five-day moving average price has been trading below its 200-day moving average since Sept. 13. The pattern suggests bullion may have slipped into a declining trend, some traders said. Its five-day moving average is $576.82 an ounce, compared with the 200-day figure of $600.80.

Spot gold prices touched $559.40 an ounce on Oct. 4, the lowest since June 15.

``Liquidation by funds will continue as there are no recovery signals in horizon,'' Kishore Narne, head of research at Anand Rathi Commodities Ltd., said in Mumbai. ``I expect gold to drop to $535-540 levels in the next two-three weeks.''

Gold for delivery in December traded at $575.40, little changed from yesterday's close, at 11:10 a.m. Mumbai time in after-hours electronic trade on the Comex division of the New York Mercantile Exchange.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

In India, the price of the metal for December delivery fell 15 rupees, or 0.2 percent, to 8,718 rupees per 10 grams, or 27,113 ($594) an ounce, at 11:15 a.m. Mumbai time on the Multi Commodity Exchange.

Oct. 6 (Bloomberg)

Copper Declines in Asia After Trader Charts Give Sell Signals - By Feiwen Rong


Copper in Asia declined after charts some traders use to predict price movements gave sell signals.

A price movement ``above $7,400 is needed to reverse the downtrend since Sept. 27,'' analysts at Barclays Capital in London said in an e-mailed report yesterday. Without such a movement, ``the market is precariously on edge.''

Copper futures on the London Metal Exchange fell as much as $29, or 0.4 percent, to $7,270 a metric ton, and traded at $7,275 at 11:37 a.m. Singapore time.

Daily Telegraph - 06/10/2006

Banks may be behind plunge in gold price - By Ambrose Evans-Pritchard


Central banks may have dumped far more gold on the markets over the last three weeks than officially reported, accounting for the sudden plunge in prices that has stunned investors.
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Barclays Capital said Europe's banks had sold an extra 100 tonnes from reserves in a rush to meet a quota deadline on Sept 26, but had done so by selling through forward contracts that disguised the effect.

"We have been able to infer this from trading patterns. It has had a major impact on the markets," said Costanza Jacazio, the bank's gold expert. Barclays is one of the world's three top bullion traders.

"We suspect that the Banque de France has been involved," she said.

The huge sales would help explain gold's brutal fall from $640 an ounce in early September to $559 this week, an effect compounded in recent days by hedge fund liquidation. It was up slightly yesterday at $569.75 in New York trading.

Gold typically rallies in September in the build-up to the Indian marriage season. While gold has undoubtedly been hit by the broader fears of a commodity slump, base metals have held up much better. The central banks have reported sales of just 393 tonnes of gold for the year, far below the 500 annual limit agreed under the Washington Accord, and agreement by 15 central banks in Europe.

Barclays said the group had in reality met the 500 tonne limit, with others snapping up the unused quota of the Bundesbank - which has balked at selling in order to assert its independence against Berlin's politicians.

"We believe this is actually very bullish for gold because it shows that the sell-off was not driven by investors," said Ms Jacazio.

Philip Klapwijk, chairman of the precious metals group GFMS, said bullion would soon resume its five-year bull market. "The game is not over for gold. We've still got a big dollar devaluation ahead," he said.

Reuters - Fri Oct 6, 2006 11:59 PM - By Vivianne Rodrigues


A rally in U.S. stocks that pushed the Dow industrials to a record may stall next week as signs of an economic slowdown curb the appetite for equities just as the third quarter's earnings season gets under way.

This week, the blue-chip Dow Jones industrial average hit a record closing high and an all-time intraday high for three days in a row in a rally driven by a sharp drop in oil prices and expectations that the Federal Reserve will not raise interest rates in the near future.

The rally also propelled the Standard & Poor's 500 Index to fresh 5-1/2-year highs more than once.

But on Friday, weaker-than-expected September employment data, following a White House forecast for slower GDP growth late on Thursday, brought the rally to a halt and may drag stocks lower in the week ahead, analysts said.

"We had a long run in equities and we're probably due for a sell no matter what the news is," said Elliot Spar, market strategist at Ryan Beck & Co., in Shrewsbury, New Jersey. "If the economy is going to go down, then you have to worry about earnings momentum."

Investors will scrutinize corporate profits next week, Spar said, as the earnings season heats up, with Alcoa Inc., Costco Wholesale Corp. PepsiCo Inc. and General Electric Co., slated to report.

Trading may be lighter than usual on Monday as the U.S. bond market will be closed in observance of the Columbus Day holiday. The U.S. stock market will remain open.


BEWARE OF THE JINX MONTH

For the week, stocks rose -- with the Dow up 1.5 percent, the S&P 500 up 1 percent and the Nasdaq up 1.8 percent.

The Dow average closed at record highs three times in the week, with an intraday high on Thursday at 11,870.06, its highest level since Jan. 14, 2000. On Thursday, the S&P 500 closed at 1,353.22 and peaked intraday at 1,353.79 -- with those levels marking the highest since Feb. 5, 2001.

For the year to date, the Dow is up 10.6 percent, the S&P 500 is up 8.1 percent and the Nasdaq is up 4.3 percent.

After stocks broke new ground last week, some investors may be more cautious during the rest of October, known as "the jinx month," according to the Stock Trader's Almanac, because of stock market crashes in 1929 and 1987.

Volatility may increase early this week, traders said, with the possibility of a nuclear weapon test by North Korea over the weekend.

"If they do go ahead with the test, the stock market may get a bit more skittish," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut. "It's just one thing we don't need right now."

The White House said on Friday that it had no new information to disclose about whether a nuclear test was being planned, but said North Korea should not carry out the test.

On Friday, U.S. crude oil for November delivery settled at $59.76 per barrel -- down 5 percent for the week. NYMEX crude is down 24 percent from its record set in July.


EARNINGS ON FRONT BURNER

On Tuesday, the third-quarter earnings season kicks off for blue chips with Alcoa reporting results, followed by General Electric on Friday.

"Earnings have been on the back burner, and they move to the front very soon," said Michael Panzner, vice president of sales trading at Collins Stewart in New York. "I have a funny feeling things haven't been particularly great."

S&P 500 companies are expected to achieve third-quarter earnings growth of 14.1 percent from a year earlier, according to Reuters Estimates. Meanwhile, pre-announcement activity for U.S. companies stayed negative for the week ended Sept. 29.


FOMC MINUTES, RETAIL SALES AHEAD

Next week's economic data could help investors assess the likely magnitude of consumer spending before the start of the holiday season as well as the Fed's view of the economy.

On Tuesday, the government releases its report on wholesale inventories for August. Economists polled by Reuters expect inventories to rise 0.7 percent, down from a 0.8 percent gain in the previous month.

Minutes of the Federal Open Market Committee's Sept. 20 meeting will be released on Wednesday and the Fed's Beige Book -- a survey of economic conditions in the Fed's 12 districts -- will follow on Thursday.

The international trade deficit for August, also due on Thursday, is forecast at $66.70 billion, down from $68 billion in July, according to the Reuters poll.

A slew of data is due on Friday, including import prices, retail sales and the University of Michigan's reading on consumer confidence.

Import prices likely shrank 1.2 percent in September, after a 0.8 percent gain in the previous month, according to the estimates of economists surveyed by Reuters.

Retail sales for September are forecast to rise 0.2 percent, matching a 0.2 percent gain in August, according to economists polled by Reuters. Excluding auto sales, September's retail sales are seen unchanged, compared with a 0.2 percent gain the previous month.

The preliminary October reading of the University of Michigan's consumer sentiment index probably will show a rise to 86.5 from 85.4 in September, according to the Reuters poll.

Bloomberg - 6 October 2006

Zambia plans to raise copper-mining tax to 2,5%


Zambia's former Finance Minister Ngandu Magande said the country plans to increase the sales tax paid by copper and cobalt mining companies to 2,5 percent, Reuters reported, citing an interview with Magande.

The company currently charges them 0,6 percent, the newswire said on Thursday. Magande is expected to retain his post as finance minister after President Levy Mwanawasa, re-elected on Oct. 2, names his new cabinet, it added.

The country will also force the companies to increase the pay of qualified Zambians to match the salaries of expatriate workers, Reuters said.

Zambia plans to increase economic growth to between 7 percent and 8 percent, from current levels of 5 percent, the newswire said.

Bloomberg - 6 October 2006

Copper may fall next week as U.S. housing slowdown curbs use


Copper may drop next week on speculation a slowdown in U.S. housing demand will curb consumption in the world's second-largest user of the metal.

U.S. Federal Reserve Chairman Ben S. Bernanke said Oct. 4 the housing market is in a "substantial correction" that will lop about a percentage point off economic growth in the second half and restrain expansion next year. An average family house contains 400 pounds of copper, found in wires and pipes.

The metal has slumped 17 percent since May 11 when it traded at a record $8,800 a metric ton in London.

"Collapsing U.S. housing demand will lead to a further fall," said Thomas Au, principal at R.W. Wentworth & Co., a New York-based consulting company.

Six of 12 analysts, investors and traders surveyed by Bloomberg yesterday forecast copper will decline next week. Four expected a gain and two predicted little change.

Copper for delivery in three months on the LME lost $29, or 0.4 percent, to $7,270 a metric ton as of 7:37 a.m. local time. It has dropped 3.6 percent this week. On the Comex division of the New York Mercantile Exchange, copper for December delivery rose 0.3 percent to $3.331 a pound in electronic trading.

The metal didn't trade on the Shanghai Futures Exchange due to a week-long national holiday in China, the largest copper- consuming nation.

Demand usually tracks industrial activity. The Institute for Supply Management's manufacturing index fell to 52.9. The gauge was expected to fall to 53.5 from 54.5 in the prior month, based on the median of 64 forecasts in a Bloomberg News survey completed before the data was released Oct. 2. Private residential construction spending dropped 1.5 percent, the Commerce Department said Oct. 2.



Interest-rate gains

"The concern on the U.S. economy is far from over," said Roy Carson, a London-based analyst at Triland Metals Ltd., one of 11 companies trading on the floor of the LME.

Copper has fallen from its record as central banks in the U.S., Europe and Japan raised interest rates, triggering speculation that global economic growth will slow next year.

"These fears are overdone," Morgan Stanley, the world's biggest securities firm by market value, said in a report yesterday. An increase in business spending in Asia and Europe will cushion the effects of a U.S. housing slowdown, it said.

Morgan Stanley raised its 2007 forecast for average copper prices by 17 percent to $3.50 a pound, or $7,716 a ton. It also increased this year's forecast to $3.15 a pound, from $2.98. Copper demand will exceed production by 110.000 tons in 2006, the bank said.

Shrinking inventory may indicate expanding demand. Copper stockpiles tracked by the LME dropped 2.7 percent this week to 114,425 tons as of yesterday. That's less than three days of global consumption.

www.thepost.ie - 08 October 2006

Rise of commodities unlikely to be sustained - By Eugene Kiernan


Commodities have garnered a lot of the financial market limelight in 2006. In the past 18 months, the prices of basic commodities such as aluminium, copper, lead and zinc have doubled in value.

Commodity prices have indeed run very hard. Since the end of 2001, base metal prices have soared about 270 per cent and oil prices have also risen. From $19 for a barrel of oil in 2001 to around $60 currently, we have seen a tripling in energy costs.

This move in commodities has generated a lot of interest and led many portfolio investors to consider commodities as an asset class to be included in pension funds. Base metals, as measured by the Bloomberg Base Metals Index, peaked in early May, slumped by over 20 per cent to mid-June, and then staged a slow recovery. They are currently 10 per cent below these recent highs today. As a pattern, it was not dissimilar to what we saw in many global equity markets.

Oil prices displayed a different pattern, rising to just under $79 for Brent crude in early August only to slide by 25 per cent in the weeks since. This decline has been partly responsible for the better feel to equity markets since mid summer. Do these short-term trends have any implication for investors? The commodity which attracts the most attention is oil. Energy prices have been dancing to a different beat in this most recent period. The most recent leg has been clearly downward. How have economies and markets responded to these gyrations?

Its not that economies have become immune to energy price increases, but they have learned to cope better.

Oil companies are an important part of many of the global stock markets today. In Britain, oil companies will account for about 20 per cent of all profits earned in the market. In the US, majors such as Exxon and Chevron account for 6 per cent or so of the S&P index.

Higher oil prices mean stronger cash flows for these companies, but volatile oil prices can hamper planning and indeed final customer demand. Senior management from the global players in this industry have always spoken about long-term pricing for oil being substantially below the level we approached in mid-2006. The key point from an investors point of view is that at oil price levels even lower than today, free cash flow in these companies will still be sufficient to fund developing the business and allow cash to be returned to share holders in healthy dividends or buy-backs.

This robust aspect of energy stock performance is clearly displayed when we look at how their share prices have done even as oil prices have plummeted. The energy sector has lagged other sectors of the market, but the fallout is not as severe as the fall in the energy price itself.

These are volatile times for commodity prices, but what recent moves may have shown investors is that the hyper growth rate that we have seen in commodity prices should not be extrapolated into the future. Oil shares and the oil price are not the same thing.

your plowing a lonely furrow here but i,m reading it!

DITTO//

Thanks guys. Keep reading - it's good for your wealth !! (I hope)

Bloomberg - Oct. 9

Still Like Copper, Nickel, Zinc? Buy an LME Membership Instead - By Chanyaporn Chanjaroen and Matthew Leising


The London Metal Exchange, the biggest marketplace for trading aluminum, copper, nickel and zinc, is a better investment than any of those commodities.

The price of membership has increased 72 percent to $2.03 million since May on speculation the 129-year-old exchange will sell shares to the public or be acquired. Copper and zinc fell 15 percent in the past five months and aluminum 21 percent.

Profits quadrupled this year at the LME, whose members collect a fee of 0.016 percent of the value of every contract that changes hands. The boom and bust in commodities expanded trading 21 percent to 59.1 million futures and options, or about $2 billion a day, increasing members' revenue while eliminating the risk of price fluctuations.

``You make money when the market goes up, down or sideways,'' said William Adams, chief energy and capital market strategist at LaSalle Futures Group Inc. in Chicago. Investors ``can almost look at an exchange as a trade factory,'' profiting as the number of trades rises, he said.

Shares of the Chicago Board of Trade, where daily trading in Treasuries, grains and gold reached a record in the third quarter, have more than doubled since the exchange went public a year ago. IntercontinentalExchange Inc. has risen 97 percent in nine months, and Chicago Mercantile Exchange Holdings Inc. stock has returned an average 90 percent a year since 2002.

Chicago Board of Trade Chief Executive Officer Bernard Dan will talk with LME chief Martin Abbott about a link-up at a meeting this week, the Observer reported yesterday, without saying where it obtained the information. Dan would either like to buy the LME or set up an alliance, the paper said.



2,000 Traders

Surging values of commodity exchanges follows a five-year rally in raw materials that led to all-time high prices for oil, gasoline, copper, zinc and sugar, and sent gold to a 26-year record. Demand for commodities jumped as global economic growth fueled purchases of homes, cars and appliances, particularly in China and the U.S., and producers of raw materials were unable to keep pace.

A public sale of the London Metal Exchange is likely to be discussed when 2,000 metals traders, producers and consumers gather in London for their annual convention this week. Some of the 81 member-firms may push the exchange to go public to allow them to raise cash from their investment.

``An IPO should be very carefully considered,'' said David King, who ran the LME from 1989 to 2001 and is now managing director for business development at HSBC Bank Middle East Ltd. in Dubai. ``More and more exchanges around the world are selling shares to the public to raise funds or otherwise satisfy the needs of their stakeholders.''



`Stagnating'

The exchange, which still relies on brokers shouting orders across a six-meter-wide trading floor rather than on electronic transactions, may need to sell shares to finance its inevitable switch to computers, some commodities experts said. The LME otherwise risks losing market share like the New York Mercantile Exchange has for its benchmark gold contracts.

Nymex, whose members resisted computer-based trading in favor of face-to-face transactions, lost almost half of its gold futures business to the CBOT's online gold contract. The LME needs to modernize, said Colin Griffith, chairman of the 10- month-old Dubai Gold and Commodities Exchange.

``If you look around the world, Comex and Nymex are now doing a lot more business on electronic platforms,'' Griffith said. ``The Chicago Board of Trade has come in and taken a big chunk of gold trade via its efficient electronic-trading platform. Those who are not doing that are stagnating.''

Selling the LME to investors isn't a sure thing. King's successor at the exchange, Simon Heale, said in an interview that the possibility of a public offering, or even a takeover, ``is a non-story.'' LME shares belong to those who want to trade on the LME, he said.



Beats Big Board

Heale, 53, left his position last week to make way for former publisher Martin Abbott. LME spokesman Adam Robinson said Abbott wouldn't be available to comment before the annual convention that starts today.

Growth in trading at the London exchange outpaced the 14 percent increase on the Chicago Board of Trade, the second- largest U.S. futures market, through August. The LME's two newest members are Charlotte, North Carolina-based Bank of America Corp., the U.S. second-largest bank, and the Royal Bank of Canada, or RBC, the biggest Canadian lender.

``There is demand from our customers'' for LME products, said Alex Heath, head of RBC's base metals trading desk in London, who has spent 30 years in the metals industry.



Membership Prices Jump

The surge in commodities exchanges stands in contrast with the New York Stock Exchange and other equity marketplaces that recently went public. Shares of the parent of the NYSE have declined by 1.8 percent from March 8 through September as more trading moved to rival markets. The Big Board's share of trading in its own listed stocks fell last month to a record low of 69.9 percent.

LME's so-called Class B shares, which grant the holder the right to trade on the exchange, last sold for 43 pounds ($81) each, according to its Web site. In June, the shares sold for 25 pounds each. Since Class B shares were introduced in May, 51,200 have changed hands. To be an LME member, which gives the right to issue metal contracts and clear trades, a company must hold 25,000 shares. Class A shares, which give the holder a stake in the exchange itself, haven't traded since March.

The increase in the LME share price ``reflects people's recognition of the strong cash-flow-generating characteristics of exchanges and buoyant volumes,'' said Andrew Mitchell, an analyst at Fox-Pitt, Kelton in London. ``The potential change to a profit-making model has prompted talk of an eventual initial public offering.''



Windfall Investment

Net income at the LME was 1.4 million pounds ($2.6 million) last year, up fourfold from 2004. Nymex Holdings Inc., owner of the world's largest energy marketplace, said second-quarter profit more than doubled to $38.1 million.

Daniel Dicker, who bought a Nymex seat two decades ago so he could trade commodities, says the investment has been a windfall.

``That's the irony, no one bought these because they were investments,'' said Dicker, who owns two Nymex seats and has seen one of them rise 40-fold in value and the other 20-fold. ``I feel like I put a quarter chip down on a roulette table on black and went out to dinner, and in the two hours the wheel hit nothing but black.''

Commodities exchanges now are attracting takeover offers. The New York Mercantile Exchange agreed to sell a 10 percent stake to Greenwich, Connecticut-based buyout firm General Atlantic LLC for $170 million. General Atlantic won a bidding war among investment firms such as Blackstone Group LP and Battery Ventures, as well as a group led by former Nymex chairman Michel Marks.



Past Attempts

The LME, whose members Barclays Plc and Man Group Plc, have fended off attempts to steal business. The Nymex introduced an aluminum contract in 1999, with Alcoa Inc., the world's largest producer of the metal, the first company to trade it. Today, fewer than 100 contracts change hands each day on the Nymex, compared with as many as 11,000 three-month aluminum futures contracts on the LME.

Nymex has begun shifting more of its trades online. It began offering simultaneous electronic and floor-based trading of most metals contracts on Sept. 4. Two weeks ago, about 52 percent of its energy contracts were bought and sold by computer, according to John Davidson, a managing director at the Chicago Mercantile Exchange.

CBOT on Aug. 1 began offering daytime electronic trading in grain futures for the first time in its 158 years. Nymex, in a bid to take back its market share from CBOT, offered shares and $10 million in cash to its members so it can extend electronic trading of precious metals to daytime.



