Monthly Metal Review

Overview

All base metals started the month of October quite negatively amid the annual gathering of worldwide base metal players taking place in London for the LME week. Nevertheless, all of them managed to recover strongly at the end of October and to settle above their initial month level. A positive conclusion of the European summit of the 26th of October and a higher than expected preliminary Chinese PMI manufacturing at 51.1 in September compared to 49.9 in August helped achieve the recovery.

For more than eighteen months, European leaders have been trying to provide a coordinated, concrete and clear solution to the European debt crisis without succeeding. Decisions were taken too late or too disparately to convince markets. Things seem different this time. Europe appears driven to face the problem. The end of October marked a clear positive step in the resolution of the European debt crisis. In addition, positive economical news flew from United States. Inflation revealed to be lower than expected during the month of October with Consumer Price Index standing at 0.3% in September vs 0.4% in August. In this context, the New York Federal Reserve Bank president William Dudley, announced that another round of Quantitative Easing might be possible. This fuelled positive sentiments in the market. The remaining question would be to know if the rally seen in the last days of October is to be sustainable in the long term.

For the first time since the beginning of the discussion regarding the resolution of the European crisis, Greek, Italian and Spanish bonds market values were taken into account in banks valuation. This allowed governments to define precisely required bank haircuts. The loss of value assumed by banks and private investors will amount to 50% of bond face values. In order to support them, governments estimated the necessary European banks recapitalization at EUR 108 billions, well below the EUR 200 billions anticipated by the International Monetary Fund at the beginning of the month. Moreover, in order to help countries struggling with financial issues, governments agreed to increase the amount of the European Financial Stability Facility from EUR 440 billions to EUR 1’000. Funding will not involve any help from the European Central Bank but will mainly be achieved through the participation of the Chinese government and the International Monetary Fund. However, its new president Mario Draghi already announced that Central Bank will keep on buying government bonds to support the economy. Finally, European leaders introduced, for the first time since the creation of the European Union, the idea of a supranational financial entity. This one will require members to revise European treaties.

All these positive factors, added to supply constraints in several base metals markets prompted a quick recovery. In London, copper cash settlement reached USD 7’981/ton on October 28th almost USD 1’000/ton higher than 6 days before. The same day, Zinc and Lead settled respectively at USD 1’908 /ton and USD 1’986/ton while Nickel increased from USD 18’580/ton on October 18th 2011 to USD 19’700/ton on October 28th, 2011.

Paper wise, the Commodity Futures and Trading commission in United States is working on regulations to prevent speculation by the end of 2012. It actually needs to gather accurate information on trader positions to come with an appropriate plan of action. LME might not necessarily apply these new regulations. On the financing side, most European banks have been struggling to fund in US dollars. While five major central Banks announced three unlimited auctions in US dollars from October to the end of the year and would release funding pressure, most base metal actors have been encouraged to accept credit lines in EUR and to trade in Euro dominated prices.

Facing such a rapid recovery, one should remain cautious. Details of the European plan are far from being set up and implementation far from being achieved. Furthermore, debt to GDP ratios remain elevated for France, Italia and Spain. The recent end of month recovery in base metal prices may have been caused by short covering, following positive news from Europe and US GDP growth. Nevertheless, most analysts believe copper, zinc & lead and nickel supply shortage will persist for the coming months, and might support prices.

