Claude, et. al:
Tidbits from Barclays Capital Metals Research discussing potential "squeeze" in zinc shaping up. Kevin Norrish in Barclays' commodities unit notes:
LME zinc open interest increased substantially whilst forward spreads tightened. He suggests that "the zinc market may be about to get squeezed." Also, "...prices have fallen back but we believe that there is significant potential for further rallies over the next few weeks." He discusses rumors as to "...who might be engineering a squeeze and there has also been much speculation about who the big shorts in the market may be."
However, he notes a number of bearish factors including 1) price prospects for other LME metals are bearish and "it is unlikely that zinc can outperform ... on its own." 2) "The technical analysis below shows that despite the recent rally zinc remains in a long-term downtrend." 3) "China remains a difficult area to predict." 4) "In the medium term zinc is almost certainly heading for significant oversupply. Refined production will accelerate toward the end of this year and in to 2000 as...(260,000 tonnes of new smelter capacity comes on stream)".
I wonder whose axe Barclays is grinding because: 1) any metal can, and does, move on its own supply/demand/technical merits against the direction of other base metals. 2) the purported technical analysis consists only of a price chart containing absolutely no analysis of relative strength, moving averages, momentum, stochastics, etc. 3) China IS difficult - it is exporting far less zinc to the west that is desired. 4) Increases in demand (consumption gains plus/minus any inventory hoarding by users) could vastly outweigh the supply gain. Consumption would increase by 323,200 tonnes through year 2000 if it grows at 2% in each of 1999 and 2000, as seems likely. Another 160,000 tonnes of zinc would be demanded if zinc consumers, now reported to have low inventory, sought to add just one week's worth of consumption as a hedge inventory. BARCLAYS' ANALYSIS TOTALLY IGNORES THE QUESTION OF CHANGE IN DEMAND LEVELS - UP OR DOWN. That is a serious flaw and, therefore, raises the question; whose axe are they grinding???
Among the surest signs of a tight market are 1) big manipulators see the market as being tight enough to be ripe for rigging, and 2) regulatory interests and their "clubby" friends put forth flawed analysis to try to quiet the market.
Go zinc, go.
RH |
