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August 2, 2010 Dear Friend,
It is too
strong a statement to call this the "Summer slowdown
that never happened," as particular isolated markets are
slowing down. These include
logs, wood, scrap paper,
nickel, stainless steel, ordinary carbon steel scrap and
commodity steel. Price declines have ranged from $215
for OSB, $3.50 for nickel, $75 for ordinary steel scrap
or $125 per ton for hot-rolled steel sheets.
However, some of the
nonferrous metals markets are unusually strong including
copper. A serious geographic maldistribution of
copper inventories exists. The 609,389 tonne
exchange inventory total breaks down at about 49,000
tonnes in European LME locations, 170,889 tonnes in Asia
of which 104,507 are Shanghai and about 66,382 LME and
about 389,000 in the U.S. of which 91,382 are Comex and
297,618 tonnes LME. The tendency of Asian or
European consumers to panic was heightened with BHP’s
Escondida predicting a 5%-10% or 60,000 to
120,000 tonne decline in the next year and FCX
Grasberg postponing a high grade zone by four
years to 2014-15 to delay 60,000 tonnes of output.
We estimate a “demand-supply” differential from
monthly commodity exchange inventories.
The July 2010 month alone suggested a 4.1% shortfall in
nickel supply, a 3.9% shortfall in copper, a 1.5%
aluminum shortfall, a 0.8% lead shortfall and a 2.0%
zinc shortfall in unprecedented Summer tightness.
Nickel inventory increases, caused by summer demand
slowdowns in stainless steel and the Vale Inco
settlement, are the sole slowing major nonferrous metal.
These dynamics benefit all
copper-related companies and the Big Six diversified
mines in particular.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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