Days Are `Numbered'

Investors can start buying and selling reduced-size metals contracts on the LME from Nov. 20. The contracts, called LMEminis, willallow users to trade in lots of 5 tons, compared with existing 25-ton contracts. LMEminis will only be traded electronically.

The days of floor-trading on the LME ``are severely numbered,'' Malcolm Freeman, managing director of Ambrian Commodities Ltd. in London, an LME member who has been at the exchange since joining as a 17-year-old clerk in 1974. The trading floor will probably be closed within a year, he said.

Not so, says the LME's outgoing chief Heale.

Trade in the ring ``is robust,'' Heale said. Members will have the final say on whether to keep the floor open.

``There's a transparency on the floor that trade via electronic platforms and telephone can't match,'' said Fred Demler, head of global metals trading at Man Financial Inc. in New York. Man is the LME's largest brokerage for funds.

``The LME floor has been in operation for nearly 150 years and will continue as long as customers and member firms want to,'' said Peter Sellars, president of Sempra Metals Ltd. which trades on the floor and operates an electronic trading platform.

Bloomberg - Oct. 9

Gold Extends Gains in Asia After North Korea's Nuclear Test - By Feiwen Rong


Gold extended gains in Asia after the North Korea said it carried out its first nuclear weapons test, boosting the precious metal's appeal as a safe investment amid geopolitical tensions.

Gold for immediate delivery rose in early trade after crude oil rebounded in New York. The bullion extended gains after the announcement by North Korea's official Korea Central News agency.

``Events such as this will boost gold's appeal,'' Ma Tianyu, a bullion trader at Bank of China, said by phone from Shanghai today. ``So far, people have not flocked to gold market yet and we are all waiting to see the event as it unfolds.''

Gold for immediate delivery rose as much as $5.1, or 0.9 percent, to $579.20 an ounce at 11:29 a.m. Singapore time.

Gold futures for December delivery rose $7.10, or 1.2 percent, to $583.90 an ounce on the Comex division of the New York Mercantile Exchange at 11:29 a.m. Singapore time.

Oct. 9 (Bloomberg)

Shanghai Copper Rises on Speculation Chinese Demand to Increase - By Xiao Yu


Copper in Shanghai rose after a week- long Chinese holiday on speculation demand is increasing fast enough to erode inventory in the world's biggest copper consumer.

Rising demand from processors such as electric wires and cable producers may prompt users to import more, said Li Ling, a trader at Shenzhen Star Futures Co., by phone from Shanghai today. Inventories at factories are close to zero, a signal imports may rebound, said Yang Changhua, senior analyst at Beijing Antaike Information Development Co. on Sept. 27 at a conference in eastern Nanjing city.

``October and November are the peak consumption period of the year,'' said Star Futures' Li. Processors tend to undertake maintenance in summer as households use more air-conditioning, draining power supplies for the plants.

Copper for November delivery rose as much as 1,510 yuan, or 2.2 percent, to 71,900 yuan ($9,093) a metric ton on the Shanghai Futures Exchange. The metal traded at 70,840 yuan a ton at 11:20 a.m. local time.

China's imports of copper, which rose to a record price of $8,800 a ton in May on the London Metal Exchange, fell 24 percent from January to August from a year ago, the customs office said Sept. 12. Imports have been dropping year-on-year since October 2005.

Metal for three month delivery on the LME rose as much as $65, or 0.9 percent, to $7,525 a ton. Metal traded at $7,510 at 11:12 a.m. Shanghai time.



22-Week Low

Copper stockpiles in Shanghai fell to a 22-week low as of Sept. 28 as traders brought the metal out of the exchange warehouses to meet demand in the physical market, Jiang Mingjun, a trader at Shanghai Oriental Futures Co. said Sept. 29. Stockpiles fell 9,470 tons, or 22 percent, to 33,549 tons, from the previous week.

Inventories in the LME warehouses have fallen 3,525 tons this month to 114,050 tons, Bloomberg data showed.

Metal for immediate delivery in Changjiang, Shanghai's biggest copper market, rose as much as 1.5 percent today to 71,940 yuan a ton. Chinese users have to pay 17 percent value- added tax, 2 percent import tax, premiums and freight charges for imported copper.

Oct. 10 (Bloomberg)

Shanghai Copper Falls as China's Growth Curbs May Hurt Demand - By Helen Yuan


Shanghai Copper futures had their biggest decline in three weeks amid speculations that government measures to curb excessive investment will hurt consumption of the metal used in piping and wiring.

Copper for November delivery fell as much as 880 yuan, or 1.3 percent, the biggest decline since Sept. 20, to 69,750 yuan ($8,826) a metric ton on the Shanghai Futures Exchange. The contract traded at 69,850 yuan at 11:30 a.m. break local time.

China, the world's biggest copper consumer, will step up efforts to avoid accelerated economic growth that may lead to overheating, Ma Kai, the nation's top economic planner, said in a statement posted on the National Development and Reform Commission's Web site yesterday. China will curb excessive growth in investment and loans and tackle the widening trade deficit in the second half, he said.

``Tighter controls on properties and other fixed-asset investments may harm metal demand,'' said Wang Zheng, a Shanghai-based metal trader with Dalu Futures Co.

Metal for three-month delivery on the London Metal Exchange fell 0.1 percent to $7,440 a ton at 12:02 p.m. Shanghai time.

Metal for immediate delivery in Changjiang, Shanghai's biggest copper market, fell as much as 1.2 percent today to 71,090 yuan a ton. Chinese users have to pay 17 percent value- added tax, premiums and freight charges for imported copper.

China's economy grew 11.3 percent in the second quarter, the fastest pace in more than a decade. The World Bank said in August failure to control investment could leave the world's fourth-largest economy with idle plants, falling profits and rising bad loans.



Lower Prices

The State Council, China's Cabinet, will soon issue new suggestions on land use and management including adjusting fees and taxes for construction purposes, Ma said.

Calyon, the investment-banking unit of Credit Agricole SA, France's second-largest bank, said copper and aluminum prices will probably average lower in 2007 compared with this year because of a ``deceleration'' in global economic growth.

Copper prices will average $6,100 a metric ton next year, down from $6,675 a ton estimated this year, Calyon analyst Michael Widmer said in a report yesterday.

Users will be forced to switch to cheaper materials after copper prices soared to records earlier this year, Peter Kettle, research director at industry consultant CRU International in London.

AFX

Copper prices could turn lower by end-2007 as supply rises - analyst


Copper prices, which have seen dramatic increases this year, will remain strong in the first half of next year but could turn lower after that as new supplies come on stream, said Peter Kettle, research director at mining consultancy group, CRU.

Speaking at an LME seminar, Kettle said supply is set to "catch up with demand eventually" owing to increased investment in new mining projects. "Our forecast is for balance" between supply and demand in 2007, he said. "There remain concerns about strikes and certainly there is still the possibility of another price spike early next year, but after that we see fairly large surpluses. We see a fairly sharp fall in prices," said Kettle.

He also noted that while the 'super-spike' in copper prices may have caused permanent damage to consumption patterns. "Over the next couple of years, the price effects could bend the trend downwards. Copper (consumption) might be affected by substitution. Our calculation is that losses as a result of substitution are spreading," he said.

World demand for copper suffered a bet loss of 1 pct in 2005 as users chose to use other metals, according to CRU research. "These losses are very likely permanent," said Kettle.

International Herald Tribune - 10 October 2006

China sets new limits on lead, zinc


China sets new limits on lead and zinc. China said Tuesday that it hoped to cap the production capacity of refined lead and zinc by 2010 to cool investment and ease raw material shortages.

The government wants to limit annual capacity of refined lead to four million metric tons and that of zinc to five million tons by closing polluting plants and restricting new projects, the State Administration of Taxation said in a statement.

Oct. 11 (Bloomberg)

Gold Falls After U.S. Dismisses Reported Second N. Korea Test - By Tan Hwee Ann


Gold fell in Asia, wiping out earlier gains after the U.S. dismissed a report that North Korea had conducted a second nuclear test.

The White House said no new seismic activity had been detected in North Korea. Japan's Nippon Television Network Corp. said earlier the country had detonated a second atomic bomb after North Korea reported a first test on Oct. 9. Some investors buy gold as a haven at times of political uncertainty.

``The U.S. has knocked it down, and that said, the market is back to where it was,'' Darren Heathcote, head of trading at Investec Australia, said by phone in Sydney. ``At the moment, the driver for gold is oil, which fell last night. One could expect gold to remain in the doldrums.''

Gold for immediate delivery fell as much as $1.10, or 0.2 percent, to $571.90 an ounce and was trading at $572.20 at 12.29 p.m. Sydney time. It jumped as much as $2.80, or 0.5 percent, to $575.80 following the Nippon Television report.

Gold, which some investors buy as a hedge against inflation, has dropped 22 percent from a 26-year high of $730.40 an ounce on May 12. That's in line with the 25 percent fall in New York crude oil futures from its record $78.40 a barrel on July 14.

Oil prices are trading near an eight-month low today after Saudi Arabia told customers in Europe and Asia that it will maintain shipments amid a seasonal drop in demand.

Gold for delivery in December rose as much as $3.60, or 0.6 percent, to $579.80. It was unchanged at $576.20 an ounce at 12:30 p.m. Sydney time in after-hours electronic trade on the Comex division of the New York Mercantile Exchange.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Oct. 11 (Bloomberg)

Copper Declines in Shanghai After Codelco Signs Labor Agreement - By Xiao Yu


Copper futures in Shanghai fell for a second straight day as concern over supply disruptions eased after Codelco, the world's biggest producer of the metal, avoided a strike at its Andina unit in central Chile.

The workers at Andina, which accounts for 14 percent of Codelco's copper output, accepted the offer of a rise of 3 percentage points above inflation and a 6.4 million peso ($11,968) bonus, Codelco said yesterday in a note to the securities regulator. Government-owned Codelco will also hold wage talks this year at Chuquicamata, its largest mine, it said.

``Further supply disruptions are unlikely this year as major copper producers have increased salaries for workers,'' said Xue Feng, Shanghai-based trader at Maike Futures Co. ``Investors' concern over potential supply disruptions are easing as big producers have reached agreement with workers.''

Copper for November delivery fell as much as 340 yuan, or 0.5 percent, to 69,660 yuan ($8,799) a metric ton on the Shanghai Futures Exchange. The contract traded at 69,880 yuan at 11:30 a.m. mid-day break.

The agreement with Andina's 1,018 unionized workers follows BHP Billiton Ltd.'s decision to increase bonuses paid to workers on its Spence project in Chile last month. BHP, the world's largest mining company, also agreed to increase wages as part of a package that averted a strike on Sept. 27. Spence, which will begin operating in December, will produce 200,000 tons of copper annually at full capacity.

Metal for three month delivery on the London Metal Exchange fell $5, or 0.1 percent, to trade at $7,425 a ton at 11:02 a.m. Shanghai time.



Market Confidence

Copper for immediate delivery in Changjiang, Shanghai's biggest copper market, fell as much as 340 yuan today to 70,750 yuan a ton. Chinese users have to pay 17 percent value-added tax, premiums and freight charges for imported copper.

Copper fell partly because investors are concerned that the U.S. economy may slow down. Recent falls in gold and oil prices also affected market confidence, said Maike's Xue. A stronger dollar would make gold less attractive as investment as it is costlier for buyers holding other currencies, he said.

Gold, which is seen as a hedge against inflation, has dropped 22 percent from a 26-year high of $730.40 an ounce on May 12. That's in line with the 25 percent decline in New York crude oil futures from its record $78.40 a barrel on July 14.

Still, some traders and producers believe copper will stay high till the end of this year as demand is recovering and the U.S. economy is unlikely to go into recession, Maike's Xue said.



`Robust Demand'

Chile, the world's biggest copper producer, expects metal prices to average $3 a pound this year, amid ``robust'' demand, Karen Poniachik said in an interview in London yesterday. Copper will trade between $3.40 and $3.50 a pound through December, Poniachik said.

Copper futures for December delivery rose 0.1 percent to $3.380 a pound on the Comex division of the New York Mercantile Exchange in after-hour trade.

Oct 10 - (Reuters)

New York - After the Bell: Alcoa falls further


Shares of Alcoa Inc. extended their after-hours losses on Tuesday after the world's largest alumimum producer reported its third-quarter profit almost doubled, but results fell below Wall Street forecasts.

Shares were trading down 7.2 percent at $26.25 after closing at $28.29 on the New York Stock Exchange.

Oct. 12 (Bloomberg)

Gold Trades Near Four-Day Low as Oil's Drop Cuts Hedge Appeal - By Feiwen Rong


Gold traded its lowest in four days in Asia after a drop in energy costs reduced the appeal of the precious metal as a hedge against inflation.

Crude oil has slid 3.7 percent this week, on speculation OPEC won't enforce an output cut as demand growth slows. Gold and oil have closely tracked each other since the commodities reached highs in May and July.

``Gold is not going anywhere because of unstable and weak oil prices,'' Osamu Ikeda, general manager of precious metals division at Tanaka Kikinzoku, Japan's largest precious metal refiner, said by phone from Tokyo today.

Gold for immediate delivery traded at $573.30 an ounce at 11:49 a.m. in Sydney. It earlier fell as much as $1.20, or 0.2 percent, to $571.80 an ounce.

Some investors buy gold when energy expenses climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in the inflation rate.

Gold has dropped 22 percent from a 26-year high of $730.40 an ounce on May 12. That's in line with the 27 percent fall in New York crude oil futures from its record $78.40 a barrel on July 14.

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, is still debating the scale of the cut needed to stem a three-month slide in prices, Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said. The International Energy Agency yesterday cut its world consumption forecast this year and next for a second month.

Gold for delivery in December rose $1, or 0.2 percent, to $577.50 an ounce at 11:52 a.m. Sydney time in after-hours electronic trade on the Comex division of the New York Mercantile Exchange.

12 October 2006 - People's Daily Online

World's 5th largest gold, copper reserves found in Pakistan



The world's fifth largest reserves of gold and copper were discovered in Chaghi area in Pakistan's southwest Balochistan province, local newspaper The News reported on Thursday.

Director General of Provincial Department of Mineralogy Maqbool Ahmed said that two multinationals, Canadian and Chilean-firms, which were issued licenses 10 years earlier for exploration of gold in the Bekodik area, have completed the exploration work and have chalked out a project for the extraction of gold and copper.

In the preliminary stage, the two companies will invest a billion U.S. dollars in the project, Ahmed said.

According to Ahmed, 200,000 tons of copper and 400,000 ounce of gold will be produced annually through the said project.

The Balochistan government will get a share of 25 percent. With the start of the project, employment will be provided to 3,000 youth of the province.

According to Ahmed, there are gold reserve in Zhob and Lasbela districts of the province and nine multinationals have been issued licenses for their exploration.

However, the opposition parties in the province expressing their reservations charged that federal government wishes to loot the resources of the province.

Oct. 13 (Bloomberg)

Gold Declines in Asia After Traders' Charts Give Sell Signals - By Feiwen Rong


Spot gold in Asia fell, reversing some of yesterday's gains, after the charts that some traders use to predict price movements gave sell signals.

Gold for immediate delivery approached a so-called resistance level at $580 an ounce yesterday, marked by clusters of orders to sell the precious metal. The commodity had gained 1.1 percent to settle at $579.30 an ounce in New York as some investors' sought a hedge against rising inflation.

Bullion ``is not running on anything other than some resistance at that level,'' Ron Cameron, a resources analyst at Ord Minnett Ltd., said by phone from Sydney today. ``The market also gets a bit cautious before the weekend.''

Gold for immediate delivery fell as much as $1.20, or 0.2 percent, to $578.10 an ounce and traded at that level at 11:25 a.m. Singapore time. Still, the metal has gained 23 percent over the past year.

``$580 is a level which if we could trade through it, it could go for a reasonably strong rally,'' Cameron said.

Crude oil rose in New York after a report showed U.S. fuel demand increased for the first time in seven weeks and heating fuel supplies fell more than expected. Oil for November delivery rose as much as 52 cents, or 0.9 percent, to $58.38 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $58.26 at 11:36 a.m. in Singapore.

``Gold seems to have found some support at $570 level and it's unlikely to trade below it unless oil declines,'' said Chris Kwon, gold broker at Seoul-based HanMag Refco Futures Corp.

Friday, October 13, 2006 - Dow Jones Newswires

Range-Bound Gold Testing Investor Patience


Gold risks pullback if it continues to tread water, as selloff by some impatient investors "might kick off a nastier dip," warns Australia's CBA bank. Spot gold last at $578.70/oz, adding $2 to modest overnight gains in line with oil, EUR/USD, although remains at upper echelons of $560-580 range. "So far, gold has stayed out of trouble by avoiding the June lows" of around $540; "the proximity of those lows is a making us nervous because, should prices fall below that level, investor patience will be tested."

Oct. 13 (Bloomberg)

Gold Has Biggest Weekly Gain Since July as Crude Oil Climbs - By Choy Leng Yeong and Danielle Rossingh


Gold in New York had the biggest weekly gain since July as energy costs increased, boosting the appeal of the precious metal as a hedge against inflation.

The price of gold gained 2.8 percent in the past two days as crude-oil prices climbed 1.9 percent. The metal tumbled 4.5 percent last week and is down 19 percent from a 26-year high of $732 an ounce in mid-May. Oil climbed today on signs of growing U.S. energy demand and disruptions to supplies from Norway. Prices still have slumped 25 percent from $78.40 a barrel, the highest ever, in July.

``Gold is following oil tick for tick,'' said Michael Guido, director of hedge-fund marketing at Societe Generale in New York. ``You have technical funds buying gold.''

Gold futures for December delivery rose $12.40, or 2.1 percent, to $592.70 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage gain since Sept. 5. The weekly gain was 2.8 percent. Prices are up 14 percent in 2006 and 25 percent from a year ago.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Some investors buy gold to preserve purchasing power in times of accelerating inflation. Gold futures surged to $873 in 1980, when a jump in the cost of oil led to a 13 percent annual rise in U.S. consumer prices.

``The oil price is one of the reasons gold has spiked higher,'' said Frederic Panizzutti, a senior vice president at MKS Finance, one of Switzerland's four bullion refiners.

Gold may rally in coming days on investment demand, John Reade, an analyst at UBS AG in London, said in a report.

``We are hearing more positive signs from our wealth- management colleagues about private clients' intentions and activities in gold,'' he said.

Demand for StreetTracks Gold Trust, an exchange-traded fund that is linked to the price of gold, has risen 53 percent this year. The fund has 126.4 million shares outstanding, each representing a 10th of an ounce of gold.

Hoovers - 13 October 2006

LME metals end mostly higher, copper down


Bullish supply-side predictions for nickel, lead and tin saw all three metals end London Metal Exchange Week in fresh record-high territory while copper remained barely changed on the week, traders said.

Technical buying buoyed nickel, tin and lead to fresh highs amidst lackluster, rangebound trading in gold, oil and currency markets.

Fresh outflows of nickel from LME warehouses encouraged aggressive buying, lifting prices to record highs for the fifth consecutive session.

Nickel broke a new high at $31,150 a ton, up $650 on previous late kerb. Prices ended London's late kerb slightly lower at $30,750/ton, up $250 on previous PM kerb levels.

Aluminium, like nickel, was subject to "fairly agressive" buying pressure which was unchallenged by selling until prices hit $2,650/ton, a trader said. Aluminium ended Friday's session up $45 on previous PM kerb at $2,635/ton.

Supply-side concerns related to three smelter closures in Indonesia helped lift LME tin to a 17-year high of $9,950/ton, albeit on thin volumes, traders said. The smelters didn't have the correct operating permits, Indonesian police said.

Lead's upside momentum carried into a fifth session, lifting prices to a fresh cycle high of $1,512/ton, on the strength of system-driven momentum buying. Prices closed shy of highs at $1,490/ton, down $2 on previous kerb levels but up 5.5% on the week.

Unlike the remainder of the complex, LME copper "closed the week still somewhat hesitant," according to Triland Metals Ltd., down $20 on previous PM kerb and unchanged on the week at $7,460/ton.

