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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (44535)	10/6/2009 12:39:51 PM
From: LoneClone	Read Replies (1) \| Respond to of 194504

Metal markets set for short term retracement But, a copper-led recovery is expected in the medium term Author: Nick Trevethan (Reuters) Posted: Tuesday , 06 Oct 2009 SINGAPORE (Reuters) - mineweb.com Metals markets are set for a short-term retracement before a recovery led by copper, zinc and lead, Four Elements, a boutique hedge fund based in Singapore, said this week. The fund's chief investment officer, Lionel Semonin, said the outlook for metals was among the strongest of the 30 commodities the systematic fundamental asset manager looks at. "Metals are relatively correlated," the former BNP Paribas executive said. "We expect them to all move higher. The stronger outlook is where you have scarcity of capacity and where substitution is less." "Copper, lead and zinc are interesting. Copper supplies look relatively tight. Zinc is linked to infrastructure while the issue with lead, as we have seen, is that it is not easy to make it cleanly." He said the economic indicators used to populate the fund's model were constructive and appeared to offer positive signals for the medium term. The fund uses market-specific data on supply, demand and inventories as well as price performance between markets, trade and other macro economic indicators to feed its algorithms. In the short term, his analyst team was a little conservative after the recent price rally. "The increase in prices in the past nine months has come from relatively few players. That lack of market breadth means we could see quite a dramatic reversal," he said. "We are much more prudent than we were a few weeks ago. I would not be surprised to see a retracement in the next few weeks as backward-looking economic indicators show a little weakness. But we will then go higher." CHINA Prices of copper and lead have doubled, while zinc and nickel have rallied 50% or more in the course of 2009, in part boosted by a huge re-supply effort by China, but Semonin said consumers elsewhere had yet to build up inventories. "China's demand for metals will remain high. I don't think they will want to continue stockpiling for stockpiling's sake, but they will build stocks in relation to their growing demand. "In the OECD, people still need to restock but the timing of that is difficult to see. For many of these metals, infrastructure is very important and emerging markets like Indonesia, India and South America are the ones to watch in the long term." The fund, established in December last year in the depths of the economic crisis, has under $10 million under management and invests long or short across energy metals and agricultural products. Semonin also said other metals, including nickel and aluminium, though less positive, still had potential to rally. "The problem with aluminium is that there is a lot of material out there. But it is closest linked to energy because energy is a large part of the cost of production. But you could see a squeeze on supply at certain times that would drive prices higher." London Metal Exchange aluminium stocks stand around a record high of 4.6 million tonnes. However, as much as 75% of that material is stored under long-term financing deals and is therefore not immediately available to the market. He also said interest in alternative and renewable energy, besides lifting demand for lead, would also underpin nickel in the future. "Lead should benefit from new energy euphoria, but the same is true to a certain extent for nickel," he said. "The issue for nickel has been softer demand and substitution in stainless steel, which is the major user of the metal versus nickel used in hybrid car batteries." (Editing by Clarence Fernandez)