We present 3 dozen data series we monitor herein in graphs for your convenience.

 

·                     Several metals markets continue in an uptrend, contrary to nervous market expectations.  These include Chinese steel (Figure 7), copper inventories (Figures 9 and 10),  global copper consumption (Figure 11), U.S. aluminum consumption (Figure 13) and global aluminum demand (Figure 14).  Aluminum or lead are stronger than other base metals as it has more exposure to autos and less exposure to nonresidential construction than steel or copper.

·                     We consider both the large global diversified mines and the emerging capitalization nonferrous mines to be the “best plays” on continued growth, and our recommendations include BHP, Vale, AAUKY, XSRAF, TCK, FCX, ANFGF, MLKKF, DULMF, PLM, GMO and TC.

·                     Lead (Figure 22), nickel (Figure 23) and zinc (Figure 24) inventories remain high and appear to signal continued oversupply bearish trends.  Lead and zinc inventories made highs recently.  Even after a 30% decline from February peaks, nickel inventories remain over twice their pre-2008 records.  The Canadian strike settlement adds 2,000 tonnes of weekly supply after October. 

·                     Near-term U.S. steel industry variables reversed downward in the past 90 days  as shown in Figures 1, 2, 3, 4, 6 and about to be reflected in Figure 5.

·                     We doubt the accuracy of steel scrap price data in Figures 4, 32, 33 and 34.  Large minimills like Nucor buy their inputs up to 25% below the quotes, and market prices fell over $50 more than the AMM reports in recent weeks.

·                     Nonferrous base metals prices have fallen 20% to 30% from earlier 2010 highs, as the copper (Figure 12), aluminum (Figure 18), zinc (Figure 21), nickel (Figure25), lead (figure 26) and molybdenum (Figure 36) charts show.  It is possible to interpet these price declines either bullishly or bearishly, as either “buying opportunities” or indicative of oversupply.

 

Faithfully,

 

John C. Tumazos, CFA