FT.COM - October 12 2006

Structural shifts in copper market - By Chris Flood


New institutional funds flowing into the copper market have resulted in a historic shift in the relationship between prices and stocks, according to Bloomsbury Mineral Economics (BME), the metals consultancy.

The copper market has developed into a hybrid that is part industrial metals and part investment vehicle.

Investment demand has created a virtual deficit in the futures market, equivalent to 250,000 tonnes, which acts as a more powerful influence on prices than any slight rise in inventories.

However, BME stressed there was no speculative bubble in copper prices. This was shown by the narrowing in the spread between cash and three-month prices that purely speculative flows would have increased.

Instead, coppers price behaviour had been altered by remorseless pressure from investment buying, mainly via commodity index funds that hold about $105bn in futures, equivalent to about 600,000 tonnes of the red metal.

The recent growth in the popularity of structured notes has injected another $10bn into the market, with up to 300,000 tonnes being held as call options.

BME said there was now a triple deficit stretching across the copper market from concentrates to refined metals to the futures market.

The deficit in the copper concentrates market is expected to be the largest ever in 2006 at 330,000 tonnes, due partly to weak mine production.

Mine production has been lower than expected due to supply disruptions with strike action affecting output at La Caridad, Cananea and Escondida.

BME cut its estimate for mine production this year to 14.87m tonnes from 15.22m tonnes in April. This is well below the International Copper Study Groups current forecast of 15.17m tonnes for 2006, effectively the industry consensus.

For 2007 the situation is similar, with BME forecasting output of 15.86m tonnes, down from 16.16m tonnes in April and well below the ICSG forecast of 16.20m tonnes.

BME also said the refined copper market would remain in deficit this year at 300,000 tonnes and in 2007 at 100,000 tonnes with just a tiny surplus emerging in 2008.

Chinese consumption growth in 2006 has been revised up to 2.5 per cent instead of a decline of 4 per cent. West Europe consumption is expected to increase by 9.5 per cent compared with an earlier estimate of 7.5 per cent. The slowdown in the US housing market is expected to reduce consumption by 0.7 per cent this year, whereas a rise of 1.5 per cent was previously forecast.

Strategic stockpiles of refined copper are expected to be depleted by the end of 2007 with little opportunity for rebuilding before the next global recession.

Extremely high levels of exchange stocks will be required to drag prices back towards the $3,000 level, but even with increasing levels of stocks, prices are likely to remain much higher than previously.

The Independent - 14 October 2006

Are the good times over for commodities market? A super-cycle was predicted, so why are commodity prices off the boil, asks James Daley

What has happened to the so-called commodities super-cycle? Six months ago, commodity experts claimed the world had entered a 15- to 20-year bull market. By May this year, the gold price had more than doubled in five years, while the price of oil and copper had risen more than fourfold over the same period. From wheat to nickel to coffee, almost all commodities at least doubled in value over five years, to this spring.

The good times were supposed to continue. And yet, suddenly, commodity prices have come off the boil, as fears of a slowdown in the US economy have given investors the jitters. The Reuters/Jeffries CRB commodity price index is now down almost 20 per cent since May, despite continued demand from Asia, supposedly the underpinning for the super-cycle.

Ian Henderson, manager of JP Morgan's Natural Resources fund, says that the past few months have been a blip. "A lot of very fast money enhanced the commodities market in 2005," he says. "My view is that [short-term movements in prices] are the wrong thing to focus on - the focus should be on what's going on in China."

Although speculating investors have helped to boost commodity prices over the past 18 months, most fund managers and analysts agree that it is the rapid growth in developing countries such as China and India that is behind the recent bull-run.

Henderson points out that the International Monetary Fund has just increased China's growth forecast to 10 per cent for both this year and next year - almost four times the rate at which the UK economy is growing. "The super-cycle argument remains as true today as it was a year ago," says Graham Birch, who heads up Blackrock Investment Management's natural-resources team and manages the Merrill Lynch Gold & General fund.

"The drivers behind it are still the industrialisation and urbanisation of big developing economies, such as China and India. With these countries growing at 8 or 9 per cent a year, they're consuming more of the world's resources.

"We've seen weakness in the market recently because the US economy has slowed down a bit. But you don't expect markets to go in straight lines. This looks like a soft patch in what is a relatively strong market."

Mark Mathias, of Dawnay Day Quantum, which runs specialist commodity investments, is convinced that the recent fall in prices has created a fantastic buying opportunity, though he dismisses the notion of a super-cycle. "The super-cycle suggests we're in a bigger cycle than normal, but commodity cycles are all like this," he says. "The last commodities bear market lasted 20 years, so it's natural that the bull market might go on just as long."

Even so, for most investors, it's sensible to allocate just a small amount of your portfolio to the sector. Commodities are a good way to diversify, as they tend to have a low correlation with other asset classes. While stock markets plummeted in 2001-2, for example, commodities made strong annual gains.

Dan Kemp, head of fund research at Williams de Bro warns that investors shouldn't get carried away because of recent strong returns: "The enthusiasm we've seen for commodities has very little to do with diversification benefits, and everything to do with the fact their prices have been going through the roof."

Graham Tuckwell, chairman of ETF Securities, says that non-specialist investors should probably begin by allocating 3 to 5 per cent of their portfolio to commodities.

Oct. 13 (Bloomberg)

Copper May Fall on Speculation Chinese Use Is Slowing - By Chanyaporn Chanjaroen


Copper may drop next week on speculation demand for the metal in China, the world's largest user, will slow.

Chinese copper imports fell 24 percent in the first nine months of the year to 1.5 million metric tons, the country's customs office said yesterday. Ma Kai, China's top economic planner, said Oct. 9 that the nation will step up efforts to prevent the country's booming economy from overheating.

Six of 13 analysts, investors and traders surveyed by Bloomberg yesterday forecast copper will decline next week. Three expected a gain and four predicted little change.

Chinese demand ``continues to be on the slow side and I don't expect it to pick up for the balance of 2006,'' said Warren Gelman, president of St. Louis-based trading company Kataman Metals Inc. Copper will fall next week to about $3.30 to $3.40 a pound, or $7,275 to $7,496 a ton, he said.

Copper for delivery in three months on the LME rose $20, or 0.3 percent, to $7,500 a metric ton as of 11:57 a.m. local time. It has risen 0.1 percent this week.

On the Comex division of the New York Mercantile Exchange, copper for December delivery rose 1 percent to $3.42 a pound. Copper for December delivery on the Shanghai Futures Exchange gained 0.2 percent to close at 69,910 yuan ($8,848) a ton. Chinese prices include 17 percent tax and 2 percent duty.

China accounts for a fifth of global copper demand. Imports last month were 174,931 tons, the customs office said. Imports were 226,430 tons in September last year, according to data compiled by Bloomberg.



Lost Consumption

The country probably will consume about 3.8 million tons this year, a 5.6 percent increase from a year ago, according to Beijing Antaike Information Development Co., which advises the government on industry policies.

Copper has quadrupled in the last five years, and traded on the LME at a record $8,800 a ton on May 11. Some users have switched to cheaper materials, and the resultant lost consumption may rise to 400,000 tons this year, up 77 percent from last year, Peter Kettle, research director at U.K. industry consultant CRU, said in London on Oct.9.

The 225,000 tons lost last year from substitution was 1 percent of world demand and three times what was lost in 2004, Kettle said at a seminar organized by the London Metal Exchange. Stainless steel and plastics are benefiting the most, he said in an interview.

``Damage is being done to consumption and it's probably permanent,'' he said.

Associated Press - October 15, 2006

Drop in commodities may hurt emerging markets - By Ellen Simon


NEW YORK Commodities had a miserable third quarter and many on Wall Street say they have further to fall. That theory was bolstered last week as oil prices sunk to their lowest level for the year.

If commodities prices do sink further, it will be bad news for emerging markets and the investors who have poured billions of dollars into them over the past three years.

Commodities prices tend to have a domino effect lower oil prices often drag down gold prices, for instance. And lower commodities prices tend to push down stocks in emerging markets such as Russia and Brazil, countries with a rich supply of oil and metals, respectively.

While many emerging markets continue to be on a tear, if the commodity bears are right, there may be plenty of pain to spread around.

While investors pulled $263 million out of gold and natural resources funds for the week that ended Oct. 4, they still have $26.9 billion in the funds, according to Bank of America Corp. Fund flows into emerging markets slowed during the same period, but investors still have $96.6 billion riding on emerging market funds, according to Bank of America.

Stephen S. Roach, Morgan Stanley's chief economist, wrote in September that the tidal wave of money that has flowed into commodities over the last three years has transformed commodities markets "from one of the best real-time gauges of economic activity" to a financial asset like any other that is, one that's susceptible to hysteria and bubbles.

"Just as return-hungry investors chased these markets on the upside, they could well run like lemmings to get out on the downside," Roach wrote.

Merrill Lynch & Co.'s chief investment strategist, Richard Bernstein, agrees, saying that cheap money and heavy borrowing inflated prices in commodities. Those prices are now 60 percent above what could be explained by fundamental supply and demand, he wrote earlier this month.

"These data suggest that September's downfall in commodities might only be the beginning of a protracted bear market," he wrote.

Other factors that pushed commodity prices higher, such as the U.S. housing boom and powerful growth in the Chinese economy, also could drive prices lower. A slowdown in the housing market is well under way, and economists expect slower growth from China as well.

The decline in home construction already has hit the lumber market, where prices recently dropped to 5-year lows. Metals used in homebuilding, such as copper, also are facing price pressure.

Roach argues that a downturn for U.S. consumers could slow business for Chinese producers. U.S. consumers continue to gobble goods made in China, which is why the U.S. trade deficit with China was a record $22 billion in August. But if American consumers were to start cutting up their charge cards, the effects would be felt in Chinese factories almost immediately.

Less use in the U.S. auto industry should affect steel, aluminum, glass and rubber demand, wrote Tobias Levkovich, Citigroup Inc.'s chief U.S. strategist.

While the argument for continued high prices for commodities is that demand will continue to grow, Levkovich points out that there's some room for supply to grow, too, with a possible increase in Saudi oil production and a recent Chevron Corp. find in the Gulf of Mexico.

If the strategists are right, investors who have seen impressive run-ups in markets such as South Africa, where stocks are up more than 25 percent for the year to date, might consider taking some money off the table and away from all the other dominos.

The Times - October 17, 2006

Metal prices hit new highs - By David Robertson


LEAD, nickel and tin prices hit record highs at the London Metal Exchange yesterday, with all the key metals now achieving records in 2006.

Tin was the last of the metals to reach a record price this year when three-month delivery contracts reached $11,000 per tonne yesterday. This was up 12 per cent on the opening price and up 20 per cent over the past three trading sessions.

Traders blamed supply problems in Indonesia for the rise. Indonesian police have moved to shut down smelters operating in the country without permits.

The number of tin suppliers is relatively small compared with other metals, so small disruptions can cause exaggerated price movements.

Stephen Briggs, an analyst at SociGale, said: This has be to be delayed reaction to what is happening in Indonesia. Clearly, tin has been in the background for months, but this fundamental news has shot it into the limelight and investors are getting their teeth into it.

Lead also hit a new high yesterday, reaching $1,542 per tonne before falling back to $1,530 later in trading. Nickel prices rose to $31,300 per tonne.

Soaring demand from China and limited new discoveries of many key metals has forced prices up significantly during 2006.

Other metal prices also rose yesterday, with aluminium up 1.5 per cent to $2,675 and copper up 3.6 per cent to $7,730.

Zinc closed up 3.4 per cent at $3,930, just $40 short of its record high set on May 11.

FT.com - October 17 2006

Profit taking hits base metals - By Chris Flood


Zinc and nickel hit new records on Tuesday but profit taking later in the session dragged base metals lower after strong gains in recent days.

Zinc fell 2.4 per cent to $3,865 a tonne after it hit a record $4,020 a tonne earlier in the session. Physical availability is seen as extremely tight, encouraging interest from hedge funds and other momentum players.

Nickel rose to a record $32,050 a tonne but was unable to hold on to its gains and retreated 1.4 per cent to $31,400 a tonne. Global stocks remain critically low and sentiment is being supported by Eramets decision to declare force majeure (a form of legal protection) on nickel deliveries to Asian customers after disruptions to supplies to the worlds largest ferronickel plant in New Caledonia.

Tin fell 9.1 per cent to $10,000 a tonne after it hit a record $11,000 on Monday.

Disruptions to supplies in Indonesia and Bolivia (which account for about 35 per cent of global tin mine output) could push the market into deficit. The Indonesian government has closed more than 20 small smelters that were operating without proper permits.

The threat by Evo Morales, Bolivias president, to nationalise the countrys mining industry may not be as severe as it first appeared. Bolivias vice-president ruled out expropriations and the governments plans involve gaining control of new developments only. However, after tin gained 20 per cent in the previous three sessions, a pause was not unexpected and traders said consolidating above $9,800 would provide a new support level.

Lead fell 2.4 per cent to $1,497.5 after it hit a record $1,545 in the previous session.

Copper hit $7,872.5 a tonne but retreated 1.6 per cent to $7,640 in spite of news that the Gresik smelter in Indonesia will halt production until mid-December.

Crude prices were choppy as the market awaited clarification about plans to cut production by 1m barrels a day by the Organisation of the Petroleum Exporting Countries. The cartel is due to hold a meeting in Qatar later this week to finalise its plans.

ICE December Brent fell 86 cents to $60.80 a barrel while Nymex November West Texas Intermediate lost $1.09 at $58.85 a barrel.

Oil had rallied in morning trade in London, supported by an Opec statement on Monday which noted that uncertainties about global economic prospects, particularly in the USA, slowing demand growth, rebounding non-Opec supply and high stock levels have triggered a strong bearish sentiment in the market.

Edward Meir of Man Financial said This strong statement may have led the market to conclude that the cartel was looking beyond this weeks cut and possibly towards a second one, perhaps imposed in December.

The cartel will hold an emergency meeting later this week in Qatar but still it remains unclear if the cut will be made from the current quota level of 28m barrels a day or actual output running closer to 27.5m barels a day.

Wheat prices in Chicago hit a fresh 10-year high at $5.56 a bushel before retreating 4⅓ cents to $5.37 a bushel amid ongoing concerns about low levels of global stocks and the impact of drought in Australia on supplies.

Gold fell 0.8 per cent to $587.90 a troy ounce in spite of rising geopolitical tensions over North Koreas nuclear plans.

Oct. 17 (Bloomberg)

Tin Prices Plunge 10% on Sales by Producers; Zinc, Copper Drop - By Chanyaporn Chanjaroen


Tin in London plunged a record 10 percent as producers locked in sales to take advantage of prices at the highest in at least 17 years. Zinc fell after reaching the highest ever, and copper declined.

Lower tin production expected this year at PT Timah, the world's largest producer, and clashes among miners in Bolivia sent prices soaring 13 percent yesterday to the highest since 1989 yesterday. The countries account for about 35 percent of global production, UBS AG said today in report.

``Producers are selling forward their production as prices are at a very high level,'' said Charles Swindon, managing director of RJH Trading Ltd. in London. Funds are also selling to realize gains after prices rose yesterday, he said.

Tin for delivery in three months plunged $1,100, or 10 percent, to $9,900 a metric ton at 5:01 p.m. on the London Metal Exchange. A close at that price would mark the largest percentage decline ever. Prices yesterday reached $11,000, the highest since at least 1989.

Demand for tin, used mostly in soldering electronic components, will lag behind production by around 5,000 tons this year, London-based GFMS Metals Consulting Ltd said. Expanding use in China, the world's largest consumer of the metal, will help boost global consumption 7 percent to 390,000 tons in 2006, GFMS data showed.

Tin prices swing widely because trading volumes are the lowest among the six industrial metals traded on the LME, said Nick Moore, a London-based analyst at ABN Amro Holding NV. Supplies will remain ``tight,'' he said.



Supplies `a Concern'

PT Timah will cut output this year by 8 percent to 38,407 tons, Thobrani Alwi, the company's president director, said yesterday. Mines in Bolivia, which account for about 5 percent of world supply, were damaged after fatal clashes between miners, the newspaper El Diario reported last week.

``Supplies remain a concern,'' said RJH Trading's Swindon, who bought the metal today after prices fell.

Zinc for delivery in three months dropped $95, or 2.4 percent, to $3,865 a ton after reaching a record $4,020 earlier. Prices of the dark gray metal, mostly used to galvanize steel, have more than doubled in the past year.

Inventories tracked by the LME dropped 1,325 tons, or 1 percent, to 127,400 tons today. Stockpiles have declined for 15 months to the equivalent of less than five days of global consumption. Demand will exceed production by 420,000 tons this year, Societe Generale said last week in a report.



Copper

Copper prices declined $123, or 1.6 percent, to $7,645 a ton in London. On the Comex division of the New York Mercantile Exchange, futures for December delivery fell 9 cents, or 2.5 percent, to $3.491 a pound.

Freeport-McMoRan Copper & Gold Inc. said today third-quarter output dropped 11 percent from a year earlier. BHP Billiton Ltd. owns Escondida, the world's largest copper mine. Freeport's Grasberg mine in Indonesia is the second-largest.

Mitsubishi Materials Corp. suspended operations at its smelting unit in Indonesia until the middle of December. It will lose 52,000 tons of output. The unit can produce 250,000 tons a year.

Oct. 17 (Bloomberg)

Gold Futures Fall in New York After Oil Prices Erase Gains - By Pham-Duy Nguyen


Gold in New York fell for the first time in five sessions after a drop in oil prices reduced the metal's appeal as a hedge against inflation.

The price of gold has followed oil this year. The metal has fallen 19 percent from a 26-year high partly as oil shed 25 percent from a record in July. Oil today traded above $60 a barrel before erasing gains. Gold is still up 14 percent this year.

``If oil is going to let up, that's going to help bring down the price of gold,'' said Mike Sander, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California.

Gold futures for December delivery fell $5 or 0.8 percent, to $593.50 an ounce on the Comex division of the New York Mercantile Exchange. Prices had gained 3.9 percent in the previous four sessions.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Some investors buy gold when energy expenses climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in the inflation rate.

Losses accelerated today after gold climbed above $600 and failed to make further gains, analysts said. Investors have placed orders to sell the metal around $600, said Marty McNeill, a gold trader at R.F. Lafferty Inc. in New York.



`Resistance' at $600

``Gold is backing off from $600,'' McNeill said. ``You have a lot of resistance at that level.''

Gold hasn't closed above $600 an ounce since Oct. 2.

``Gold came up to $600 and tested it but couldn't hold,'' Altavest's Sander said. ``That's a bearish sign for gold.''

Lower oil and gold prices are a buying opportunity, Marc Faber, founder and managing director of the investment firm Marc Faber Ltd. in Hong Kong, said at a conference in London.

``Gold and oil are in a buying range,'' said Faber, who told investors to bail out of U.S. stocks a week before the 1987 so-called Black Monday crash. ``I would buy gold at these levels. It's a good opportunity.''

Gold may also gain should tensions escalate with North Korea and investors buy the metal as a haven. South Korea said its northern neighbor may be preparing to test another nuclear bomb, after detonating one on Oct. 9.

``North Korea could become a big deal,'' said Frank McGhee, head metals trader at Integrated Borkerage Services Inc. in Chicago.

Silver for December delivery fell 13 cents, or 1.1 percent, to $11.78 an ounce. Palladium for December delivery dropped $4.95 or 1.5 percent, to $319.60 an ounce. Platinum for January delivery declined $8.30, or 0.8 percent, to $1,083 an ounce.

Oct. 18 (Bloomberg)

Copper in Shanghai Drops After U.S. Data Signals Slower Demand - By Xiaowei Li


Copper futures in Shanghai declined, paring yesterday's gain, after weaker-than-expected U.S. industrial production data signaled that demand for the metal used to make pipes and wires may fall.

The nation's industrial production fell 0.6 percent in September, the most in a year, the U.S. Federal Reserve said yesterday. The measure had been expected to fall 0.1 percent, according to the median estimate in a Bloomberg News survey of 61 economists. It was the first time in more than three years that production had fallen in consecutive months.

