Following the major technical sell-off of the week before, it was business as usual on the London Metal Exchange last week as all six major metals recorded net gains over the period.
Only the two secondary alloy contracts spoilt the picture with minor losses. Given the size of the major fund liquidation and the opportunity afforded to shorts to cover their positions, it may well be that the market is in a far better and more balanced position. Stocks of copper, aluminium and lead all rose while those of zinc, nickel and tin declined.
Once again the currency situation became a factor as the weakening US dollar added to the upside momentum.
From a low of $3,110 the previous week, the threemonth price was back up to a high of $ 3,307 by last Wednesday before settling back over the next two days to close on Friday $99 higher at $3,276. The backwardation remained out at $152 but the 8,550 tonne increase in stocks disappointed some observers. The strength of the Shanghai market remained an important factor as did speculation over the strength of Chinese demand.
Gaining only $2 per tonne to a $1,864 close on Friday, the performance of this contract was far more modest. Highs and lows for the week were $1,889 on Wednesday and $1,845 last Monday. Recent tightness in the market and the ensuing backwardation has attracted a lot of metal to the market, 20,150 tonnes last week. As the tightness eases the cash-to-three-months spread has now narrowed to a backwardation of only $2. The level of strong demand in the US and Canada is underlined by a 6.7 per cent rise in consumption over the first two months of the year as compared with the same period for
2004. During the same period US output fell by 3.3 per cent. The secondary alloy contract lost $10 to $1,670 while the US version gave up $5 to $1,675.
A sound performance with a reasonably strong close saw zinc gain $29 over the week to $ 1,308. Moving ahead strongly over the first three days, a high of $1,326 was achieved on Wednesday before the market slid back on Thursday to a $1,288 low. The performance on Friday was encouraging and may well lead to fresh gains this week. Stocks fell as usual, this time by 5,000 tonnes.
A trading range between Monday's low of $910 and Thursday's $953 high finally led to a $945 close on Friday for a net $23 gain over the period. The $45 backwardation continues to underpin the overall price but the strong resistance at $960 remains in place. Exchange stocks move both ways but ended 2,350 tonnes up at 33,350.
Helped by ever-falling stocks, last week down by 1,362 tonnes to 7,110, a tightening backwardation out to $350 per tonne and the weakening dollar, nickel recovered well to a mid-week high of $16,200 for forward metal before then settling back to finish the week $185 up at $15,960.
Settling in to a $8,000 - $8,200 trading range, tin barely joined in the overall recovery with a $25 gain to Friday's $8,125 close. Stocks remain low with a 370 tonne draw-down taking the total to only 4,855 tonnes while the backwardation remained out at a steady $50 per tonne.