Purchasing

Robert J. (Bob) Garino

Copper, other metals boosted by economic stimulus package
January 25, 2008

Copper futures prices got some much needed support this week from buyers who saw inventories continuing to fall (now at 2 ½ month lows)….amidst the knee-jerk response to the stimulus packaged agreed to by the Bush Administration valued at more than $150 billion worth of rebates and business tax cuts...

Gold…

What’s bigger than the Fed lowering rates by 75 basis points? Tuesday’s move by the Fed marked the biggest funds rate cut on record going back to 1990. The action was taken following Monday’s heavy global selling rising concerns that weakness in the

world's largest economy was spreading worldwide…even if this latest move proves to have a calming effect, many believe the Fed will again move to cut rates at its January 29-30 meeting. The Federal Funds rate now stands at 3.5%.

And that sort of brings us to gold…a poll by Reuters, released Wednesday, reported that average gold prices are expected to be up by more than 20% this year, and retain most gains in 2009…the 50 analysts who participated cited dollar weakness, market turmoil and inflation fears…the group produced a median price for gold of $850 for this year, up from an average of $696.95 recorded in 2007…the spot market traded at a historic highs last Friday ($923.40)…

Ferrous…

So, how much steel was produced last year? According to the International Iron and Steel Institute, output reached a record 1,343,500,000 metric tons, up 7.5% over 2006…China’s production was figured at 489 million metric ton, up 15.7% -- without China, global output would have grown by 3.3%.Confirming that data, the China Iron and Steel Association reported crude steel output rose 16.4% to an estimated 490 million metric tons in 2007, outpacing consumption. Consumption, the association said, rose 12.9% 436 million metric tons while net exports accounted for 54.89 million metric tons of crude steel…CISA forecast 2008 crude steel production at 540 million metric tons, a rise of 10%, while crude steel consumption by the domestic market would rise by about 12% this year. CISA's projections imply that China will produce a surplus of nearly 52 million metric tons of steel in 2008. Exports anyone?

Here’s the Top 10 for last year:

Country           Rank   2007   2006  % change

China              1          489.0  422.7  15.7

Japan              2          120.2 116.2  3.4

U.S.                 3          97.2     98.6     -1.4

Russia             4          72.2     70.8     2.0

India                 5          53.1     49.5     7.3

S. Korea          6          51.4     48.5     6.0

Germany          7          48.5     47.2     2.8

Ukraine            8          42.8     40.9     4.7

Brazil                9          33.8     30.9     9.3

Italy                  10        32.0     31.6     1.2

The share held by the BRIC producing nations increased to 48% from 31% in 2001.

Moving back to nonferrous…

Copper supply and demand, especially…latest from the International Copper Study Group has the global market for refined copper in deficit by some by some 218,000 metric tons between January and October of last year...output was figured at 15.110 million tons, while consumption totaled 15.328 million tons. The study group estimated world refined copper usage increased by 7.2% in the first 10 months of ‘07 compared with the same period in 2006.

Growth, the study group noted, was driven by China (surprise, surprise) where consumption was up 37% as net imports of refined copper rose by 170% to “about 1.18 million tones (metric tons).”

Chinese customs reports placed net refined copper imports at closer to 1.37 million metric tons…

Meanwhile, Reuters annual base metals price forecast was released this week…some 40+ analysts participated in this (futile) exercise…the forecasted results for 2008 and 2009 are as follows:

Commodity 2008 Average 2009 Average

Aluminum         $1.14/pound     $1.146/pound

Copper            $3.075             $2.775

Nickel              $12.93             $11.36

Lead                $1.14               $0.90

Zinc                  $1.125             $1.03

Tin                   $6.98               $5.855

Posted by Robert J. (Bob) Garino on January 25, 2008 | Comments (2)