``The worse-than-expected US figures aside, we expected copper in Shanghai to correct downward from yesterday's highs,'' Li Xun, a trader at Shanghai Continent Futures Co., said today. ``We believe the falls so far are reasonable.''

Copper for December delivery dropped as much as 990 yuan, or 1.4 percent, to 71,280 yuan ($9,015) a metric ton on the Shanghai Futures Exchange.

Oct. 18 (Bloomberg)

Commodity Strategists: Iron Ore to Fall on China, Bank Says - By Helen Yuan


Iron ore prices may fall next year because of increasing output of the steelmaking raw material in China, according to China International Capital Corp., the nation's biggest investment bank.

Benchmark ore prices may fall as much as 5 percent in the year starting April 1, Luo Wei, senior associate at research department at China International in Shanghai, said in an interview. UBS AG said Sept. 25 prices will fall the same amount.

Contract prices for iron ore have risen for four straight years and gained 19 percent to a record this year as China almost doubled output of steel. The nation's increasing ore production may curb demand for imports and cut prices, Luo said.

``Global ore prices may fall marginally though Chinese demand remains strong,'' Luo said Oct. 13. ``Small producers will turn to domestic supplies if global prices continue to rise.''

Initial talks between Chinese steelmakers led by Baosteel Group Corp. and the world's largest iron ore producers including Cia. Vale do Rio Doce, BHP Billiton Ltd. and Rio Tinto Group start next month.

Luo, 33, has been tracking the steel industry for five years after covering the building material sector for four years. China International underwrote the sale of shares in Baosteel Group's publicly traded unit in 2000 and 2005.



Goldman Forecast

Luo's forecast contradicts Goldman Sachs JBWere Pty and Credit Suisse Group, who both said Chinese ore production is expensive and predicted a gain in prices. Goldman Sachs on Sept. 26 forecast a 10 percent rise and Credit Suisse in July predicted a 5 percent gain.

China's iron ore production rose 43 percent to 345 million metric tons in the first eight months, Bloomberg data showed. The ore imports increased 24 percent to 219 million tons during the period.

Roger Downey and Ivan Fadel with Credit Suisse said in a Sept. 27 note that domestic iron ore is sold at as high as $80 to $85 a metric ton, while benchmark annual ore sold from Australia costs $47 a ton before the costs of freight.

Iron ore imports held up at 23 Chinese ports were 42 million tons last week, up 39 percent from a year earlier, according to Mysteel.com. China accounted for 53 percent of iron ore sales for BHP in the year ended June 30, and 47 percent of Rio Tinto's sales for calendar 2005.

``The share of ore imports on the Chinese market is unlikely to increase,'' said Luo.

Chinese ore typically contains about 33 percent of iron, compared with 65 percent in Australian ore. China's efforts to mine more of the raw material may result in declining ore content, analysts have said.

Some 10 percent of the domestic production contains a little higher than 10 percent of iron, according to Zou Jian, chairman of the Metallurgical and Mining Association.

October 20, 2006 - ASSOCIATED PRESS

Commodities may sink even further - By Ellen Simon


Commodities had a miserable third quarter and many on Wall Street say they have further to fall. That theory was bolstered when oil prices recently sank to their lowest levels for the year.

If commodities prices do sink further, it will be bad news for emerging markets and the investors who have poured billions of dollars into them over the past three years.

Commodities prices tend to have a domino effect -- lower oil prices often drag down gold prices, for instance. And lower commodities prices tend to push down stocks in emerging markets such as Russia and Brazil, which have a rich supply of oil and metals, respectively.

While many emerging markets continue to be on a roll, if the commodity bears are right, there may be plenty of pain to spread around.

While investors pulled $263 million out of gold and natural resources funds for the week that ended Oct. 4, they still have $26.9 billion in the funds.

Stephen S. Roach, Morgan Stanley's chief economist, wrote that the tidal wave of money that has flowed in recently has transformed commodities markets from good economic indicators to an asset like any other -- susceptible to hysteria and bubbles.

"Just as return-hungry investors chased these markets on the upside, they could well run like lemmings to get out on the downside," Mr. Roach wrote.

Merrill Lynch & Co.'s chief investment strategist, Richard Bernstein, agreed, saying that cheap money and heavy borrowing inflated prices in commodities. Those prices are now 60 percent above what could be explained by fundamental supply and demand, he wrote earlier this month.

Other factors that pushed prices higher, such as the U.S. housing boom and the Chinese economy, could also drive prices lower.

The decline in home construction has already hit the lumber market, where prices recently dropped to five-year lows. Metals used in home building, such as copper, are also facing price pressure.

Mr. Roach argued that a downturn for U.S. consumers could slow business for Chinese producers.

Less use in the auto industry should affect steel, aluminum, glass and rubber demand, wrote Tobias Levkovich, Citigroup's chief U.S. strategist.

If the strategists are right, investors who have seen impressive run-ups in markets such as South Africa, up more than 25 percent year to date, might consider taking some money off the table -- and away from all the other dominoes.

Dow Jones Newswires - Friday, October 20, 2006

Signs High Nickel Prices Hurting Demand


Record nickel prices expected to remain supported for some time as LME stocks languish below 5,000-ton level; however, signs high prices beginning to hurt consumer demand, says Standard Bank. Reports China domestic nickel prices easing as smaller price-sensitive stainless steel plants cut orders; China consumes 15% of world's nickel "but this figure will likely come under pressure should prices continue to remain at their current levels." LME 3-month last at $31,750/ton, unchanged vs London PM kerb, within reach of this week's $32,050 all-time high.

Dow Jones Newswires - Friday, October 20, 2006

Gold At Risk Of Further Shakeout - Analyst


Gold at risk of another bout of liquidation as market struggles to find sufficient upside traction, says Bullion Desk's James Moore; spot last at $588.90/oz, down just 30 cents vs NY close as players await more oil cues from upcoming OPEC meeting. However, Moore says further shakeout of stale bulls necessary to draw fresh investor strength. Pegs tough resistance at $600-$608, support $585 then $576.

Dow Jones Newswires - Friday, October 20, 2006

Copper prices to fall below $7000/t


Analysts at JP Morgan expect copper prices to fall below the $7000/t mark going ahead.

In a research note published this morning, the analysts mention that the weakening US auto, housing and IP data could exert pressure on copper prices. The LME inventory statistics for copper may be misleading, since fund investors are clearing out excess inventories, the analysts add. JP Morgan expects the supply of copper to rise by 7.1% in 2007.

Oct. 20 (Bloomberg)

Copper May Fall Next Week on Signs China, U.S. Demand Slowing - By Chanyaporn Chanjaroen


Copper may drop next week on signs that demand for the metal is slowing in China and the U.S., the world's largest consumers of the metal.

Consumption of copper in China declined in the eight months to August, the Ware, England-based World Bureau of Metals Statistics said Oct. 18. U.S. industrial production fell 0.6 percent in September, the most in a year, the U.S. Federal Reserve said Oct. 17. Demand for base metals including copper moves in line with industrial activity.

Seven of 13 analysts, investors and traders surveyed by Bloomberg yesterday and Oct. 18 forecast copper will decline next week. Five expected a gain and one little change.

``We are becoming increasingly concerned with what we see as a manufacturing slowdown,'' said Mark Lewon, vice president for operations at Utah Metal Works Inc. in Salt Lake City. ``I look for lower copper prices soon.''

Copper for delivery in three months on the LME rose $39, or 0.5 percent, to $7,699 a metric ton as of 6:27 a.m. local time. It has risen 3.2 percent this week.

On the Comex division of the New York Mercantile Exchange, copper for December delivery rose 50 cents, or 0.1 percent, to $3.5145 a pound in after-hours electronic trading. Copper for December delivery on the Shanghai Futures Exchange increased 0.2 percent to 71,720 yuan ($9,075) a ton. Chinese prices include 17 percent tax and 2 percent duty.

The decline in U.S. industrial output was larger than the expected drop of 0.1 percent, the median estimate in a Bloomberg survey of 61 economists. It was the first time in more than three years that production had fallen in consecutive months.



Global Oversupply

``Some industrial metals could still correct,'' Marc Faber, founder and managing director of investment company Marc Faber Ltd. in Hong Kong, said Oct. 17. Copper has dropped almost 13 percent from a record $8,800 on May 11.

The decline in China's demand for copper triggered a global oversupply of 88,000 tons from January through August, the WBMS said. European demand jumped 17 percent.

A decline in copper prices may be partially mitigated by lower production. Freeport-McMoRan Copper & Gold Inc. said Oct. 17 that third-quarter output dropped 11 percent from a year earlier. Freeport's Grasberg mine in Indonesia is the world's second-largest copper mine.

Mitsubishi Materials Corp. suspended operations at its smelting unit in Indonesia until the middle of December. It will lose 52,000 tons of output, about a fifth of annual production.

Oct. 20 (Bloomberg)

Shanghai Copper Stockpiles Rise for Second Week on Tax Changes - By Xiao Yu


Copper stockpiles in Shanghai rose for a second week as demand for the metal declined after China ended export-tariff rebates on refined copper and some products.

Deliverable stockpiles of the metal gained 570 tons to 36,665 tons this week, based on a survey of six warehouses in Shanghai, the exchange said today. Stockpiles have risen 9 percent in the past two weeks, according to Bloomberg data.

``Copper demand was hurt after China removed tax rebates on exports of refined copper and some copper products,'' said Li Ling, a Shanghai-based trader at Star Futures Co. The changes had eroded processors' profit margins, Li said.

China, the world's biggest copper user, ended export-tariff rebates on refined copper and some products, and cut the rebate to 5 percent from 13 percent for copper tubes, five ministries said Sept. 15. It also reduced rebates on some other metals, steel and textiles. Copper is used to make pipes and wires.

``Rising stockpiles imply slowing demand for the metals, which is reasonable as the low season is coming,'' Wu Bowen, a trader of Shanghai Jinpeng Futures Co., said today.

Aluminum stockpiles rose 1,047 tons to 38,121 tons, based on a survey of 11 warehouses in Shanghai, Guangdong and Wuxi, the exchange said in a statement on its Web site.

Dai Oldenrich - Good articles from good sources, just thought I'd say thanks for a very good thread. I read it even if others don't.

Oct. 21 - (Bloomberg)

Gold Falls From Two-Week High on Speculation Rally Was Overdone - By Pham-Duy Nguyen


Gold fell in New York for the third day this week as some investors bet the rally to $600 an ounce yesterday was overdone.

Gold closed above $600 yesterday for the first time since Oct. 2. Speculative long positions, or bets that prices will rise, are at the lowest this year. The metal is down 18 percent from a 26-year high of $732 in mid-May.

``The speculative interest at $600 is rather cautious,'' said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. ``You've seen the fund business migrate to other markets and away from the metals.''

Gold futures for December delivery fell $5.80, or 1 percent, to $596.70 an ounce at 10:46 a.m. on the Comex division of the New York Mercantile Exchange. Prices are still up 0.7 percent for the week and 15 percent for the year.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Hedge-fund managers and other large speculators decreased their net-long position in Comex gold futures in the week ended Oct. 10, according to Commodity Futures Trading Commission data.

Speculative long positions outnumbered short positions by 62,449 contracts on the Comex, down 10 percent from a week earlier, the Washington-based commission said Oct. 13.

``There's a minor amount of profit taking,'' said Frank McGhee, head metals trader at Integrated Borkerage Services Inc. in Chicago. ``You've got some investors selling after yesterday's $10 run.''



Lower Energy Costs

Gold's losses accelerated after oil fell, erasing earlier gains. The price of gold has followed oil this year, gaining as much as 39 percent as oil climbed to a record in July. Oil fell below $59 a barrel on skepticism that members of the Organization of Petroleum Exporting Countries will cut production by 1.2 million barrels a day.

OPEC members announced the cuts yesterday to stem a 25 percent decline in prices over the past three months.

``Oil remains a factor in the gold market,'' said Platt of Archer. ``The OPEC reaction is a little disappointing. The market seems nonplused by the move by OPEC.''

Some investors buy gold when energy expenses climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in the inflation rate.

Oct. 21 - (Bloomberg)

Copper Falls on Signs U.S. Demand May Slow, Chile Labor Talks - By Dale Crofts


Copper prices fell on speculation that slower economic growth will force manufacturers and builders to buy less metal.

Caterpillar Inc., the world's largest maker of earthmoving machines, said sales of equipment such as bulldozers won't meet expectations as a housing slump triggers slower economic growth. The average U.S. home contains about 400 pounds of copper, which has dropped 14 percent from a record high in May.

``The Caterpillar earnings were further affirmation of the housing slowdown and that is weighing on copper,'' said Michael Pento, a senior market strategist at Delta Global Advisors Inc. in Huntington Beach, California. ``People think we are going into this beautiful soft landing, but I'm not convinced.''

Copper for delivery in December fell 4.75 cents, or 1.4 percent, to $3.462 a pound on the Comex division of the New York Mercantile Exchange. Prices rose 1.4 percent for the week, the second straight gain, and are up 93 percent from a year ago.

Copper for delivery in three months on the London Metal Exchange dropped $100, or 1.3 percent, to $7,560 a metric ton, leaving copper up 1.4 percent for the week, the first weekly gain in four.

Caterpillar, which gets more than half its sales in the U.S., forecast revenue growth of 13 percent in 2006, instead of a previous goal of 12 percent to 15 percent. Profit will be $5.05 to $5.30 a share, down from its earlier estimate of $5.25 to $5.50.



Chile Labor Talks

Prices also fell on speculation Codelco, the world's biggest copper producer, may avoid a strike at Chuquicamata, its largest mine.

Codelco probably will present labor leaders at Chuquicamata with a wage offer at a meeting Oct. 23, a union director said. Union leaders will meet for the first time with management to discuss wage negotiations, Hector Roco, a director on the mine's largest union, said today by telephone.

Codelco's success in renewing labor contracts at the Northern division and Andina ``will remove quite a big bullish factor from the market,'' Robin Bhar, an analyst at UBS Ltd. In London, said today by phone.

The Sunday Times - October 22, 2006

Peruvian to join London's band of mining tycoons - Grant Ringshaw


A SOUTH American mining tycoon is to become the latest foreign businessman to cash in on the natural-resources boom by listing his company on the London Stock Exchange.

Eduardo Hochschild, executive chairman and controlling shareholder in the Peruvian gold and silver miner Hochschild Mining, will see his personal fortune valued at $1.6 billion (850m) by next months London debut.

Hochschild, the worlds fourth-largest producer of silver, is planning to raise $500m from the float, valuing the firm at about $2 billion. The business is 80% owned by Eduardo Hochschild. Alberto Beeck, another executive director, has a 17.6% stake.

Roberto Danino, a former prime minister of Peru and general counsel for the World Bank, is also an executive director with a 1.5% stake.

After the float, Eduardo Hochschilds stake is expected to fall to about 60%. His decision to list the companys shares on the London Stock Exchange (LSE) will be seen as another victory for London over its arch-rival New York.

The LSE and the New York Stock Exchange have been engaged in a bitter battle to attract the flotations of foreign companies.

However, New York has suffered because of the onerous requirements of the Sarbanes-Oxley Act and the risk from class-action lawsuits in America.

A host of foreign mining and metal companies are planning to come to London. These include Severstal, the giant Russian steelmaker, and Chelyabinsk Zinc, Russias largest zinc producer.

The Peruvian group is the worlds fourth-largest producer of silver and has significant interests in gold mining. Last year, Hochschild produced 10.5m ounces of silver and 233,000 ounces of gold. The groups profits are split evenly between production of these two precious metals.

Hochschild owns three mines in Peru. It also has two advanced projects in Peru and Argentina. A further two projects in Mexico are in their early stages. It has about 25 long-term development projects in Latin America in total.

Hochschild is a specialist in deep-vein underground mines, as opposed to many gold and silver mining rivals that operate open-cast mines. Deep-vein mines are typically more profitable, with Hochschilds margins running at about 50%.

The Peruvian mining giant is aiming to use the funds raised from the flotation to develop its existing projects. The group has set itself a target of doubling its combined gold and silver production by 2011 through organic growth.

However, Hochschild is also understood to be looking at a series of joint ventures and acquisitions worth between $150m and $250m each.

Hochschild was set up by Mauricio Hochschild, a German immigrant, in Chile in 1911 as a base-metals company.

After the second world war the group expanded into Bolivia and Peru. By the 1960s it had become one of the worlds largest mining groups, similar in size to Rio Tinto. However, in 1984, the South American operations were sold to Anglo American.

In the same year, Hochschild bought Anglos Peruvian interests, creating the foundations of the present group.

Hochschild is managed by an executive committee, led by Eduardo Hochschild. But the group is expected to appoint a chief executive after the flotation. The board also includes Sir Malcolm Field, a former chief executive of WH Smith, the high-street retailer.

Hochschild executives are due to meet potential investors this week.

The float is being handled by the investment banks JP Morgan Cazenove and Goldman Sachs.

MUMBAI - Oct 23 - (Reuters) -

India to let private firms run coal mines-report


India will allow private mining firms, including foreign ones, to enter the coal mining sector next month to help increase energy supplies in the country, the Economic Times newspaper reported on Monday.

Only power, steel and cement firms are currently allowed to own coal mines, which they operate jointly with mining firms. The new rules will allow mining firms to own and run mines, the paper said, citing unnamed sources in the coal and law ministries.

The newspaper said mining companies, including BHP Billiton, Rio Tinto and Sesa Goa, would soon be able to gain rights to mine and operate coal mines in India, boosting production.

"We are now in the final stages of drafting guidelines for allowing captive coal block allocation to private-sector mining companies too. This is expected to be notified by the month-end or in early November," the report quoted a government source as saying.

The government will invite bids from mining companies after the new policy is announced, the report said.

Oct. 23 (Bloomberg)

Copper Declines in Shanghai on Signs of Slowing Demand in China - By Xiaowei Li


Copper futures in Shanghai fell on concern demand for the metal used in pipes and wires is slowing in China, the world's largest consumer.

Consumption of copper in China declined in the eight months to August, the Ware, England-based World Bureau of Metals Statistics said Oct. 18. There is little sign demand for the metal is picking up in recent months, Wang Zheng, an analyst at Shanghai Continent Futures Co. said.

``Current demand for the metal, as shown by orders from users, is weaker than we expected,'' Wang said today.

Copper for delivery in December fell as much as 850 yuan, or 1.2 percent, to 70,820 yuan ($8,966) a metric ton on the Shanghai Futures Exchange, and traded at 71,160 yuan at the market's midday break.



----------------------------------------------------



TAIPEI - Oct 23 - (Reuters)

Shanghai copper down in quiet trade; LME ticks up - By Richard Dobson


Shanghai copper futures softened on Monday despite firmer London prices, as quiet turnover and relatively high prices kept speculators and investors at the sidelines.

Copper on the Shanghai Futures Exchange moved lower on Monday, with the most active December contract closed the morning session down 340 yuan, or 0.5 percent, at 71,160 yuan a tonne from Friday's close of 71,500 yuan.

"Speculators abandoned the Shanghai copper market due to small-scale movement, while hedgers quit the market because of mounting prices. Thus the trading volume is very light," said Li Rong, analyst at Great Wall Futures in Shanghai.

Oct. 23 - (Bloomberg)

Housing in U.S. Poised to Worsen, Derivatives Show - By Darrell Hassler and Hamish Risk


The slumping U.S. housing market is about to get a lot worse, according to traders of mortgage-backed securities and the so-called derivatives on which they are based.

The ABX index, which measures the risk of owning bonds backed by home-loans to people with poor credit, rose 30 percent since Aug. 9 to the highest since January. There are more than $500 billion of such notes outstanding.

The increase in the index shows traders expect mortgage delinquencies and foreclosures to increase at a time when the number of homes for sale as measured by the National Association of Realtors is at a 13-year high. The percentage of home-loan payments more than 60 days delinquent rose to 7.23 percent in July from 5.9 percent a year earlier, the fastest rate of increase since 1998, Moody's Investors Service said Oct. 17.

