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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (15151)	6/10/2004 2:07:37 PM
From: Activatecard	Respond to of 110194

Metals to shine again By Robin Bromby 10jun04 PREPARE yourself for another rollercoaster ride on the metals markets this year, when both consumers and hedge funds wake up to the fact that Chinese demand is not going away. That's the message coming from several analysts who see a second spike in prices following the recent retreat. The factor that will trigger this new price surge is low stockpiles. And that makes these metals even more vulnerable to manipulation by hedge funds. Nickel stockpiles on the London Metal Exchange are now below 12,000. It was their fall below 25,000 tonnes (about five weeks' supply) in January that sent that metal's price soaring. Tin supply is even more critical: about 3000 tonnes, or four days' supply. ANZ Institutional Bank resources analyst Daniel Hynes said base metals markets had not yet peaked, and prices should soon regain recently lost ground. Aluminium, zinc and copper would be in the vanguard. In the past month, nickel prices dipped 22 per cent, copper 12 per cent, lead 14 per cent and zinc 8 per cent. Yet the fundamentals had not changed, Mr Hynes said. "In fact, consumption of metals is growing quicker than expected," he said. ANZ believed China's new 7 per cent growth target would be exceeded, even if Beijing used "forceful" methods to cool its economy. Mr Hynes predicts China's use of aluminium will grow 11 per cent over the year, copper and nickel 9 per cent, zinc 8 per cent and lead 10 per cent. Barclays Capital Research also expects another peak in commodities prices, as in all previous metals price cycles. Base metals analyst Ingrid Sternby said the market was being fuelled not only by physical demand, but by fund managers looking at metals as an alternative investment. Last October, speculative buying through the Comex (commodities exchange) market in New York accounted for 44 per cent of copper activity. Hedge funds now controlled more than $US1 trillion, while the growing mutual fund business in China had $US25 billion under management. Ms Sternby said the money was moved through the London Metal Exchange and the Shanghai Futures Exchange, as well as New York. "We reckon that on a typical trading day speculative trading can amount to more than half of turnover," she said. Far East Capital chairman Warwick Grigor said hot money moved into the US dollar and oil after China said it would slow its growth. It would return once it was clear to the hedge funds that there was a physical floor to metal prices and that supplies of metals remained tight. "They're hunting in packs," said Mr Grigor. "The wheel just turns again." The hardest part would be left to local investors. While the hedge funds were likely to have a field day, the volatility in the metals markets would confuse many investors here when it came to punting on local mining stocks, Mr Grigor said. thecouriermail.news.com.au 0.html