We're gearing up for THE flagship event of 2009 for the great and good in the world of base metals. Stories and people are flying in!
Commodities reporters around the world are getting together stories, interviews, analyses, opinion pieces & factboxes in preparation for Monday.
Looking forward to the #LME - Minor Metals Online Price Discovery Q&A at the RAC on Monday morning
By Andy Home
LONDON, Oct 12 (Reuters) - So, October is here again and with it comes LME Week, THE social event in the global metals calendar, when the great and the good from all corners of the industry flock to London.
I attended my first LME Week in 1987 and have managed to make it to most in the intervening years, albeit with a couple of gaps in the late 1990s and again in the early part of this decade.
This means that I am an old hand, but only relatively.
There are many on the LME “Street” who can put my record to shame. Last week I was having drinks with a broker who has attended continuously since 1976. And beating that was my lunch companion of a couple of weeks ago who told me this will be his 38th consecutive LME Week!
I’m pretty sure that even that commendable dedication to the metals cause can be surpassed. It would be interesting to find out who holds the LME Week record. Readers are cordially invited to submit their entries…
But what exactly is LME Week?
The main show, as it were, is the LME annual dinner, a black-tie event held in the Grosvenor House Hotel (((http://www.marriott.co.uk/hotels/travel/longh-grosvenor-house-a-jw-marriott-hotel)) on the Tuesday.
This originally evolved from the LME Golf Club dinner and is the longest-running annual black-tie dinner in London and the largest.
Well, that’s the generally-held belief. When I asked the LME, they said it is “probably” the longest-running annual dinner in London and it is certainly “the largest booking at the largest venue”.
Back in 1987 LME Week also marked the announcement of the official copper producer premium for the following year—the kick-off to the annual copper mating season.
It came on the Monday at a lunch hosted by Memaco, the sales agent for Zambia’s government-run copper producer ZCCM.
ZCCM was then the power-house of global copper production. The baton has since passed to Chile’s Codelco, which now normally “announces”, using the word loosely, its European premium ahead of LME Week.
Actually, last year, it didn’t “announce” anything before or during LME Week but somehow the news seeped out the premium would be “around” $80 per tonne over LME cash.
To be fair to Codelco last October was a near impossible time to make any predictions about anything in 2009.
We were, after all, in the midst of The Great Terror, the period straight after the Lehman Moment, when the financial system seemed to be imploding at bewildering speed.
Another Great Depression has been avoided but we have still had the Great Recession. Are we now in the Great Recovery? The markets would love to think so. Relief has turned to euphoria.
Stocks have staged a spectacular rally and so too have the LME metals. But the momentum has noticeably faded over the summer. Doubts have reappeared. I confess myself to be one of the doubters. I’m not sure what shape the recovery will take other than I don’t think it will be “V”.
Codelco is holding its European premium unchanged for 2010, which suggests to me that it may also be one of the doubters.
But what is the consensus? Is there a consensus?
The next few days will bring a deluge of clues, both “on the record” from the many speeches and special LME Week reports from the analyst community and “off the record” from those attending the extensive round of cocktail parties and social functions.
I and everyone else will be attempting to take the pulse of the global metals industry over the course of the week.
Stay tuned to this blog to see how I get on and for full Reuters coverage of LME Week at
((http://blogs.reuters.com/commodity-corner/2009/10/09/live-from-london-metal-exchange-week-2009/))
((andy.home@thomsonreuters.com))
LME Deputy CEO Diarmuid O'Hegarty speaks with Reuters Columist Andy Home at the start of LME Week in London, to discuss whether a drop in base metal prices is going to characterise Q4.
Click here to watch the interview on Reuters Television
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etv.thomsonreuters.com A lively debate seen at the MMTA and #LME pricing Q&A. Chatting to delegates, it looks as though it could be a tight vote in November
MMTA members in high spirits after such a torrid year, looks like the #LME week may have found its mojo already
Metals people at Standard Bank's lunch sounded pretty cautious on copper's price prospects. Some say time for a break after a long rally!
