June 22, 2010

Dear Friend,

Last week LME and other exchange inventories fell for all six traditional LME commodities plus molybdenum too, which is the only time this year all have fallen.  These declines are contraseasonal, and we suspect traders or consumers are buying at reduced prices.  Normally inventories would start to accumulate as Summer approaches and if the world is slowing.  Of course, it is possible the world is not slowing.

 

World steel output and world aluminum output in May were both slightly below April 2010 records, but fell less than expected at 1% for steel and just over 0.1% for aluminum.  Containerboard sq footage rose 5.3% in May. 

 

The World Bureau of Metals Statistics reported apparent demand declines in April for China for copper, nickel, lead and zinc, and such declines may continue through September as comparisons are tough against last year's over-stocking period.  Total global demand for April was up significantly for nickel and zinc and barely for copper and lead.  January-April YTD global demand is up 2.2% for copper, 22,3% for nickel, 2.6% for lead and 11.8% for zinc (see Tables 3 and 4).  Chinese apparent demand growth for nickel and zinc was 1/3 to ½ as much as the rest of the world, similar for copper and identical at 2.6% for zinc.   The WBMS reports refined output gains resulting from higher prices than in 2009, including Jan-April YTD gains of 4.1% for cu, 5.1% for ni, 4.2% for lead, 17.9% for zn, 4.2% for gold, 4.8% for silver and 5.7% up for moly.  

 

Yesterday our team member and three year veteran Joe Reagor had a knee surgery, his second surgery as our team member and his fourth in total at age 26.  He has had three knees and a shoulder, leaving his left shoulder the only major limb still not surgically repaired.  Your support funds our Horizon Blue Cross/Blue Shield coverage that costs $82,000 to cover 5 of us plus 7 dependents.

 

Tonight I am off to Nevada to visit a couple gold mines.

 

Faithfully,

 

John C. Tumazos, CFA