There were some spectacular performances seen during trading on the London Metal Exchange last week with copper reaching an all-time high of $3,300 per tonne on Tuesday, aluminium a ten-year high on Friday and on the same day, zinc at a level not seen for eight years.
The trading was dominated by fund and speculative activity with the everweakening US dollar providing an extra incentive for purchasers using other currencies. Clearly the investment community, like commodities at present, but they cannot continue to climb in a straight line forever, a general shake-out must come eventually before a more stable market can emerge based upon genuine demand for ever-declining stocks.
Levels of both copper and tin stocks rose slightly last week, perhaps due to the size of the backwardations in both metals, but those of the rest all declined with aluminium and zinc both showing strong drawdowns.
Having recorded its high on Tuesday, this metal retreated to a $3,270 close that day and thereafter failed to hold ground above $3,280, despite attempts over the next two days. An early bear raid on Friday knocked the forward price down to a low for the week of $3,175, but then the market recovered quickly to $3,260 by lunchtime. Trading thereafter was nervous leading to a $3,240 kerb close which actually represented a $2 loss over the week. Exchange stocks rose by 475 tonnes and the backwardation narrowed slightly to $117 by the close. While a production/ consumption deficit is seen for the first half of the year, a balanced situation is forecast for the remainder.
Here the buying by funds and speculators was joined by that of merchants, the result being a steady climb over the five days from last Monday's low of $1,943 to Friday's high of $2,016. The higher levels at last attracted sellers, who forced the price down to a close at $1,911 per tonne, for an overall gain of $28 for the week.
The market's strength was underpinned by the relentless decline of stock levels, last week by 20,825 tonnes, together with the appearance of upcoming tightness with large short positions remaining in the market.
Zinc put in an impressive performance as it climbed steadily from last Monday's $1,390 low to a high on Friday of $1,446 before closing the week up by $47 at $1,438.
Exchange stocks fell by 7,825 tonnes but as the total remains relatively high in consumption rate terms, the cash-to-three-months spread remained in a steady $16 contango.
At last breaking through resistance at $960/$965 last Monday, lead quickly moved up to a week's high of $990 on Tuesday, but then closed the day back at $976.
Ranges were then fairly steady between $960 and $980 through to Friday where, following a temporary dip to $952, the market closed the week $12 up at $977.
A good, strong performance but one that finally led to a $50 loss over the period when the market closed at $16,075 on Friday. Tuesday produced the best movement when the forward price rose from 15,825 to a high of $16,350 but this level could not be sustained and prices then traded daily either side of $16,000.
Finally closing $105 up at $8,580, tin enjoyed a steady, if unspectacular week with good trade buying finding sellers reluctant to supply the market in the face of higher prices to come.