``Delinquency trends and home prices'' show a weakening real estate market, said Scott Eichel, head of credit trading for New York-based Bear Stearns & Co., the biggest underwriter of bonds backed by mortgages. ``A lot of investors that have concerns about the housing market'' are using the ABX index to speculate on a continued drop, he said.

Sales of new and existing homes probably will drop 9.4 percent to 6.76 million in 2006 from a record last year, McLean, Virginia-based mortgage buyer Freddie Mac said Oct. 10. Home sales have risen the past five years.



ABX Index

The ABX index, created by London-based Markit Group Ltd., measures the cost, or spread, of credit-default swaps based on the $565 billion of bonds secured by so-called subprime mortgages and home-equity loans. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on the ability of borrowers to repay debt. An increase in the spread indicates deterioration in the perception of credit quality; a decline suggests improvement.

The index tracks 20 asset-backed securities that contain loans rated BBB-, the lowest level of investment grade debt. Based on the index, it costs an investor $267,000 to protect $10 million of bonds against default for five years, up from $205,000 in August. The investor would get face value for the bonds in exchange for the securities should a borrower fail to adhere to the debt agreements.



`Unequivocally Bad'

``The unequivocally bad housing data we've seen'' is prompting investors to seek to profit from potential declines in mortgage-backed securities, said Greg Lippmann, the head of asset-backed trading at Deutsche Bank AG in New York who helped create the ABX indexes in January.

Contracts covering $5 billion of home-loan debt change hands daily, he said. Derivatives are contracts whose value is derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or the weather.

The housing boom spawned new types of mortgages that allowed consumers to buy homes they may not have been able to afford otherwise.

About 18 percent of all mortgages issued in the first half of the year were to borrowers considered most likely to default, such as those with high credit-card balances, up from 2.4 percent in 1998, based on data from the Mortgage Bankers Association. The Washington-based trade group's 2,700 members represent 70 percent of the home-loan business.

The amount of bonds backed by subprime loans more than doubled since 2001, according to the Bond Market Association, a New York-based trade group of more than 200 securities firms.



Worst Month

A Merrill Lynch & Co. index of debt securities derived from home-equity loans rated AA to BBB is having its worst month this year, falling 0.01 percent. They have returned 4.54 percent since the end of December. Banks and lenders such as Countrywide Financial Corp. in Calabasas, California, and Washington Mutual Inc. of Seattle typically take mortgages and package them into bonds for sale to investors. The bonds are then divided into pieces of varying risk.

All asset-backed securities, which also includes loans packaged from credit-card and student debt, have returned 4.27 percent this year on average.

More borrowers are finding it harder to meet interest payments following 17 interest-rate increases by the Federal Reserve since mid-2004.

The default rate for subprime loans rose to 7.35 percent in July from 5.51 percent a year earlier, according to investment bank Friedman Billings Ramsey Group Inc. in Arlington Virginia.

Nine percent of all subprime loans made in 2006 may default within five years, the worst performance since at least 1998, Glenn Schultz, head of asset-backed securities at Charlotte, North Carolina-based Wachovia Corp., said in an Oct. 17 report.



`More Visibility'

``People have a little more visibility on the slowdown than they did two or three months ago,'' said Andrew Chow, who manages $5.5 billion of asset-backed securities and credit-default swaps at Seneca Capital Management in San Francisco.

Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, forecasts the housing slump will cause the economy to slow and force the Fed to lower interest rates to 4.5 percent next year. The central bank's target for overnight loans between banks is 5.25 percent. Pimco is a unit of Munich-based Allianz SE.

The National Association of Home Builders/Wells Fargo said on Oct. 17 that its index of builder confidence this month rose to 31 from 30 in September, the first increase in a year.

Housing starts in September rose to an annual rate of 1.772 million from a 1.674 million pace in August, the Commerce Department in Washington said Oct. 18. The median estimate of 61 economists surveyed by Bloomberg News was for a decline to an annual rate of 1.64 million.



Falling Prices

Even with the gains, the National Association of Realtors this month predicted prices of new homes may fall for the first time in 15 years. The trade group on Oct. 11 estimates that the median price of a new U.S. home probably will drop 0.2 percent to $240,500. The inventory of homes on the market rose to a record 3.92 million, the group said Sept. 25.

Most credit-default swap trading is in securities rated BBB or BBB- because they are the most volatile and have the greatest chance to be profitable, said Jack McCleary, head of asset-backed trading for UBS AG in New York.

Subprime mortgages with those credit ratings historically have had losses of about 5 percent of the loan value, McCleary said. Some investors are betting that losses may increase to 12 to 14 percent in the next three years, which could exponentially increase value of credit-default swaps, he said.

``In effect, it's a lottery ticket,'' he said.

Oct. 23 - (Bloomberg)

Gold Falls Most in Two Weeks as Dollar Climbs, Crude Oil Drops - By Pham-Duy Nguyen


Gold in New York fell the most in two weeks as a gain in the value of the dollar against the euro reduced the metal's appeal as an alternative investment.

Gold, sold in dollars, generally moves in the opposite direction of the U.S. currency, which advanced today on expectations interest rates in the U.S. will remain higher than Europe's. A drop in oil prices also reduced the metal's appeal as a hedge against inflation.

``With the stronger U.S. dollar and lower oil prices, gold's going to have a problem holding on to $600,'' said Mike Sander, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``There's less of an inflationary risk.''

Gold futures for December delivery tumbled $13.50, or 2.3 percent, to $582.90 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage drop since Oct. 4. Prices still are up 24 percent from a year ago.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Interest-rate futures indicate a 12 percent chance the Fed will raise its benchmark rate to 5.5 percent from 5.25 at its Jan. 31 meeting, compared with a 46 percent likelihood of a cut signaled on Sept. 25.

The U.S. central bank halted a two-year cycle of raising rates at its August meeting. Gold is up 13 percent this year, and the euro has climbed 5.9 percent against the dollar.

Gold also fell as oil dropped for a second straight day on speculation the Organization of Petroleum Exporting Countries won't cut production as much as members had planned.



`Benign' Inflation Outlook

``The inflation outlook is fairly benign,'' said David Thurtell, an analyst at BNP Paribas in London. ``Investor demand will not be as strong as it has been.''

Gold has slumped 20 percent from a 26-year high of $732 an ounce in mid-May. Oil prices have dropped 25 percent from a record $78.40 in July.

Some investors buy gold when energy expenses climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in the inflation rate.

Hedge-fund managers and other large speculators reduced their net-long position in Comex gold in the week ended Oct. 17 to the lowest in more than a year, Commodity Futures Trading Commission data showed on Oct. 20. Speculative long positions, or bets that prices will rise, outnumbered short positions by 61,259 contracts, down 1.9 percent from a week earlier.

``There seems little sign of investors and speculators wanting to rebuild long positions,'' John Reade, an analyst at UBS AG in London, said in a report.

Oct. 23 - (Bloomberg)

Copper Drops in N.Y. as U.S. Housing Slowdown May Reduce Demand - By Chanyaporn Chanjaroen


Copper fell to the lowest in more than a week in New York as a slowdown in the U.S. housing market spurred speculation that demand for the metal will be curbed.

Sales of new and existing homes probably will drop 9.4 percent to 6.76 million in 2006 from a record last year, McLean, Virginia-based mortgage buyer Freddie Mac said Oct. 10. Home sales have risen in the past five years, contributing to a quadrupling of copper prices. As much as 400 pounds of copper is used in an average home in the U.S. the world's second-largest user of the metal.

``Skepticism has increased,'' Ulrich Steiner, an analyst at Bank Leu AG in Zurich, said in an interview today. ``Market participants are somewhat nervous. The risk is rather to the downside.'' The U.S. housing market is ``important'' to copper, he said.

Copper futures for delivery in December dropped 1.1 cents, or 0.3 percent, to $3.451 a pound on the Comex division of the New York Mercantile Exchange, the lowest closing price for a most-active contract since Oct. 13. Prices gained 1.4 percent last week. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Copper for delivery in three months on the London Metal Exchange gained $5 to $7,565 a ton as of 6:21 p.m. local time. It has declined 14 percent from a record $8,800 on May 11.

The slumping U.S. housing market is about to get a lot worse, according to traders of mortgage-backed securities and the so-called derivatives on which they are based.

The ABX index, which measures the risk of owning bonds backed by home-loans to people with poor credit, has risen 30 percent since Aug. 9 to the highest since January. The increase shows traders expect mortgage delinquencies and foreclosures to increase at a time when the number of homes for sale as measured by the National Association of Realtors is at a 13-year high.



Weakening Market

``Delinquency trends and home prices'' show a weakening real estate market, said Scott Eichel, head of credit trading for New York-based Bear Stearns & Co., the biggest underwriter of bonds backed by mortgages.

Recent economic data showing a slowdown in the U.S. economy aren't ``compelling enough'' for investors to sell short on copper, said Adam Rowley, London-based analyst at Macquarie Bank Ltd.

``If you go are short, you are counting on a significant slowdown in the economy,'' Rowley said. ``The information we've got isn't compelling enough.''

The low inventory of copper on the LME will support prices, the analyst said.

Inventory at warehouses monitored by the LME gained 800 metric tons, or 0.7 percent, to 113,075 tons, the LME said today in a daily report. Stockpiles are equal to less than three days of global demand. Consumption will beat output by 101,000 tons this year, Gold Sachs Group Inc. said last month.



Tin

LME tin stockpiles dropped 680 metric tons, or 5.4 percent, to 11,970 tons, the exchange said. The decline is the largest since July 26, 2005. Tin for delivery in three months gained $225, or 2.2 percent, to $10,375 a ton.

Aluminum dropped $6 to $2,712 a ton and lead increased $12 to $1,512. Nickel gained $350, or 1.1 percent, to $32,400 a ton and zinc dropped $50 to $3,920 a ton.

Dow Jones Newswires - Tuesday, October 24, 2006

Copper Tipped To Stay Quiet Today


Little to suggest copper will break out of recent sluggish trading mode, as speculators continue to focus on tighter nickel, zinc markets; meanwhile, weaker oil, gold markets keep other players wary, despite fairly upbeat outlook for red metal consumer demand. "Copper lacks incentives these days and should be in sideways trading today in Shanghai," says Maike Group executive VP Haihua Shen; "it's a quiet market." LME 3-month trades last at $7,570/ton, down $25 on London PM kerb.

Oct. 24 (Bloomberg)

Copper Futures Little Changed in Shanghai Amid Growth Concerns - By Xiaowei Li


Copper futures in Shanghai were little changed after falling yesterday amid concern that demand is slowing for the metal used to make pipes and wires.

Copper fell to its lowest in more than a week in New York yesterday as a slowdown in the U.S. housing market spurred speculation orders for the metal will decline. There's been little sign in recent months that copper demand in China is picking up, said analyst Wang Zheng.

``Current demand for the metal, as shown by orders from users, is weaker than we expected,'' Shanghai Continent Futures Co.'s Wang said. ``From the funds perspective, buying from investment funds seem to have no continued momentum due to not-so-good returns in the near term.''

Copper for delivery in December on the Shanghai Futures Exchange traded at 71,040 yuan ($8,989) a metric ton at 11:29 a.m. local time, 80 yuan lower than yesterday's close. Earlier, the contract rose as much as 170 yuan to 71,290 yuan and fell as much as 90 yuan to 71,030 yuan.

Metal for delivery in three months on the London Metal Exchange rose $25, or 0.3 percent, to $7,570 at 11:26 a.m. Shanghai time.

Oct. 24 (Bloomberg)

Copper Drops in London as LME Stockpiles Jump Most in 6 Months - By Chanyaporn Chanjaroen


Copper dropped for a third straight session in London as stockpiles of the metal used in wires and pipes jumped the most in six months, indicating a supply squeeze may be easing.

Inventory at warehouses monitored by the London Metal Exchange gained 7,750 metric tons, or 6.9 percent, to 120,825 tons, the LME said today in a daily report. Still, stockpiles are equal to less than three days of global demand.

``The physical market is very well-supplied,'' Andrew Silver, a trader at London-based Natexis Commodity Markets, said by telephone. ``No one bothers to buy the metal these days.'' Natexis is one of 11 companies that trade on the LME floor.

Copper for delivery in three months on the LME dropped $60, or 0.8 percent, to $7,485 a ton as of 10:37 a.m. local time. It has declined 2.3 percent in the past three sessions. The three- month contract traded at a record $8,800 a ton on May 11.

Most of today's increases in LME copper stockpiles were recorded in Singapore, where inventory rose by 7,025 tons. Singapore, Asia's trading hub, is the leading point of export to China, the world's largest user of copper, and southeast Asia.

Stockpiles rose even as output at producing companies fell. BHP Billiton Ltd., the world's largest mining company, said today production dropped 19 percent to 249,900 tons in the quarter ended Sept. 30 after workers at the Escondida mine in Chile stopped work for four weeks in August and September. Scheduled maintenance at Olympic Dam in Australia also cut output.



Lead, Aluminum

Maintenance work reduced BHP Billiton's zinc and lead production in Australia, the Melbourne-based company said. Lead output fell 25 percent and zinc 28 percent. BHP Billiton owns the Cannington site in Australia, the world's largest lead mine.

Lower production at Cannington sent lead to a record $1,550 a ton on Oct. 16. Prices dropped $7, or 0.5 percent, to $1,505 a ton today.

Aluminum declined after Norsk Hydro ASA, the world's fourth-largest producer last year, said demand will decline in 2007 as economic growth slows.

``The primary aluminum market is expected to move from a moderate deficit in 2006 to a moderate surplus in 2007,'' the company said in a statement accompanying its third-quarter earnings. ``Key economic indicators signal lower global growth in 2007.''

OAO Russian Aluminum, creating the world's largest metal producer in a merger OAO Sual Group, said yesterday prices will stay at about $2,300 to $2,600 a ton for ``a number of years'' as supplies remain tight.

Aluminum fell $22, or 0.8 percent, to $2,688 a ton.

Among other metals on the LME, zinc dropped $40, or 1 percent, to $3,880 a ton and tin was unchanged at $10375. Nickel declined $250, or 0.8 percent, to $32,150 a ton.

FT.com - By Chris Flood

Dealers said base metals trading was lacklustre, suffering from weak volumes amid a reluctance to open new positions ahead of the Federal Reserve meeting on US interest rates. Trading is expected to remain quiet this week before the release of US third quarter GDP data on Friday.

Copper eased 0.8 per cent to $7,485 a tonne. Inco, the Canadian miner, said copper production in the third quarter was 27,668 tonnes, flat compared to the same period last year and lower than expected, mainly due to strike action at Voiseys Bay mine.

Codelco has begun wage negotiations early with union leaders from its largest division Codelco Norte which produced almost 1m tonnes of copper last year, alomost half of the Chilean state companys output.

Nickel retreated 0.5 per cent to $32,250 a tonne after it hit a record $32,700 in the previous session.

Zinc edged 0.4 peer cent lower to $3,905 a tonne in spite of a further fall in of 2,525 tonnes in LME inventories, shrinking rapidly towards the psychological level of 100,000 tonnes from 117,375 tonnes currently.

Oct. 25 (Bloomberg)

Gold Falls in Asian Trade as Charts Indicate More Drops Likely - By Chia-Peck Wong

Gold fell in Asian trade as charts some traders use to predict prices indicate that more declines may be in store.

Speculators and traders are selling gold after the bullion failed to break past $600 an ounce twice this month. That level is a so-called resistance on charts where sell orders cluster.

``Gold's falling on technical reasons, $600 looks to be a top so in the short-term, gold's outlook isn't very good,'' Yang Qing, the chief gold trader at the Bank of China Ltd., said by phone from Beijing.

Gold for immediate delivery fell as much as $2.35, or 0.4 percent, to $584.10 an ounce and traded at $584.39 at 11:55 a.m. Singapore time.

Traders are awaiting the outcome of the two-day meeting of Federal Open Market Committee of the U.S. Federal Reserve that starts today. Any comment from the Fed saying inflation is still a concern would help gold prices, Bank of China's Yang said.

All 106 economists surveyed by Bloomberg expect the Fed to hold its target rate at 5.25 percent today. Minutes from the Fed's September meeting, released Oct. 11, showed the central bank saw a ``substantial risk'' inflation may not recede.

``The gold market is likely to remain range-bound ahead of the Fed meeting,'' Darren Heathcote, head of trading at Investec Australia, said by phone from Sydney.

Gold futures for December delivery fell 10 cents to $587.50 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange at 11:48 a.m. Singapore time.

Oct. 25 (Bloomberg)

Copper Futures in Shanghai Drop Amid Concerns Growth Will Slow - By Xiaowei Li


Copper futures in Shanghai fell for a third day amid concern that the rate of growth in the world's fourth-largest economy is slowing, curbing demand for the metal used to make pipes and wires.

China's economic growth may be less than 10 percent next year as government curbs on investment and liquidity take effect, the National Development and Reform Commission's Academy of Macroeconomic Research said in a report today. China's economic expansion slowed for the first time in a year to 10.4 percent in the third quarter, after reaching a decade-high of 11.3 percent in the second quarter.

``The newly formed consensus on a slowing economy in 2007 is weighing on copper,'' Li Xun, a trader at Shanghai Continent Futures Co., said today. ``Investment funds are taking a more cautious approach, and have either suspended buying or switched to taking short positions.''

So-called short positions are bets that prices will fall.

Copper for delivery in December on the Shanghai Futures Exchange declined as much as 520 yuan, or 0.7 percent, to 70,280 yuan ($8,927) a metric ton. The contract traded at 70,500 yuan at the market's midday break.

Some investors were also reluctant to buy copper ahead of today's policy statement from the Federal Open Market Committee, which sets interest rates at the U.S. central bank, Li said.

While interest rate are expected to remain unchanged at 5.25 percent, the accompanying statement, due at about 2:15 p.m. Washington time, will give the bank's outlook on growth and inflation in the world's largest economy.

Copper for delivery in three months on the London Metal Exchange gained $25, or 0.3 percent, to $7,520 a ton at 11:29 a.m. Shanghai time. The contract yesterday fell $50, or 0.7 percent, to $7,495.

Oct. 27 (Bloomberg)

Gold Falls in Asia as Dollar Gains, Reducing Investment Appeal - By Feiwen Rong


Gold declined in Asia for the first session in four as the dollar strengthened against yen, diminishing the metal's appeal as an alternative investment.

The dollar rose as much as 0.3 percent against the yen on deflation concern in Japan and speculation the U.S. Federal Reserve will keep borrowing costs at a 5 1/2-year high for the rest of the year.

``The dollar is quite stable at the moment and that's bearish for the gold,'' Ellison Chu, manager of precious metals at Standard Bank Asia Ltd. said by phone from Hong Kong today.

Gold for immediate delivery declined as much as $2.5, or 0.4 percent, to $594.65 an ounce and traded at $595.98 at 13:11 a.m. Singapore time.

A stronger dollar makes gold less appealing versus other dollar-denominated assets such as stocks and bonds.

Still, gold may rebound because the Federal Reserve officials' latest comments on U.S. economy and interest rates ``will cause some weakness'' in dollar, said Rowan Menzies, chief commodity analyst at Commodity Warrants Australia in Sydney.

The interest rate differential between the U.S. and the euro-zone is likely ``to narrow further,'' Menzies said.



Crude Oil

Bullion also suffered today due to the prospect of bearish crude oil prices, said Mao Jian, gold trader with Bank of China in Beijing. Gold usually becomes a less appealing hedge against inflation when oil prices drop.

Crude oil for December delivery dropped as much as 16 cents, or 0.3 percent, to $60.20 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Oil has fallen partly on signs pre-winter stockpiles in the U.S., the world's biggest oil consumer, are sufficient.

Gold for delivery in December declined as much as $2.80, or 0.5 percent, to $597 an ounce in after-hours electronic trade on the Comex division of the New York Mercantile Exchange. The contract traded at $598.60 at 12:53 a.m. Singapore time. The precious metal reached a 26-year high of $730.40 on May 12 as oil prices climbed to a record.