Why are metals analysts so bullish when consumers are still cautious?
Codelco CEO tells Reuters he expects the company will boost its copper output by 100,000 tonnes in 2010 and begin opening 290,000 tonnes of new annual capacity in 2010 to offset falling output from exisitng mines.
CEO of the world's largest copper miner Codelco, Jose Pablo Arellano tells Reuters Television's Jane Grieve the company is due to produce 1.7 million tonnes of copper in 2009 and about 100,000 tonnes more in 2010. He sites recovery in US and Japanese markets. Click here to watch the interview
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etv.thomsonreuters.com Bullish Calyon's Bhar favouring #LME copper going forward with supply tightness key
By Andy Home
LONDON, Oct 12 - The metals industry is in robust good health, if attendance at this morning’s LME Metals Seminar is anything to go by.
LME Week’s opening event was due to start at 0900 but at that time the queue to register was literally still out the front door of the QEII Conference Centre in Westminster so everything was pushed back 15 minutes.
The Seminar was a sell-out with 500 delegates and for late arrivals it was standing room only during the first session.
The official dinner tomorrow is also fully sold out, according to LME chief executive Martin Abbott, who started off this morning’s proceedings with a short welcome speech.
So much for global recession!
Nor was there anything downbeat about this morning’s presentations but since the ever-bullish Barclays Capital fielded two analysts, this was no big surprise.
Barclays’ Gayle Berry said that copper was “the best way to play OECD recovery” due to the red metal’s low inventory levels and its chronic vulnerability to supply disruptions.
Nicholas Snowdon gave the Barclays low-down on zinc, lead, nickel and tin. That, by the way, is the bank’s rating of the four metals in terms of upside price potential.
Maybe even Barclays can’t get too excited about aluminium, which is why Michael Jansen of J.P.Morgan Securities took up the light metal baton.
What can you say about a market that is weighed down by historically high stocks and structural supply-side overcapacity? Well, you can stress the need for “immense discipline in the smelter sector”, which would mean a surplus of “just” 600,000 tonnes next year, according to Jansen. Without such discipline the surplus “could be millions of tonnes”.
Barclays are full believers that the recovery will be V-shaped and maybe the stress should be on the word “believers”. During the Q&A session, Berry conceded that there is “not much evidence yet” from the physical markets of a V but said that evidence would start to appear early next year.
Jansen made the interesting point that “we’re getting a V but in terms of historical Vs it’s underwhelming”. What bothers him, he said, is not which letter of the alphabet we should be using but the output gap in absolute terms between where we were prior to September 2008 and where we are now.
Such old-fashioned ideas as demand and supply, however, are only part of the metals price equation these days.
It was Jeffrey Christian, managing director of CPM Group, who drew attention to the proverbial elephant in the room.
Physical metals demand growth has probably been deferred rather than destroyed but “investment demand will be back with a vengeance”, simply because investors “have more cash than ever before”.
This seems to capture the divergence in views between the “street”, which knows that the money train is rolling, and the metals industry, which is only too aware of how big the pre-Lehman and post-Lehman gap has grown.
This morning’s KEY TAKE-AWAY comes courtesy of Danny Quah, professor of economics at the London School of Economics, talking on “China and the Global Economic Recovery”.
Quah said that over the last 30 years 627 million Chinese have been “lifted out of extreme poverty to become global consumers”. Over the same time-frame, however, the “number of very poor in India has actually increased”.
Final story of the day almost out, now waiting (what seems like days) for all the ladies on Reuters desk to get ready for the #LME night ...
parties here we come!
Talking to a European copper consumer who is cautious but optimistic. He doesn't think next year will be a "sell-out" but hopes for a be ...
Minor metals trader says very little business in September.
Cocktail party overload! High spirits among traders..until the subject of #LME cobalt & molyb contracts arise. Concerns remain
#LME traders say strong fund interest in moly contracts.
By Andy Home
“Physical business is down, investment business is up and everyone will tell you the same thing.”