Daily Prices

October 2011

Copper
Date(Fix.) ($/MT)
Average 7347.50
31-10-2011 7900.5
28-10-2011 7981.5
27-10-2011 8040
26-10-2011 7720.5
25-10-2011 7590.5
24-10-2011 7380.5
21-10-2011 7062
20-10-2011 6916.5
19-10-2011 7305.5
18-10-2011 7271
17-10-2011 7566
14-10-2011 7500.5
13-10-2011 7328
12-10-2011 7419
11-10-2011 7215.5
10-10-2011 7314
07-10-2011 7250
06-10-2011 7095.5
05-10-2011 6860.5
04-10-2011 6785
03-10-2011 6795
Silver
Date(Fix.) ($/OZ)
Average 31.97
31-10-2011 34.24
28-10-2011 35.42
27-10-2011 33.55
26-10-2011 33.3
25-10-2011 32
24-10-2011 31.7
21-10-2011 30.8
20-10-2011 30.79
19-10-2011 31.97
18-10-2011 31
17-10-2011 32.3
14-10-2011 31.82
13-10-2011 31.97
12-10-2011 32.89
11-10-2011 31.37
10-10-2011 32.23
07-10-2011 31.98
06-10-2011 31.8
05-10-2011 28.69
04-10-2011 30.6
03-10-2011 31.05
PM MEAN AM Gold
Date(Fix.) ($/OZ)
Average -
31-10-2011 -
28-10-2011 -
27-10-2011 -
26-10-2011 -
25-10-2011 -
24-10-2011 -
21-10-2011 -
20-10-2011 -
19-10-2011 -
18-10-2011 -
17-10-2011 -
14-10-2011 -
13-10-2011 -
12-10-2011 -
11-10-2011 -
10-10-2011 -
07-10-2011 -
06-10-2011 -
05-10-2011 -
04-10-2011 -
03-10-2011 -
Date(Fix.) ($/OZ)
Average -
31-10-2011 -
28-10-2011 -
27-10-2011 -
26-10-2011 -
25-10-2011 -
24-10-2011 -
21-10-2011 -
20-10-2011 -
19-10-2011 -
18-10-2011 -
17-10-2011 -
14-10-2011 -
13-10-2011 -
12-10-2011 -
11-10-2011 -
10-10-2011 -
07-10-2011 -
06-10-2011 -
05-10-2011 -
04-10-2011 -
03-10-2011 -
Date(Fix.) ($/OZ)
Average 1666.55
31-10-2011 1720
28-10-2011 1738
27-10-2011 1713
26-10-2011 1714
25-10-2011 1656.13
24-10-2011 1651.5
21-10-2011 1632.75
20-10-2011 1624.5
19-10-2011 1651.75
18-10-2011 1644.5
17-10-2011 1685.5
14-10-2011 1677
13-10-2011 1664.5
12-10-2011 1684.5
11-10-2011 1662.5
10-10-2011 1662.5
07-10-2011 1651.5
06-10-2011 1642.25
05-10-2011 1608.5
04-10-2011 1655
03-10-2011 1657.75
Lead
Date(Fix.) ($/MT)
Average 1947.69
31-10-2011 1981
28-10-2011 1986
27-10-2011 1951
26-10-2011 1937.5
25-10-2011 1961.5
24-10-2011 1940.5
21-10-2011 1841
20-10-2011 1791.5
19-10-2011 1890
18-10-2011 1906
17-10-2011 1990.5
14-10-2011 2008
13-10-2011 1996
12-10-2011 2009.5
11-10-2011 1956.5
10-10-2011 1957
07-10-2011 1946
06-10-2011 1944.5
05-10-2011 1947
04-10-2011 1961
03-10-2011 1999.5
Zinc
Date(Fix.) ($/MT)
Average 1859.17
31-10-2011 1918.5
28-10-2011 1908
27-10-2011 1880.5
26-10-2011 1843
25-10-2011 1837
24-10-2011 1840.5
21-10-2011 1793
20-10-2011 1750
19-10-2011 1832
18-10-2011 1832
17-10-2011 1900
14-10-2011 1901.5
13-10-2011 1890
12-10-2011 1930
11-10-2011 1880.5
10-10-2011 1903.5
07-10-2011 1845
06-10-2011 1843.5
05-10-2011 1831
04-10-2011 1835.5
03-10-2011 1847.5
Tin
Date(Fix.) ($/MT)
Average 21792.62
31-10-2011 21875
28-10-2011 21915
27-10-2011 21855
26-10-2011 21810
25-10-2011 22290
24-10-2011 21805
21-10-2011 21760
20-10-2011 21350
19-10-2011 21650
18-10-2011 20605
17-10-2011 22000
14-10-2011 22050
13-10-2011 22500
12-10-2011 22400
11-10-2011 22250
10-10-2011 23000
07-10-2011 22720
06-10-2011 22150
05-10-2011 21250
04-10-2011 20350
03-10-2011 20060