Metals Place - 26 October 2006

China's imported iron ore prices drop by 7.2 percent


China's imported iron ore prices dropped by 7.2 percent year-on-year to reach 62.7 U.S. dollars per ton on average in the first three quarters, statistics with the China Iron and Steel Association (CISA) show.

Analysts attributed the decrease to the slowdown of China's imports of iron ore.

China imported 247 million tons of iron ore in the first nine months, up a hefty 24.2 percent from a year earlier, but down 7 percentage points in growth rate, and meanwhile, this is the first time since 2003 that the import growth has dipped under the 30 percent bar, said Luo Bingsheng, CISA's vice chairman.

"The prices are declining because the imports of iron ore are turning to a moderate growth from a fast growth, which were influenced by the steady growth of domestic iron ore output," he told an ongoing international symposium on the iron raw material in Qingdao, east China's Shandong Province.

In the first three quarters, China produced more than 400 million tons of iron ore, up 37 percent year-on-year, and the domestic prices have gone below the imported prices since May, CISA statistics show.

As a result in August, domestic steel businesses purchased iron ore from domestic mines 2.56 times that in January, statistics show.

After iron ore prices surged 71.5 percent last year, costing China the world's largest iron ore importer an additional 570 million U.S. dollars, the country has been demanding a bigger say in setting global benchmark prices.

China has been very active in negotiations with top international providers Companhia Vale do Rio Doce, BlueScope and Hammersley Iron. It only reluctantly agreed to a further 19 percent rise in iron ore prices this year.

The symposium is regarded as a warming up of a fresh round of international iron ore prices negotiation, which attract great attention of the world iron and steel industry.

More than 40 Chinese iron and steel companies including Shanghai-based Baosteel as well as the world top three iron ore providers Australian BHP Billiton, Rio Tinto and Brazilian Vale do Rio Doce attended the symposium.

But the executives of the foreign iron ore providers declined to comment on the iron prices next year, only saying that they are optimistic about China's steel market and iron ore imports. They also predicted a gap between demand and supply in China.

Lu Jianhua, director of China's Ministry of Commerce's Foreign Trade Department, did not think imported iron ore prices would continue to rise, saying that past four straight years of increase had made mines gain huge profits but left steel businesses earning little or even suffering losses.

"It is not in the interests of the two sides of demand and supply," he said.

Lu predicted that China's total iron ore imports for the year would be around 320 million tons, up 20 percent from a year earlier but down 12 percentage points in growth rate.

"Chinese steel businesses should actively participate in the global iron ore pricing and it is also justified for the Chinese government to pay attention to this, because iron ore is the major raw material of iron and steel industry, which concerns the whole of national economy," he said.

Oct. 27 (Bloomberg)

Copper Futures in Shanghai Decline Amid Concern Growth May Slow - By Xiaowei Li


Copper futures in Shanghai fell on concern the rate of economic growth in China and the U.S. is slowing, curbing demand for the metal that is used to make pipes and wires.

U.S. third-quarter growth, data on which is set for release later today, was 1.8 percent, Daiwa Securities America Inc. forecast, compared with 2.6 percent in the previous quarter. China's may grow less than 10 percent next year as the government curbs investment, the National Development and Reform Commission's Academy of Macroeconomic Research said this week.

``A slowing economy in 2007, as forecast by many, is weighing on copper,'' said Wang Zheng, a trader at Shanghai Continent Futures Co. Some investors were reluctant to take positions before the release of the U.S. data, he said.

Copper for delivery in December on the Shanghai Futures Exchange fell as much as 600 yuan, or 0.9 percent, to 70,170 yuan ($8,895). The contract traded at 70,360 yuan at the market's midday break.

Copper for delivery in three months on the London Metal Exchange gained $40, or 0.5 percent, to $7,490 a ton at 12:18 p.m. Shanghai time. The contract had fallen for the five previous trading sessions.

Dow Jones Newswires - Friday, October 27, 2006

Nickel May Be Overpriced On Easing Risk


LME 3-month nickel last at $30,500/ton, up $150 vs London PM kerb, recouping a little of nearly 4% overnight loss driven by 1,086-ton increase in warehouse inventories, bucking recent stock downtrend. "Inventories remain at very low levels by historical standards but nickel is still trading at a super premium price - perhaps too much given physical delivery problems look less likely to be repeated," says Australia's CBA.

Business Report - October 27, 2006

The commodity bull run is still in its early stages - By Bruce Tinney


The recent major themes of earnings growth, extraordinary cash flow and corporate activity should remain in place for the resources sector.

Strong, concerted growth in global industrial production has been the driving force behind the strength in commodity prices for the past three years.

Chinese industrial production, which grew at around 10 percent a year during the late 1990s, stepped up a gear to 20 percent. At the same time, Group of Seven (G7) industrial production recovered from the weakness in 2002, growing at an above-trend rate since 2004.

We are in the early stages of a long-term bull market for commodities, which should progress as Asia moves up the development curve. The per capita consumption of commodities for China and India is well below that of developed economies.

Recently, however, the G7 leading indicator has turned down, and globally we are now at the mature end of the current business cycle.

Historically, metal prices have declined when the US Federal Reserve stopped raising interest rates. Oil prices have already corrected, and base metals are expected to follow. It is interesting that the price:earnings ratio of BHP Billiton, the largest miner in the world, is 11.5 times.

This is the same rating on which the company traded at the start of this commodity cycle early in 2003. In other words, the market is rating the company as if this is the end of the cycle, and earnings have peaked. No recognition is being awarded for its extraordinary cash flows, management initiatives, portfolio positioning or project pipeline.

The surge in demand for commodities followed years of underinvestment in production capacity, consequently new supply has simply failed to meet demand, as evidenced by falling metal inventories.

The poor supply-side response is not a short-term phenomenon; as capital and operating costs are rising and quali- fied people are in short supply.

Consequently, a return to previous trough price levels for commodities is not anticipated and the major themes for the mining industry should remain in place. The rand will continue to weaken, acting as a hedge against any dollar commodity price weakness.

At the half-year, the resource companies reported year-on-year earnings growth in excess of 40 percent.

While earnings growth momentum for the diversified mining sector should peak in the first half of 2007, forward earnings growth for the platinum and gold producers could be substantial, even at lower metal prices, and forward price:earnings multiples are well below historical averages.

The feature of the mid-year reporting season was the high level of free cash flow, and resulting strength of the balance sheets for the resource firms.

Over the next 18 months, mining companies should continue to generate above-normal levels of discretionary cash flow at a time when balance sheets are relatively ungeared and mining projects are in short supply.

The excess cash should flow back to shareholders via lower dividend cover, share buy-backs, or special dividends.

The corporate activity stage of this economic cycle is under way, with some large deals, including CVRD's $15.16 billion (R114 billion) cash offer for Canadian mining house Inco.

In the absence of greenfields investments, there should be further consolidation of the industry.

Beneficiaries of corporate action could include Kumba, and some of the smaller platinum miners.


# Bruce Tinney is a resources analyst at BoE Private Clients

thanks once again dai for your thread

Glad to be of assistance maddoctor! Happy hunting!!

Oct. 27 (Bloomberg)

Copper May Decline Next Week; Supply Squeeze Eases - By Chanyaporn Chanjaroen


Copper may drop next week after increases in stockpiles worldwide eased a supply squeeze.

Inventory of the metal used in wires and pipes tracked by commodity exchanges in London, New York and Shanghai jumped to 187,079 metric tons, the highest in four weeks. Eight of 11 analysts, investors and traders surveyed by Bloomberg yesterday and Oct. 25 forecast copper will decline next week. Two expect a gain and one little change.

``With copper continuing to flow into the terminal markets, warehouses and domestic business, I'll go with `down,''' said Warren Gelman, president of St. Louis-based trading company Kataman Metals Inc.

Copper for delivery in three months on the London Metal Exchange rose $70, or 0.9 percent, to $7,520 a metric ton as of 11:47 a.m. local time. It has fallen 0.3 percent this week.

On the Comex division of the New York Mercantile Exchange, copper for December delivery gained 0.2 percent to $3.405 a pound in after-hours electronic trading. Copper for delivery in December on the Shanghai Futures Exchange fell 0.7 percent to close at 70,310 yuan ($8,912) a ton. Chinese prices include 17 percent tax and 2 percent duty.

The extra cost of buying copper for immediate delivery on the LME relative to that for three-month delivery narrowed to $7 a ton on Oct. 26, from more $20 a ton a week ago, indicating an easing supply squeeze. In a market with adequate supplies, longer-dated contracts are usually more expensive than nearby ones to reflect the cost of storage and interest.



Supply Shortfall

Rising stockpiles probably will help copper users fill a supply shortfall forecast at 52,000 tons this year by Goldman Sachs Group Inc. Inventory has increased even as production declined at the world's two largest copper mines.

BHP Billiton, the world's largest miner, said output fell 19 percent in the quarter ended Sept. 30, from a year ago as workers at the Escondida mine in Chile went on strike for four weeks in August. Freeport-McMoRan Copper & Gold Inc. said on Oct. 17 that third-quarter output dropped 11 percent from a year earlier at its Grasberg mine in Indonesia, the world's second- largest copper mine after Escondida.

The shortage of copper may improve in the first quarter, Michael Lewis, head of commodities research in London at Deutsche Bank AG, Germany's largest bank, said by telephone. An economic slowdown in the U.S. will curb demand, he said. The U.S. is the world's second-largest copper consumer, after China.

``There's not much tightening in the copper market from now onwards,'' Lewis said.

The Times - October 28, 2006

Miners seem pricey despite soaring worldwide demand


NO OTHER SECTOR is performing quite like the miners and while shares have grown in value as fast or faster than the best for the past five years, the record in the past 18 months is little short of incredible.

In the early years of the century mining shares were bouncing back after having been sidelined as unexciting old economy slow coaches. Part of the long-term outperformance of mining stocks, therefore, can be attributed to the unwinding of anomalous underpricing. Such has been the growth in the last year and a half, however, that there must at least be a risk that mining stocks are now anomalously overpriced.

A 1,000 sum invested just five years ago in a basket of London listed mineral extraction shares would be worth 3,500. A similar sum invested in a FTSE 100 tracker fund would be worth only 1,500. More than half that growth has come in the last year and a half, however. Since April 2004, mining shares have doubled in value, outperforming the average three times over.

So is there any value left in the mining shares? If you glance at the p/e ratio data you could easily jump to the conclusion that there is. The average p/e ratio for the sector over the last five years is 13. At present, however, the sector sits on a multiple just under 10.

It is worth having a second look at the data though. While a low p/e ratio often suggests that shares are cheap, it may also reflect a fear that earnings will slow down. It may also be that p/e ratios seen over the past five years have sat at inflated levels because growth that subsequently materialised was being correctly anticipated.

The current relatively low p/e ratio is partly influenced by the introduction of emerging market miners such as Kazakhmys, the company from the former Soviet satellite state Khazakhstan. Shares in these despite the fact they have recorded some of the most impressive price rises in the sector in recent months sit on low p/e multiples. According to Thomson Datastream, the stock-market data provider, the historic p/e on Kazakhmys shares is 11. Antofagasta, the Chilean copper miner, sits on a multiple of 9. These companies are immersed in emerging market risks: awkward questions hang about standards of corporate governance, exposure to currency risks, and whether time proves that Western shareholders find that their ownership is not all that they appear.

If you examine the dividend data, mining company shares look unequivocally expensive. The six-year average for the mining sector is 2.7 per cent, which in itself is a good deal lower than the 3.1 per cent norm for all London listed shares. At present, mining sector dividend yields sit 40 per cent below the five-year average. They yield half of what has been typically paid by all FTSE shares since since 2001.

Earnings growth at the eight FTSE 100 miners listed is higher than the blue chip peer group and that may mean that miners deliver better than average dividend growth. But, according to Hemscott, which collates a wide range of data on stock market companies, miners earnings will grow at 8.7 per cent in the coming 12 months, and that is only 0.9 percentage points higher than all FTSE 100 firms.

The share price strength is not wholly unjustified. If the prices of metals continue to rise the companies will not even need to raise output to deliver enhanced shareholder value. Moreover, it is easier to see demand from emerging economies such as China continuing rather than fading. The best hope for political stability in the emerging nations will come if standards of living advance.

Consumption per head of population is also likely to grow as the emerging economies grow: you only need to compare the consumption rates per head of population between the US or China or India to recognise that. Miners also seem to have adopted a cautious approach to exploration and development thus far. Output is constrained and that has kept prices firm.

The capital investment required to explore and develop new mines is also huge. But the temptation of high prices will not leave ore deposits unexplored for ever. And what are the chances that all miners will think they are capable of getting in ahead of the pack to put new production onto the market while prices remain at mouthwatering levels seen in recent months. Once the capital has been committed, however, the companies will need to generate a return. Production capacity cannot be turned on and off at will and once supply lines begin to ease, prices could soften despite continuing strength on the demand side.

It is a brave investor who turns their back on miners: simple forces of momentum buying may maintain the upwards share-price moves. But the fundamentals suggest that prices are out of kilter with sensible investment principles.

That said, the group hides quite wide variations. BHP Billiton, for example, has been left behind its peers in terms of share price growth. Not only that but it has one of the higher dividend yields and lower p/e ratios while its earnings are expected to grow faster than most peers. Analysis of the relationship between asset values and market capitalisation also suggests that BHP Billiton is one of the big mining stocks that could show progress from here.



GROWTH STORY

       share price one year % rise
Vedanta          159
Kazakhmys       129
Lonmin            123
Xstrata             92
Antofagasta      79
Anglo American  43
Rio Tinto           36
BHP Billiton        24

very interesting about bhp but what about iron ore prices next year , thought these are likely to fall?

also what do you think about the copper miners , grossly overpriced in my opinion and been looking to short the likes of ved

maddoctor, that's the quandary - is it the top of the cycle - or is it a new age where increased demand of resources from China and India cause such a supply shortage that prices continue to go higher and higher and higher and .......

Oct. 30 (Bloomberg)

Copper in Shanghai Declines After China Raises Taxes on Exports - By Xiaowei Li


Copper futures in Shanghai dropped for a second day after China's government said it will raise export taxes on copper, nickel and aluminum from Nov. 1.

Export taxes on the metals will increase to 15 percent from as high as 10 percent, the government said Oct. 27. Taxes on many steel products will rise to 10 percent. The changes follow the reduction or elimination of rebates on steel and metals exports announced in September.

``The tax changes are seen as a part of an ongoing crackdown on over-investment in resource-intensive industries, which drag down the price of metals including copper,'' Wang Zheng, a trader at Shanghai Continent Futures Co., said today. The changes make it less attractive to export metal, he said.

Copper for delivery in December on the Shanghai Futures Exchange fell 770 yuan, or 1.1 percent, to settle at 69,540 yuan ($8,828). Earlier, the contract fell as much as 3.3 percent to 68,010 yuan.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, fell as much as 800 yuan, or 1.1 percent, to 69,850 yuan.

Copper for delivery in three months on the London Metal Exchange rose $20, or 0.3 percent, to $7,490 a metric ton at 3:13 p.m. Shanghai time.

Oct. 31 (Bloomberg)

Gold Falls in Asian Trade as Charts Indicate Price May Drop - By Helen Yuan and Feiwen Rong


Gold fell in Asia for the first time in six days as charts some traders use to predict prices indicate that more declines may be in store.

Speculators and traders are selling gold after bullion touched $600 an ounce. That level is a so-called resistance point on charts where sell orders are clustered.

``Speculative traders are hesitant to increase holdings as they regard $600 as a top for the short term,'' Wang Xinyou, a gold trader with Agricultural Bank of China, said from Beijing, ``Gold has been lingering between a range of $570-$600 with lack of fresh fund inflow.''

Gold for immediate delivery fell as much as $2.32, or 0.4 percent, to $601.78 an ounce and traded at $600.50 at 12:03 p.m. Shanghai time.

The precious metal gained 3.8 percent in the five trading days before today, rising to $604.1 an ounce, the highest in more than a month, as jewelers in India, the world's biggest bullion buyer, increased purchases in the run-up to the year-end holiday season.

Jewelers accounted for 73 percent of global gold demand last year, according to the London-based World Gold Council.

Gold futures for December delivery fell $3.40, or 0.6 percent, to $603.40 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange at 12:18 p.m. Shanghai time.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.



Oil Price

``Gold has followed oil closely for many months,'' said James Steel, a metals analyst at HSBC Securities (USA) Inc. in New York, in a report yesterday. Gold's strength overnight to reach as high as $611.16 was ``noteworthy in the face of a sharp decline in oil prices.''

Weak crude oil prices have not hurt gold as demand remained strong from jewelers and investors who expected the U.S. dollar to weaken, Dennis Wong, head of markets at Hang Seng Bank Ltd. said from Hong Kong today.

``As long as crude oil price manages to stay in the range of $57-$61 a barrel, the impact of oil on the gold would be negligible,'' said Wong.

Crude oil for December delivery traded at $58.45 a barrel, up 1 cent, in after-hours electronic trading on the New York Mercantile Exchange at 12:12 p.m. Singapore time. It fell $2.38 yesterday to $58.44.

In India, the price of the metal for December delivery fell 63 rupees, or 0.7 percent, to 8,864 rupees per 10 grams, or 27,567 ($612) an ounce, at 11:25 a.m. Mumbai time on the Multi Commodity Exchange.

Gold is trading at the ``top end of the resistance level'' and has potential to break upward to trade higher, Wong added.

Metals Place - 30 October 2006

Japan's copper cathode inventories rise 5% in September


Japan's inventories of copper cathode totaled 44,363 metric tons in September, up 5.1% on month, according to preliminary data released by the Ministry of Economy, Trade and Industry Friday.

On year, copper stocks were up 14.2%.

According to the data, Japanese smelters produced 122,101 tons of copper cathode in September, down 5.3% from August, but up 5.1% from a year ago.

Oct. 30 (Bloomberg)

Copper Falls Most in Two Weeks After Inventory Gain - By Chanyaporn Chanjaroen


Copper prices fell the most in almost two weeks as rising inventories renewed speculation that mine output may exceed demand this year.

Inventories of copper tracked by exchanges in London, New York and Shanghai rose to 190,024 metric tons today, the highest since the end of March. Supplies from mines and scrap yards will top demand by 146,000 tons next year, the first surplus since 2002, Mitsui Bussan Commodities Ltd. said Oct. 6. Prices that reached a record in May are down 3.5 percent the past two weeks.

``Copper has been looking for a pullback as more metal has been creeping into warehouses,'' said Alex Heath, head of base metals at RBC Capital Markets in London. Heath has been in the metals industry for three decades.

Copper for delivery in three months fell $100, or 1.3 percent, to $7,370 a ton on the London Metal Exchange, the biggest drop since Oct. 17. Copper, used in wire and pipe, is down 16 percent since reaching a record $8,800 on May 11.

On the Comex division of the New York Mercantile Exchange, copper for December delivery fell 4.65 cents, or 1.4 percent, to $3.3585 a pound, the biggest drop for a most-active contract since Oct. 17. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.



Asian Stockpile Gains

Stockpiles tracked by the LME alone have jumped 18 percent since Oct. 18 to 129,475 tons. As much as 86 percent of total LME-monitored stockpiles are in South Korea and Singapore, the nearest warehouse locations to China, the world's largest copper user.

``Consumers have been very quiet, especially from China,'' Heath said.

A settlement of a labor contract at a Codelco unit also eased the risk of a supply disruption, Heath said. Codelco, the world's largest copper producer, reached an agreement with a union representing 394 supervisors at its El Teniente mine in central Chile.

The union on Oct. 27 approved a 42-month contract that will increase wages by 3 percentage points over inflation, union Secretary Manuel Kuwahara said. Chilean annual inflation was 2.8 percent in October. The contract also includes a bonus payment of 6.5 million pesos ($12,344), Kuwahara said.

The El Teniente settlement followed successful talks at other Chilean mines, including BHP Billiton Ltd.'s Escondida, the world's largest copper mine. Codelco's only pending negotiation is at its Norte division, the Chilean-state owned company's largest operation.



