Trading on the London Metal Exchange was subdued last week with what changes that there were by the end being only marginal.
There was more interest in the spreads than in the forward prices as the backwardation in nickel continued to make anyone unwise enough to be short of the metal suffer dearly. Zinc started to tighten as the June-July period also moved into a backwardation, indicating more interesting times to come.
Copper: This hit a low of $2,960 on Tuesday before trade buying came to the rescue to produce a $3,006 close to the day. Better than expected US housing starts data also provided muchneeded support so that by Thursday a $3,060 high was achieved. The forward price was still at $3,051 on Friday thanks to some fund buying but then the market was hit by a surge in the value of the US dollar and the three-months price closed the week unchanged at $3,001.
Aluminium: Gaining just $3 over the week to close at $1,722, this contract had benefited from continued light consumer buying and the US housing data to reach a high on Thursday of $1,750. This carried over into Friday before the firmness of the dollar caused fresh fund selling down to the closing price. The picture looks very poor as the ten and 30-day moving averages have crossed the 200-day average line, a formation known as the death cross. The secondary alloy price closed unchanged at $1,545 while the US specification version lost $5 also to $1,545.
Zinc: Continuing to be influenced by the movements of the major contracts, zinc recorded a week's low of $1,217 last Monday, a high of $1,250 on Wednesday and then lost $20 over Friday to close the week $9 up at $1,233. Exchange stocks declined by 6,400 tonnes. The market continues to recognise good fundamentals but no major improvement will follow until the leaders move higher again. Nevertheless the position of the spread over June-July must be watched.
Lead: One of the best performers over the week, lead moved steadily ahead each day from Monday's $917 low to a high on Friday of $963 ahead of a $953 close for an overall gain of $28 per tonne. Once again, the upside barrier was confirmed as being in the $960 area but the basic fundamentals remain positive. As the International Lead Zinc Study Group confirmed the outlook for a supply deficit for 2005. Exchange stocks fell by 1,150 tonnes with the backwardation widening to $45 per tonne.
Nickel: The overall trading range was set last Monday with a drop to a $15,700 low being followed by a high of $16,650 ahead of a $16,150 close. Thereafter daily ranges were modest and little changed between $15,800 and $16,200. The focus of attention was on the cash-tothreemonths spread were the backwardation moved out as far as $1,125 per tonne at one time. The Cubans who were the major sufferers in the squeeze appeared to be buying back their shorts rather than rolling them forward while the Russians delivered into Rotterdam which eased the situation. The backwardation still closed at $800 but is expected to ease as further deliveries are made. The forward price closed the week $55 down at $8,000.
Tin: The tedium continued with a trading range between $8,000 and $8,200 throughout the period leading to a $8,000 close, $55 down overall. Stocks declined by a further 350 tonnes to only 3,620 in total which ensured a strong $75 backwardation. Little change is expected this week.