That was the most succinct summary of the state of play in the LME brokerage world I heard yesterday.
And, as the broker in question correctly pointed out, everyone else I talked to during my tour of the Monday night cocktail parties said pretty much the same thing.
The China import bonanza of H1 2009 has passed and there has as yet been no compensatory pick-up in activity elsewhere.
True, consumers’ order books are a bit better than they were but they were hardly going to get any worse after contracting so sharply over the end of 2008/beginning of 2009.
The improvement is marginal, though, and there is a distinct scepticism about the strength of the “recovery” out there in the manufacturing world.
“Unemployment in the U.S. is almost 10 percent – THAT’s the state of the physical market,” said one source with a sizeable physical copper book. The same message came from a physical tin trader and a physical lead trader.
Even more downbeat was an assessment of the stainless steel market by an analyst widely viewed as something of a guru on all things steel-related.
He suggested that after raising run rates in Q3 stainless mills in China, East Asia and Europe were lowering them again in Q4 due to a lack of follow-through demand.
The Great Restocking, it is now widely felt, has been postponed to 2010.
That should be bearish for prices and most brokers felt that copper in particular is overpriced above $6,000 per tonne. Views about where copper “should” be ranged from $5,700 to “sub $5,000”
However, there is a curious collective resignation that the elusive pullback in prices, originally expected in Q3, may not take place at all because of the investment money that is looking to buy on any dips.
The disconnect between the investment and the manufacturing parts of the market is as profound as I have ever seen it.
Many thanks to Triland, Mitsui Bussan and Ambrian for their collective hospitality. And of course to my esteemed employers, who host one of the later Monday night bashes.
This year we were at the Jalouse nightclub, which I see from the website is an exclusive private club boasting artists and royalty among its 500 members.
Check it out on www.jalouse.co.uk.
Sadly, I am of an age when, royalty or not, I find the music too loud and the bar too crowded. When people start to dance on the tables, I discreetly make my excuses and leave.
Not, however, before witnessing the slightly surreal sight of the LME chief executive and the dominant long tin position holder having a cigarette together outside.
Then again, why not? As the LME deputy chief executive Diarmuid O’Hegarty told me yesterday during a TV interview, the exchange’s lending guidance is working as it should do under such circumstances and backwardation in itself is not a definition of a disorderly market. Check the interview out on: etv.thomsonreuters.com.
Yours, still looking for that “V”,
andy.home@thomsonreuters.com
Japanese senior trader says at #LME event cobalt demand strong from hybrid car makers. Good recycling too. Wonders why Europeans are doing the same.
CFO of metals firm says has no idea of what market will do, living one day at a time. If it weren't for China things would be grim.
Could the LME drop the cobalt contract? Market size and price an issue?
Copper prices could fall to $5,000 a tonne in the short term if Chinese imports slow, VM Group CEO Jessica Cross tells Reuters Television. China's imports slipped 25 percent in August from July and recovery in other economies will be needed to offset these falls, Cross explains.
Click here to watch the interview:
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etv.thomsonreuters.com Doe Run sees lead demand up next year. Ready to adjust output to reflect this.
Physical market source welcomes LME moly contract, but worries about price distortions and substitution effect.
Some copper and zinc smelters may have recently restarted capacity previously idled due to lack of space to store sulphuric acid, but an analyst says sulphuric acid market still in over-supply. Some producers having to pay for it to be taken away. Are storage problems of the by-product behind metals producers?
Producers say global economic crisis has been a good exercise, forcing them to streamline, debottleneck their operations.
#LME market duties this morning, now dashing over to RBS buffet to make contacts & get more metals gossip
The doom amongst copper consumers continued at #LME CRU breakfast - order books not really improving, everyone going to carry on living hand to mouth until they see definite signs of recovery ;-(
Analysts at #LME sticking to the recovery line - "so what if consumers are pessimistic, investors can float a market until such time as the consumer realises there's a recovery and jumps on board!"