Supply Disruption

Not everyone expects prices to keep falling.

Barclays Capital said copper may have more chance to exceed its record high in the current quarter, as supply disruptions earlier this year in South America resulted in a total output loss of 300,000 tons.

``Even if there are no further production disruptions, it is difficult to see refined metal output rising much from current levels at least until the middle of 2007,'' Barclays said in an Oct. 27 report.

Copper for immediate delivery will average $8,000 a ton in this quarter, up from $7,667 in the third quarter, the bank said. Prices will rise to an average of $8,100 in the first quarter of 2007, peaking at $8,300 in the second quarter.



Nickel

Nickel dropped $400, or 1.3 percent, to $30,600 a ton on the LME after a sixth consecutive gain in stockpiles. Prices earlier reached $29,998, the lowest in three weeks.

Nickel inventory tracked by the LME jumped 6.1 percent to 438 tons, the exchange said today. It has increased 57 percent in the past six sessions.

Aluminum was unchanged at $2,808 a ton on the LME after earlier trading at a five-month high of $2,835. The metal's so- called relative strength index registered at 70.7 on Oct. 27, rising to 71.59 today, from below 70 since May 12. A reading of more than 70 typically signals a decline.

Prices may rise to $3,000 by year end on sustained demand for the metal, said C.R. Pradhan, chairman of National Aluminum Co., India's second-biggest maker of the metal.

Global aluminum demand will rise 3.6 percent this year, and annual demand for the metal may double to 60 million tons in the next 15 to 20 years, Helmut Wieser, executive vice president of Alcoa Inc., the world's largest aluminum producer, said today in an interview in Singapore. Aluminum-consuming industries such as aerospace are ``booming,'' he said.

Among other metal on the LME, tin lost $275 to $10,075 a ton, and lead fell $7 to $1,592 a ton. Zinc rose $5 to $4,170 a ton.

Oct. 31 (Bloomberg)

Copper in Shanghai Declines After China Raises Taxes on Exports - By Xiaowei Li


Copper futures in Shanghai dropped for a second day after China's government said it will raise export taxes on copper, nickel and aluminum from Nov. 1.

Export taxes on the metals will increase to 15 percent from as high as 10 percent, the government said Oct. 27. Taxes on many steel products will rise to 10 percent. The changes follow the reduction or elimination of rebates on steel and metals exports announced in September.

``The tax changes are seen as a part of an ongoing crackdown on over-investment in resource-intensive industries, which drag down the price of metals including copper,'' Wang Zheng, a trader at Shanghai Continent Futures Co., said today. The changes make it less attractive to export metal, he said.

Copper for delivery in December on the Shanghai Futures Exchange fell 770 yuan, or 1.1 percent, to settle at 69,540 yuan ($8,828). Earlier, the contract fell as much as 3.3 percent to 68,010 yuan.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, fell as much as 800 yuan, or 1.1 percent, to 69,850 yuan.

Copper for delivery in three months on the London Metal Exchange rose $20, or 0.3 percent, to $7,490 a metric ton at 3:13 p.m. Shanghai time.

so much for the ved short!

Nov. 2 (Bloomberg)

Copper Falls in Shanghai on Inventories, Slowing U.S. Growth - By Xiaowei Li


Copper fell in Shanghai as a slowdown in U.S. manufacturing and rising global inventories increased speculation of declining demand for the metal. Aluminum futures also fell.

Outlays for construction fell 0.3 percent in September, the Commerce Department said yesterday, and a report showed manufacturing expanded at the slowest pace in more than three years last month. Copper stockpiles monitored by the London Metal Exchange are at their highest in more than two years.

``Data from London and the U.S. indicates supply may ease relative to demand worldwide, and on the domestic front buying is not picking up especially for copper,'' said Yu Yun, a trader at China International Futures (Shanghai) Co., today.

Copper for delivery in January on the Shanghai Futures Exchange fell as much as 1,670 yuan, or 2.4 percent, to 67,710 yuan ($8,597) and traded at 67,930 yuan at 10:10 Shanghai time. Aluminum for delivery in January declined as much as 230 yuan, or 1.2 percent, to 19,500 yuan.

Mineweb - 2 November 2006

Copper goes down to $7,316


Copper edged lower in London on Wednesday under pressure from a sharp jump in stocks, but lead prices sustained gains and pushed to a new high, dealers said.

Three-month copper on the London Metal Exchange eased to $7,316 a tonne in the second open-outcry session of the day, from $7,380 on Tuesday.

Copper stocks rose 4,675 tonnes overnight to 135,175, up 20 percent since mid-October.

Increased availability has meant that the premium for cash metal has given way to a discount, known as a contango.

The cash-threes spread was at a $20/$10 contango, maintaining the discount for a second day for the first time since late 2003.

"The forward spreads have really collapsed. There are expectations that material is going to continue to come in and I really can't understand why the copper price doesn't have a six at the start of it," a trader said.

"And even at $6,000, I would say it was over-priced. It's probably the strength in gold that is supporting the market."

Spot gold was trading about $5 higher at $610.40 an ounce, while oil was down 30 cents at $58.43 a barrel.



PRICE FALL

Copper prices have fallen by almost 16 percent since they hit a record $8,800 in May on a flood of fund buying, which has largely dried up.

"There is a shift in emphasis away from a market in deficit, transitioning towards one in balance or surplus, and the inventories are a window on this," ABN AMRO commodity analyst Nick Moore said.

Nov. 3 (Bloomberg)

Copper Futures Fall to Two-Month Low in Shanghai as Stocks Rise - By Xiaowei Li


Copper futures fell to a two-month low in Shanghai, extending declines attributed to rising global inventories and speculation that demand for the industrial metal may weaken due to slower U.S. economic growth.

U.S. gross domestic product increased at an annual rate of 1.6 percent in the third quarter, the slowest in more than three years, primarily because of the biggest decrease in home construction in 15 years, the government reported on Oct. 27.

Stockpiles of copper, used to make pipes and wiring, rose 3.2 percent yesterday to 139,475 tons, the most held in London Metal Exchange warehouses since May 2004, according to data released by the exchange yesterday. Most of the copper was in South Korea, located near China, the world's largest consumer.

Copper for delivery in January on the Shanghai Futures Exchange fell as much as 630 yuan, or 1.0 percent, to 67,350 yuan ($8,556), the lowest since August 31. It traded at 67,390 yuan at the market's midday close.

``The domestic copper market is cooling down due to a lack of funds investment,'' said Li Xun, a trader at Shanghai Continent Futures Co., today.

The number of open contracts, or buy and sell positions in the market, at around 70,000 lots today, is the lowest this year, and compares with over 10,000 in May when the domestic price touched record 81,600 yuan ($10,365), Li said.

Some academics have suggested that China should spend some of the cash on other financial instruments such as bonds, or physical investments like oil reserves and gold.

'If we use the forex to buy the gold and other things it's feasible, but I don't think Chinese government has the ability to do this since it requires specialized knowledge,' said Ha Jiming, chief economist with China International Capital Corp based in Hong Kong.

Another problem is that China's forex holdings are so huge that shifting even one or two pct of 1 trln usd will seriously spook the markets, Ha said.

Some economists have suggested spending the money domestically, but that raises the problem of having to convert the foreign currency back into yuan, thus adding unwanted liquidity to an economy that is flush with cash.

'This is not really money that you can use for that sort of purpose otherwise your monetary policy just goes out the window,' said Stephen Green, a senior economist at Standard Chartered in Shanghai.

One way of getting around that problem would be allow the Ministry of Finance to issue yuan bonds to buy dollar-reserve assets.

However, there are many legal issues involved and the central bank insists that the reserves are assets on its balance sheet and so must be purchased before they can be used for other purposes.

This is Money - 6 November 2006

Where next for mining stocks? - Evy Hambro, Merrill Lynch


Evy Hambro, manager of the 3.1bn Merrill Lynch International Investment World Mining fund, looks at the prospects for mining stocks...


Mining equities are volatile in nature and over the last three years have experienced periodic corrections, typically in the spring and autumn, as sentiment has intermittently moved away from cyclical stocks. We appear to be experiencing this once again.

Although markets continue to be jittery, supply and demand fundamentals for the mining industry remain robust and mining equities are looking increasingly attractive.

Supply-side disruption continues to impact the market, with labour disputes adding to ongoing concerns about low inventory levels. The repercussions of this disruption should support strong metal prices going forward.

Commodity stocks are classic economically-sensitive cyclical investments. In other words, they are highly sensitive to prevailing wider economic trends.

As key ingredients in industrial processing and manufacturing, commodity prices tend to be strongest during periods of industrial growth. Little wonder, therefore, that commodities had a tough time during the Asian crisis in 1998 and during the global economic downturn at the start of the century.

More recently, commodity prices have moved substantially higher, partly as a result of robust global economic growth, but more importantly in response to the unprecedented demand growth from the rapidly industrialising Chinese economy.

During the lean demand years when mining companies were cutting capital and consolidating rather than expanding, Chinese demand growth was soaking up the spare capacity in the supply chain.

Then, when the global economy started to turn around there was precious little capacity left to satisfy this higher level of demand. Prices have had to rise to reflect this and today we are enjoying the impact of these combined forces.



No quick fixes on commodity supply

In our view, prospects for commodities are driven by the supply/demand fundamentals for each commodity. Supply dynamics vary from commodity to commodity, with present shortages of nickel, zinc and copper dominating metal markets today. But supply deficits are likely to be in evidence right across the sector.

In our view, there is simply not sufficient growth in capacity on the horizon for mining companies to be able to plug supply deficits in the medium term.

There are no quick fixes for commodity shortages. The long lead times involved in stepping up production levels means that it may take years before supplies could start to rise meaningfully. And extra spending on exploration may not necessarily guarantee a substantial rise in output.

There have been precious few world class new discoveries in the last decade and with exploration budgets just starting to rise it will be some time before the next ones are made. On the whole, most base metal prices are currently trading at above their long-term averages.

What about demand? At the same time as supply levels look set to remain constrained, we are not expecting demand to collapse. While global economic growth has certainly been moderating since its peak this spring, the absolute rate of global growth remains fairly robust (and probably slightly above the long-term trend rate).

We expect commodity consumption growth to remain sufficiently solid in 2007 to ensure that supply/demand balances in the metals and minerals markets remain favourable, with positive implications for prices.

Higher commodity prices have led to another round of spectacular results from the mining industry and this has meant many miners are translating their strong balance sheets and high cash flows into higher dividends and increased share buybacks. These compelling fundamentals will mean there is the continued possibility of further corporate activity as mining companies seek to grow quickly and cost effectively.

Merger and acquisition (M&A) activity took centre stage throughout the third quarter as companies sought to acquire production growth due to a dearth of organic growth projects. By the end of September, Xstrata had taken over Falconbridge and Goldcorp had announced a friendly takeover of Glamis. We see scope for more M&A activity across the industry and these could provide a further boost to shareholder returns.



Mining sector valuations looking increasingly attractive

Mining and metals markets experienced a volatile third quarter which led to a sell-off in the miners during September. Despite weakness in the shares, metal prices remained well supported during this period, with the MG Base Metal Index rising by 7.2% during the third quarter. Nickel was particularly strong, rising by 41.5% over the quarter as global nickel inventories fell to incredibly low levels on the back of supply disruptions.

We see significant value in mining shares as a result of the dislocation between weaker mining share prices but still robust underlying metals prices. This has led to a significant derating of mining companies' price-earnings ratios (P/Es) since February 2006, particularly those of the diversified miners.

Many stocks are now trading at 8 times to 9 times earnings, while some are on only 4 times to 5 times earnings. This compares with around 12 times earnings for the UK stockmarket (FTSE 100) and around 16 times for the S&P 500 index. Therefore, we see significant potential for upgrades to the miners' valuations and earnings forecasts in the months ahead.

The new fashion for being capital expenditure (capex)-frugal and capital return munificent could result in a sustained period of slower-than-trend supply growth for commodities.

When balanced against a backdrop of robust demand for commodities, we believe this bodes well for both commodity prices and mining equities' ratings. At the same time, the industry's new focus on shareholder value suggests that shareholders have scope to earn attractive returns even if, against our current expectations, mining equities do not rally this year.

To sum up, our conclusion is that higher than long-term average commodity prices should be around for a while. These commodity prices should lead to high rates of return on the capital employed (ROCE) by the companies, meaning that share prices for mining equities could well be due for a significant rerating. With this in mind, we feel that an end to strong share price performance in the mining sector is but a dream in the minds of the commodity bears.

Nov. 9 (Bloomberg)

Copper in Shanghai Falls to Two-Month Low as China Imports Less - By Xiaowei Li


Copper futures fell to a two-month low in Shanghai as China's slowing imports and rising global inventories raised speculation supply may exceed demand this year. Aluminum also dropped.

China's imports of copper and copper products fell 22 percent in the first 10 months of 2006 to 1.7 million tons, the Beijing-based customs office said on its Web site yesterday. Imports of copper by the world's fastest-growing major economy have been falling since October 2005, partly because domestic production surged by as much as 20 percent.

``The import figures yesterday dealt a huge blow to international copper markets, which then sent repercussions back to China's market,'' Shen Jianyun, a trading manager at China International Futures (Shanghai) Co., said.

Copper for delivery in January on the Shanghai Futures Exchange, after rising in each of the previous three sessions, fell as much as 1,880 yuan, or 2.8 percent, to 66,500 yuan ($8,453), the lowest since Aug. 30. The contract traded at 67,110 yuan at the market's midday close.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, fell as much as 1,200 yuan, or 1.7 percent, to 68,650 yuan a ton today.

``A sustained premium in contracts for immediate delivery indicates domestic demand has been maintained at a reasonable level, which could have held back the domestic price from slumping further,'' said Shen.

Shanghai aluminum for delivery in January dropped for the first day in five, by as much as 560 yuan, or 2.8 percent, to 19,840 yuan a ton. It traded at 19,960 yuan at midday.

Copper for delivery in three months on the benchmark London Metal Exchange fell 4 percent to $7,120 a metric ton yesterday, the biggest drop and lowest closing price since Oct.4. It rose $90, or 1.3 percent, to trade at $7,210 a ton at 11:54 a.m. Shanghai time.

Inventory tracked by the London Metal Exchange has more than doubled in the past year to 144,250 metric tons, the highest since May 2004. Prices have dropped 17 percent since reaching a record in May, when metal demand surged and strikes disrupted mine output.

Copper is used to make pipes and wires. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Dow Jones Newswires - Friday, November 10, 2006

Copper Price To Drop 30% In '07 - Merrill


Copper price supported short term by rebound in Chinese demand, strong European demand, strike threats, but price likely to fall around 30% in 2007 on weakening demand, substitution, says Merrill Lynch. Forecasts demand in 2007 to grow 2%, supply up 5.3%; estimates copper surplus to rise progressively from 2007-2009, helping inventories recover from current historical lows. Expects weaker demand in 2007 as U.S. housing sector slows, G7 de-stocks, predicts China unlikely to restock aggressively if price above $5,511/ton.

Nov. 10 (Bloomberg)

Copper Plunges Most Since June on Higher Inventories in China - By Millie Munshi


Copper fell the most since June, capping its third straight weekly decline, as higher inventories renewed speculation that demand may be slowing in China, the world's largest user of the metal.

Stockpiles in warehouses monitored by the Shanghai Futures Exchange rose 15 percent this week and Chinese imports dropped 22 percent in the first 10 months of the year, the Beijing-based customs office said on its Web site Nov. 8. Surging demand from China helped send prices to a record high in May, and copper prices had quintupled since 2001.

``The demand on a domestic basis has collapsed completely,'' said Bret Tauben, who trades scrap copper for metals-recycler Metalsco Inc. in St. Louis. ``If you want to sell scrap copper today, it really has to be sold in Asia, and the demand there has been spotty.''

Copper futures for December delivery fell 22.05 cents, or 6.7 percent, to $3.0885 a pound on the Comex division of the New York Mercantile Exchange, the biggest drop since June 13 and the lowest close since June 27. Prices fell 7 percent this week, the most since mid-September, and are down 24 percent from a record $4.04 on May 11.

On the London Metal Exchange, copper for delivery in three months fell $405, or 5.5 percent, to $6,920 a metric ton ($3.139 a pound), the first time it has traded below $7,000 since June 29. Prices still are up 73 percent from a year ago.

Copper will fall to $2.40 a pound next year and $1.65 in 2008, Merrill Lynch & Co. said today, reiterating an earlier forecast. Mine supply, which has been trailing demand during copper's rally, will exceed demand by 500,000 tons next year, Merrill said in its report.



Rising Inventories

Total inventory of copper at warehouses monitored by exchanges in London, New York and Shanghai jumped to 210,541 tons as of today, the highest since March 13.

``If China's demand doesn't come back roaring, there would be very few copper-hugging people out there,'' said Michael Widmer, head of metals research at Calyon in London.

A slowing U.S. housing market also will dampen copper prices in the next year, Merrill said. Home construction fell last quarter at the fastest rate since 1991. Builders are the biggest buyers of copper, which is used in wire and pipe.

``We do not believe the worst of the U.S. housing cycle is behind us and the full impact of reduced demand for copper may not be felt until early-mid 2007,'' Merrill said in the report.



Scrap Prices

Metalsco's Tauben, who has been in the metals industry since 1979, said the price gap between scrap and primary copper is as wide as he's ever seen and may be eroding demand.

Bare #1 copper scrap, the highest grade and a very close substitute to new metal, has been consistently priced at least 20 cents a pound less than the Comex price, he said.

Producers of new copper have been ``afraid to call their customers because they're afraid their customers will delay orders,'' or buy scrap metal instead, Tauben said. ``The price is too high for the reality.''

A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

http://www.greenenergyinvestors.com/index.php?showtopic=1142

Nov. 13 (Bloomberg)

Copper in Shanghai Falls to Three-Month Low as Stockpiles Rise - By Xiaowei Li


Copper futures reached a three-month low in Shanghai after falling the maximum daily 4 percent allowed by the exchange as rising inventories led to speculation that supply may exceed demand this year. Aluminum fell too.

Copper stockpiles in Shanghai Futures Exchange warehouses rose 15.5 percent to 35,123 metric tons after falling to a seven- month low of 30,410 tons in the previous week, the Exchange said on Friday. Total inventory of copper at warehouses monitored by exchanges in London, New York and Shanghai jumped to 210,541 tons as of Nov. 11, the highest since March 13.

``The plunge was within our expectations and was reasonable given the current supply and demand situation,'' Wang Zheng, a trader at the Shanghai Continent Futures Co., said.

Copper for delivery in January on the Shanghai Futures Exchange fell 2,720 yuan, or 4.0 percent, to 65,060 yuan ($8,274), the lowest since July. 31.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, fell as much as 3,050 yuan, or 4.4 percent, to 66,050 yuan a ton today.

Shanghai aluminum fell as much as 800 yuan, or 3.9 percent, to 19,760 yuan and traded at 20,020 yuan at the market's midday break.

On the benchmark London Metal Exchange, copper for delivery in three months rose by $13, or 0.2 percent, to trade at $6,933 at 12:28 p.m. Shanghai time. The contract earlier fell as much as 0.8 percent to $6,865. It traded below $7,000 on Friday for the first time since June 29.

``A contango of around $20 has been around on the London market for two weeks or so, and we believe consequently funds are flowing out from metals due to small near-term returns,'' said Wang. A contango is when future prices exceed cash prices and typically indicates adequate near-term supplies.

Chinese arbitrage buying may have helped London copper rebound. Arbitrage is the practice of buying from one market to sell in another market to profit from the price difference.

``There is some spotty arbitrage going on as the futures price in Shanghai still exceeds that of London,'' said Hu Kaixi, a trading manager at China International Futures (Shanghai) Co.

