Once again the question of whether the base metal boom is coming to an end was being asked during trade on the London Metal Exchange last week.
With many markets closed at the beginning of the period, trading was generally dull with a downward bias.
The only metal not to lose ground was nickel which continued to benefit from ever-declining stock levels and a cash-to-three-months spread which at one time widened to a $825 backwardation as the Cuban short in the market continued to pay for his unwise trading.
The majority of stock movements continued to reflect net drawdowns although those for copper and aluminium did rise slightly. Nickel tonnage fell by 630 to 5,610 of which 2,364 tonnes are on cancelled warrants.
Very much on the defensive throughout the week, this metal had declined to a low of £3,127 by Wednesday before improving slightly to close the day at $3,144. A rally on Friday to a high of $3,205 came to a quick end on the release of the US Non-Farm Payroll data with the forward price closing the week down by $42 per tonne at $3,173. Exchange stocks increased by 325 tonnes. The longer-term funds continued to hold their long positions and it is they who really hold the key to the future for this metal.
Starting the week at $1,813 last Tuesday, this contract was down to $1,793 by that day's close. Weaker again on Wednesday, expected support at $1,780 was found to be in short supply and soon gave way. Lows of $1,764 were recorded on each of the last three days with Friday's $1,769 close being $52 down on the week.
The contango in the cash-to-three-months spread widened to $12 per tonne which acted to persuade some longs to liquidate their positions. Exchange stocks rose by 2,300 tonnes. Now starting to look oversold this contract may soon find some speculative support.
Both alloy contracts shared $35 apiece to close at $1,595.
So recently seen as one of the best bets for 2005, zinc was quick to follow the downward path set by copper and aluminium with a break of support at $1,275 leading to further losses through $1,250 and on down to $1,240 before a level was finally found on Thursday.
Friday saw a high of $1,273, but the close was nearer the low of the day at $1,257 for an overall loss of $41 per tonne. Exchange stocks continued their ongoing decline with a drop of 5,025 tonnes. The fundamentals for zinc remain sound so an upward correction may soon follow.
Moving between Tuesday's $950 high and a low on Thursday of $921, lead finally closed the week $13 down at $935 as stocks fell by 1,750 tonnes. The backwardation in the spread remained a strong $40 per tonne with the tightness tending to deter short sellers. There seems to be little else to look for in the near term.
The trading range of $15,300-$16,100 was fairly narrow by the normal standards for this contract with Friday's $15,900 close being a $100 increase over that of the previous week. The major interest was in the behaviour of the spread and the size of the backwardation which is severely hurting the shorts; further extreme tightness will follow as the stocks continue to decline.
An overall trading range of $150 per tonne summed up a very dull market with $8,000 remaining the central point. The markets finally closed $30 off at $8,000 as stocks fell by 255 tonnes.