China will buy metals next year soon as the price falls, doesn't matter if they need them or not. Next year looks ok but after that, I don't see how we can come out of recession unscathed, what will drive the economy, employment isn't there, the consumer is terrified, the banks are bust. The patient has stopped bleeding but he's still in bad shape - a dose of healthy scepticism at #LME.
#LME Bubbly guests at the RBS Sempra buffet left wondering why no champagne? An example of UK fiscal tightening perhaps?
LME Metals Seminar delegates say metal prices will stay steady for the rest of 2009 and rise in 2010. Delegates cited recovery in Asia and a weaker USD as bullish factors, with Eastern Europe recovery more subdued. Click here to watch the interview:
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etv.thomsonreuters.com Guests
Gavin Lavelle, CEO, Brady plc
Tom Saeki, General Manager LME Department, Mitsui
Christian Evers, Senior Manager, Autoliv
Michael Choi, Manager, non-ferrous metals, Hanwha
Sandor Megyeri, Managing Director, Metalonline
#LMEc Minor metal antimony jumps to near one year highs and could go higher. Traders wondering where they can get supplies outside of China?
#LME notes -- Reliance on China to support base metals prices could worry investors. China is the biggest consumer, but its not the only consumer and besides a significant proportion of its copper products are exported to the United States.
Remember Remember; the bear-raid over the evening of the LME dinner - 3 years ago
This was when the Chinese were said to ‘bear raid’ LME metals prices prompting a price collapse
Could it happen again?
Base metals are seen as fundamentally overbought by many
– eg high inventory levels
Western traders report, no consumer buying on the LME
Even Rio Tinto comments that there is no pickup in copper usage
BUT - Metals prices appear strong
China, Japan and other nations are competing for metals both physical and future supply
In the way that communist policies subsidised excess metals production through the cold war and for some time after centralized governance is now buying in metal for strategic and investment purposes.
Prices are therefore supported by excess liquidity, low interest costs and by strategic and other investment demand
The LME dinner and associated gatherings in London this week may confirm a lack of demand within the trading community but may equally confirm that much metal is sourced directly from producers.
So, what do we do?
Recommendation:
Bank some profits and look for some new growth opportunities in the short term
John Meyer
Mining Analyst
Fairfax IS PLC
By Andy Home
LONDON, Oct 13 – It’s not getting any easier. I’m still trying to find some signs of tangible, physical recovery in the metals markets outside of China.
The most optimistic comment I got this morning came over coffee at the CRU Breakfast from someone in the marketing department of, well, let’s just say it was a major global copper producer.
He said that at least customers weren’t cancelling tonnage as they were this time last year. The only problem is that no-one is asking for any extra allocation through the end of this year either.
At the other end of the scale was a commentary on the Italian copper market from an LME broker who does a lot of business in the country.
Fabricators are reducing run rates again after lifting them after the August summer holidays. Some brass mills are closing again.
Confidence is still wholly lacking with many companies reducing the number of counterparties they are prepared to deal with. Credit insurance “is a big problem”.
No-one’s prepared to price or book forward because they don’t know whether the counterparty will be there in six months time or whether they’ll honour a contract if the price has fallen in the interim.
And this is a “recovery”?
Still, the consensus is that going short is too risky. Pent-up fund buying and the potential for more dollar weakness are two big disincentives.
Supply-side problems are there too, particularly after the start of strike action at BHP Billiton’s Spence mine in Chile. There is now much speculation about how contract talks will play out at the giant Escondida mine.
There is also much background chatter about tightening raw material markets, copper most of all, but zinc too.
For price underperformers in the complex, for which think aluminium, there is already talk of the end-of-year index re-weightings.
It strikes me that the market is looking for reasons to move higher other than the obvious, i.e. a tangible improvement in end-user demand.
Here’s a public appeal. If you are a metal fabricator and seeing signs of improved demand and/or restocking from your customers, I’d love to hear from you.
andy.home@thomsonreuters.com
More from me together with top Reuters metals stories and third party content at www.metalsinsider.com
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