Copper is used to make pipes and wires. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Metal stocks in Asia fell today as copper prices dropped. Jiangxi Copper, China's largest listed producer of the metal, fell as much as HK$0.68 yuan, or 8 percent, to HK$7.82. Nippon Mining Holdings Inc., Japan's largest copper producer, had their biggest intraday decline in a month of 4.9 percent to 813 yen.

where you gone dai , missing updates

MarketWatch - 16 November 2006

Gold futures suffer fifth losing session in a row


Gold futures fell Thursday to tally a loss of more than $15 during a five-session losing streak as lower energy prices and strength in the U.S. dollar dulled safe-haven demand for the precious metal

The dollar edged higher against the euro and the yen, gaining after a government report showed capital flows into the U.S. in September were sufficient to cover the nation's trade deficit for the month.

The report overshadowed tamer-than-expected data on consumer inflation for October, which boosted market expectations the Federal Reserve will have the leeway to cut interest rates early next year.

Overall, "gold has benefited from the apparent slowdown in inflation reflected in this week's data, and the potential impact this will have on interest rates," said James Moore, an analyst at London-based TheBullionDesk.com.

"As well, speculation of diversification away from the dollar is also proving positive for gold," he said in an afternoon note to clients.

But "the yellow metal is still struggling to clear $628-$630 short term ... a successful breach should see gold target $642-$645," he said.

Gold for December delivery closed down $2.10 at $621.70 an ounce on the New York Mercantile Exchange, retreating from a high of $629. The contract has now lost 2.4%, or $15.10 of its value after falling over five sessions, closing $2.50 on Wednesday alone after a report said global demand for gold fell in tonnage terms in the third quarter.

The latest U.S. economic data comes after a surprisingly tame producer price report on Tuesday eased fears that inflation pressure might force the Federal Reserve to raise interest rates again, pressuring the dollar. The dollar has been supported this year mostly by the interest-rate differential between the U.S. and Europe and Japan.

Gold traders "continue to focus on medium-term prospects for the U.S. currency, and are somewhat relieved that they are witnessing signs of emerging pre-season jewelry offtake," said Jon Nadler, an investment-products analyst at bullion dealers Kitco.com.

But "there were some pervious indications that luxury spending may not put in a strong showing this year and ... as a consequence, year-end seasonal gold demand might not be as robust as hoped for," he said in e-mailed commentary.

Gold prices were also pressured Thursday by a decline in crude-oil futures, which mirrored moves in natural gas. Natural-gas supplies rose last week for the first time in three weeks.

Other metals closed mixed Thursday, but copper futures saw a big drop, with its December contract down 5.35 cents to end at $3.041 a pound.

December silver futures closed flat at $12.945 an ounce, January platinum rose $18.50 to close at $1,189.30 an ounce and December palladium added $3.45 to close at $322.25 an ounce.

On the supply side, gold inventories were unchanged at 7.52 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies were unchanged at 107.6 million troy ounces and copper supplies fell by 274 short tons to 25,818 short tons.

Nov. 17 (Bloomberg)

Copper Falls in Shanghai Towards Biggest Weekly Loss Since July - By Chia-Peck Wong


Copper prices in Shanghai fell and are headed for the biggest weekly decline in almost four months amid concerns that supply growth may outpace demand on rising stockpiles and production from China.

Copper output in China, the world's biggest user of the metal, may rise as much as 8.5 percent next year, Shang Fushan, director of the copper department of the China Nonferrous Metals Industry Association, said yesterday. Imports have been declining since October 2005. Stockpiles monitored by the London, New York and Shanghai exchanges have soared 39 percent in the past year.

``The outlook isn't positive as stockpiles keep increasing,'' Yuan Fang, a futures trader at Shanghai Dongya Futures Co., said by phone today.

Copper for January delivery fell as much as 1,380 yuan, or 2.2 percent, to 61,310 yuan ($7,789) a metric ton on the Shanghai Futures Exchange, the lowest since July 24. The metal has fallen 8.4 percent since Nov. 10's settlement price, making it the biggest weekly decline since the week ended July 21. It traded at 62,120 yuan by the midday break.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, fell as much as 450 yuan, or 0.7 percent, to 63,650 yuan a ton today.

Stockpiles of the metal monitored by exchanges in London, New York and Shanghai totaled 215,626 tons as of yesterday, the highest since August 2004.

The deteriorating outlook for copper may lead more hedge funds to exit their holdings, said Yuan.

Hedge-fund managers and other large speculators increased their net-short position in New York copper futures in the week ended Nov. 7, according to U.S. Commodity Futures Trading Commission data issued Monday.

Speculative short positions, or bets prices will fall, outnumbered long positions by 13,640 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report. Net- short positions rose by 2,697 contracts, or 25 percent, from a week earlier.

Copper for three-month delivery on the London Metal Exchange fell as much as $80, or 1.2 percent, to $6,730 a ton, matching yesterday's intraday low, or the lowest since June 28. It traded at $6,740 a ton, down $70, or 1 percent, at 11:52 a.m. Shanghai time.

Metal for delivery in March fell 1.20 cents, or 0.4 percent, to $3.063 a pound on the Comex division of the New York Mercantile Exchange in after-hours trade at 11:43 a.m. Shanghai time.

FT.com - November 16 2006


Metal remained rangebound but copper fell 1.6 per cent to $6,800 a tonne after Bloomsbury Mineral Economics forecast the refined copper market would have a surplus of 45,000 tonnes next year against its previous forecast for a deficit of 130,000 tonnes.

Growth in Chinas fixed-asset-investment (a key driver of industrial production) slowed significantly to 16.8 per cent year on year in October from 23.6 per cent in September, which suggests government moves to cool the economy are working.

maddoctor - am away on xmas hols next week (someone has to do it !!) - stay lucky.

have a good hols , happy xmas

May 7 (Bloomberg) - Metals Bubble Poised to Burst on Increasing Supplies - By Millie Munshi

Copper, nickel and lead, the best performing commodities in the past four months, may be the worst by year-end.


On Wall Street, the chorus is getting louder that rising metal supplies are outpacing demand. From Goldman Sachs Group Inc. to JPMorgan Chase & Co. to Societe Generale, there are warnings of a mania that is showing all the signs of a climax. ``This is a real bubble,'' says metals trader David Threlkeld, who first got the world's attention in 1996 when he showed that copper hoarding by Sumitomo Corp. trader Yasuo Hamanaka would lead to a market collapse. Once again, ``we have an enormous amount of unsold copper,'' says Threlkeld, president of Resolved Inc. in Scottsdale, Arizona. The metals bears are convinced that consumption may drop partly because China, the biggest user, is attempting to reduce investment through interest-rate increases and lending curbs after the economy expanded 11.1 percent in the first quarter. Demand is also weakening because of a slowing U.S. economy and a consumer-driven pursuit of alternatives to historically expensive copper and nickel, according to Stephen Roach, chief economist at Morgan Stanley, the second-largest securities firm by market value. Copper will decline 30 percent to an average of $5,650 a metric ton in the fourth quarter from more than $8,000 today, according to the median of 12 analysts' forecasts compiled by Bloomberg. Nickel and lead will drop about 50 percent from record prices reached on May 4, the data show. The anticipated slump would depress exports from Australia, Canada and Chile, wipe out more than $22 billion on the London Metal Exchange and squeeze the profits at mining companies from BHP Billiton Ltd., the largest in the world, to OAO GMK Norilsk Nickel, the biggest metals producer in Russia.

To be sure, many of the bears were wrong so far this year. An investor who acted on the advice of JPMorgan, the third- largest U.S. bank, missed gains of 67 percent for nickel, 30 percent for copper and 41 percent for lead, the best-performing commodities in the 26-member UBS Bloomberg CMCI Index. That compares with a 6.2 percent increase for the Standard & Poor's 500 Index and 2 percent for U.S. Treasuries, according to Merrill Lynch & Co. indexes. ``We're sticking to our guns'' because ``prices are unsustainable,'' said London-based Jon Bergtheil, head of global metals strategy at the bank, on May 2. Nickel may average $35,328 a ton in 2007, down from $51,600, because stainless steelmakers might buy less in the second half, he said. Bergtheil in February said that nickel would decline 25 percent in 2007. The metal, used to make stainless steel, has since gained 40 percent.

Nickel may plunge to $30,000 a ton by the end of 2008, because the current level is ``overdone,'' Goldman Sachs analysts led by James Gutman in London said in an April 2 report. ``There is a risk of longer-term demand destruction.'' Stainless-steel producers are canceling orders, he said. His colleague in London, Jeffrey Currie, head of global commodities research, was less bearish last week, saying he expects metals prices to be ``trading sideways'' this year. The record copper price of $8,800 a ton reached last May was the peak, said ABN's London-based analyst Nick Moore. He recommended selling copper in December because global supplies were growing. He declined further comment in a May 3 e-mail, saying he couldn't discuss changes to price estimates before they were published. Copper for three-month delivery ended at $8,320 a ton in London on Friday.

World supplies of copper outpaced demand by about 50,000 tons in the first quarter, Stockholm-based copper producer Boliden AB said May 3. Global output rose 8 percent in the period, twice as much as demand, the company said. Chile, the world's biggest supplier of the metal, said production jumped 13 percent in March as high prices encouraged miners to increase supply. Output rose to 502,106 tons from 442,410 tons a year earlier, the Santiago-based National Statistics Institute said April 26. Nickel stockpiles tracked by the London Metal Exchange, the world's largest metals bourse, rose almost 60 percent since dropping on Feb. 6 to 2,982 tons, their lowest since July 1991 and barely enough to supply the world for a day. Lead inventories are also rising, gaining by 42 percent since March 13 on the LME, to 43,825 tons. A surplus of 25,000 tons of lead may exist next year, from a deficit of 35,000 tons forecast this year, Natixis Commodity Markets Ltd. said in a quarterly report on May 1. The metal's record price is likely to trigger more exports from China, said Natixis, one of 11 companies trading on the floor of the LME. Lead for three-month delivery ended at $2,115 a ton in London on Friday.

Some of the world's biggest users of metal are finding ways to reduce consumption. Pohang, South Korea-based Posco, the world's fourth-largest steelmaker, said April 25 it will increase output of nickel-free stainless-steel fivefold next year. Nickel helps make steel corrosion-resistant. Morgan Stanley's Roach, who will soon become the bank's chairman in Asia, says commodities are poised to crash in the same way they did in May 2006, when a 5.4 percent weekly decline in the Reuters-Jefferies CRB Index was the biggest tumble since December 1980. ``Watch out below for yet another reversal of commodity froth,'' Roach said April 26. ``It's deja vu spring of 2006.'' He correctly predicted the slump in commodities 12 months ago.

Roach anticipates a drop in commodities because China will increase interest rates to slow the economy and inflation, while a slowdown in U.S. housing will rein in consumer spending. China ordered banks on April 29 to set aside more money as reserves for the seventh time in 11 months to try to prevent the world's fastest-growing major economy from overheating. Lenders must put aside 11 percent of deposits starting May 15, up from 10.5 percent. The increase will draw 170 billion yuan ($22 billion) from the financial system. China raised borrowing costs three times since April last year, and will increase rates twice more this year, according to a Bloomberg survey of economists. In the U.S., the world's biggest economy, growth slowed to a 1.3 percent annual pace in the first quarter from 2.5 percent in the fourth. An index of pending sales of existing homes fell 4.9 percent to the lowest level in four years in March, the National Association of Realtors said.

Bullish metals investors expect China will fail to curb growth, according to Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which oversees about $125 billion. ``The speculative element in commodities hasn't been affected by the slowdown in the U.S. economy,'' Dolphin said. ``The expansion we're seeing in China and India has kept the speculators in.'' Even the largest U.S. pension fund, the California Public Employees Retirement System known as Calpers, is chasing commodity returns after years of holding stocks and bonds. The fund in March invested $450 million in the Goldman Sachs Commodity Index. ``Strength in commodity markets will be something we should see generally over the next 10 to 20 years,'' said Russell Read, the chief investment officer, in an April 24 interview. ``We see a relative shortage of commodities stemming from a boom in demand from emerging markets, particularly India and China.''


`Crash' Possible

Any further gains will be fleeting, according to Societe Generale's head of commodities research, Frederic Lasserre. He expects commodities will extend their rally and rise close to near-record levels in the third quarter of this year, before falling back.

The gains in metals are ``100 percent-driven by funds,'' said Resolved's Threlkeld. ``At some point the funds are going to want to take a profit. And when that happens there could be an almighty crash.''

from here, i do not see the physical demand for stainless, and thus by definition, iron ore, nickel and copper and moly reducing over the next 12 or 24 or perhaps even 36 months ..... have a look at today's Telegraph biz section and the article re the boom in cargo shipping.

gold, of course, has a mind and logic of its own!

WORLD TRIBUNE.COM - By Sol Sanders

The Chinese bubble is about to pop


All signs point to an approaching Chinese economic crisis.

Given the lack of transparency, the impact of the coming landing is even less predictable than such economic developments elsewhere.

There are daily announcements by Communist leadership aimed at cooling an overheated economy. But most are fictitious, a cover for bottlenecks in some sectors, unrestrained speculation in others. So any divination is just that.

There is no denying the remarkable last decades progress. GDP growth figures are probably exaggerated. The truth is nobody really knows. [One cannot forget an angry ex-Prime Minister Zhu Rongzi publicly dressing down regional officials for giving him manufactured figures.] Given the fact that 80 percent of Chinas more than one billion do not share in success of the effort to introduce a liberal economy in a totalitarian state, we have little history to judge the whole experiment.

But here is intelligent Shanghai gossip:

Despite all restrictions, held in place by occasional draconian prosecution [executions], for corruption, illegal hot money has poured in. Theoretically Beijing has control of its currency. In fact, in 1997, Zhu, with controls and by juggling export subsidies, spared China the effects of the East Asia Financial Crisis. But that was eons ago in Chinese economic development. Once again, the Chinese have proved their phenomenal entrepreneurial talent. The central banks hard currency reserves are now reaching an incredible trillion dollars. That, in turn, introduces inflation with the exchange of imported dollars for renminbao.

Speculators believe, despite all government statements [and the hard line Chinese leaders took with Vice President Cheney this week on American demands for reevaluation], upward movement will come. They want a slice when they trade back into dollars.

China is suddenly facing an overall trade deficit nearly $9 billion in the first quarter and likely to grow exponentially. That is despite its enormous U.S. trade surplus. probably as much as $142 billion last year, and probably growing even more rapidly as U.S. consumer confidence sucks in more consumer goods. The overall trade deficit, likely to snowball so long as Chinas export boom continues, results from a growing import bill for raw materials [and components for assemblies China exports]. Ironically, China itself pushes world prices. China has become the worlds second largest oil importer [after the U.S.] with prices rising. [Chinas oil imports increased 38 percent last year; predictions were for a fuel imports doubling this year.] Chinas pull has inflated world prices for example, benchmark hot-rolled-sheet price jumped 80 percent to $500 a net ton, a 15-year high.

All this has pressured Chinas claptrap financial system. Despite repeated statements by the authorities to brake lending, Chinas four main banks probably have increased it by 10 percent just this year. Thats despite signs some sectors are piling up inventories Shanghai and Beijing real estate, household appliances, automobiles. Again nobody knows, but nonperforming loans may be 50 percent or higher. And, again despite repeated statements, banking practices have not changed. One important reason: Chinas huge, Soviet days white elephants, so-called state-owned enterprises [SOEs], are bleeding the banks with their enormous political influence and the fear of additional unemployment were their bankruptcy finally faced. [Recently, Prime Minister Wen Jiatao trotted out the argument their maintenance in the Northeast rustbelt was a matter of national security.] One danger, of course, is of a run on savings institutions by Chinas incredibly frugal savers when a switch back to dollars after a postponed reevaluation.

Chinas economic fragility is not just a problem for Beijing. As the Chinese maw has grown, it has become a growing market for its neighbors. Thailand, Singapore, Malaysia, Philippines and Australia have seen their exports to China including manufactures grow by as much as 50 percent. Japan is coming out of its decade of stagnation, in part because of the fillip Chinese exports have given its still only partially reformed export-led economy. South Korea, caught in political and economic crosscurrents, counts on its China boom for its high tech exports to buoy it until domestic demand returns. Even the U.S., however much it might complain over the loss of jobs to China, continues to have a lower inflation rate in part because Beijing [as well as Tokyo, Seoul, Taipei and Hong Kong] gobble up its treasury notes, halting any crowding out of private sector borrowing in capital markets.

Beijings new leadership, noted for its non-risk-taking past, is caught in the headlights. It dare not fiddle with the currency tied to the dollar, its only stable economic tool. On the other hand, even if no one else does, Chinese Communists remember their rise to power owed as much if not more to runaway inflation in the last years of the Chiang Kaishek regime as to battlefield victories. [The Chinese inflationphobia is as great as the Germans who remember the 20s inflation that brought Hitler.]

An hour of decision is approaching rapidly.

FT - May 6 2007

Chinas stock market


However you measure it, the Chinese stock market is a bubble. Top cadres have warned as much. New offerings are doubling in value on day one and shareholder accounts are multiplying at a phenomenal rate. So far this year, the domestic currency A share market is up 43 per cent and daily turnover exceeds $30bn.

The authorities face a stark choice: act now to deflate the bubble or wait for the inevitable implosion and equally inevitable street protests. But Beijing has limited tools with which to take pre-emptive action. Verbal warnings and the stemming of credit by hiking banks reserve requirements have both failed. Interest rates would need to be sky-high before investors spurned the stock market, up almost 1 per cent a day in the past two months, while bank deposits currently yield negative returns in real terms.


____________________________________________________________________



.....................and so on and soforth. It all just has to go pop some time soon.
Anyone believing that the present frenzy in rising markets will continue much longer is simply deluding themselves.
It's a real world that we live in and a very simply fact of life is 'what goes up must come back down again'.
Often with quite a bump!

don't confuse commodity requirements with a rising stock market or even rising commodity prices, both of which can and often are driven by speculation ...... although nothing rises or falls inexorably, it is a matter of fact that China (and India and Pakistan) not only needs huge imports of raw materials to satisfy its domestic demands, but China (and India and Pakistan) has become one of the very top manufacturing and exporting countries in the world.

Copper Falls Most in Three Months on Signs of Slowing Demand - By Millie Munshi


May 10 (Bloomberg) -- Copper futures in New York tumbled the most in three months on signs that demand may slow in China, the world's largest user of the metal used in pipes and wires. Stockpiles in Shanghai Futures Exchange warehouses have more than doubled this year to the highest since December 2005, indicating that China may buy less copper from overseas. Futures had climbed 32 percent in the two months before today as China's imports surpassed last year's pace for four straight months. ``We're expecting to see a deceleration in Chinese imports,'' said Mark Liinamaa, a metals analyst with Morgan Stanley in New York. ``It's likely that they got a little ahead of themselves in the first part of the year and imported more than their overall need.''

Copper futures for July delivery fell 11.25 cents, or 3.1 percent, to $3.5665 a pound on the Comex division of the New York Mercantile Exchange. The drop was the biggest since Feb. 2, when most-active futures fell 4.3 percent during a rout in global equity markets. ``A large reason you've seen copper pullback is because China has slowed down a little bit in their buying,'' Kevin Kerr, president of Kerr Trading International in Wilton, Connecticut, said in an interview May 7.

Metal for immediate delivery in Changjiang, Shanghai's biggest cash market, fell as much 2.6 percent today. Cash prices have remained lower than front-month futures prices, suggesting enough supplies are in the spot market to meet demand.



Pulling Out

``People have started pulling out of the market,'' Liinamaa said. Morgan Stanley estimates that copper will average $3.05 a pound this year, down 14 percent from today's close. The metal has averaged $2.98 so far this year. Traders who follow historical price charts also sold copper today, said Marc Kaplan, president of Mews Metal Trading LLC in Verona, New Jersey. Copper's so-called relative strength index, which gauges how rapidly prices have gained or fallen, reached 71.3 on May 1. Readings above 70 indicate a price may be poised to fall. ``Prices had been moving very quickly,'' Kaplan said. ``The price has probably gotten too high, and people are starting to take some money off the table.''

On the London Metal Exchange, copper for delivery in three months fell $160, or 2 percent, to $7,890 a metric ton. The metal reached a record $8,800 on May 11, 2006. A futures contract is an obligation to buy or sell a commodity at fixed price for delivery by a specific date.