December 2, 2010

Dear Friend,

I will be in London on December 6th to 9th att ending the December 7th Xstrata investor day, visiting Antofagasta PLC, Anglo American and BHP Billiton and calling on some investor clients.  We will not have any conference call on Monday or Thursday morning this week.ing

 

Crude oil, gold, silver and palladium made 2010 highs this past week.  Inventories fell for 5 of the 6 major nonferrous metals, with copper inventories making a 14 month low.   Metals markets were encouraging with 9.8% unemployment signalling even lengthier U.S. stimulus programs, a weak dollar and Shanghai stocks fell for each metal for the second straight week.  China's  central bank bought about 10% of world mine output through October or about 1 tonne per business day.

 

We took six institutional investors through U.S. Steel Gary Works on November 19th, and wrote up our notes herein. Were very very impressed that the U.S. Steel Gary Works benefits from six satellite or "sister" plants that can utilize up to 75% of its tonnage capacity, and that 19 such plants can use up to 9 million tons or over one-third of U.S. Steel's North American output.  The recent decade's investment and operating practice changes highlighted safety and environmental improvements.  It uses about two manhours per ton of steelmaking, but its more labor intensive functions partly occur at satellite plant locations for tin mill, galvanizing or other high value uses.

 

Faithfully,

 

John C. Tumazos, CFA