MEIR ON METALS: Metals push lower in wake of official Chinese growth downgrades

Mar 05, 2012 | 10:36 AM |

Analyst Ed Meir looks at what is moving the metal markets on Monday March 5.
Copper and general commentary: Most metals prices fell slightly on Friday, pressured by weakness in the euro and lacklustre showings in the US equity markets. In addition, copper in particular looked quite toppy on the charts for much of last week, unable to decisively punch through to fresh highs.
However, what we think is troubling all the markets right now is the fact that investors have spent most of January and February discounting the improving situation in Europe, which included both the recently concluded Greek debt accords and two rounds of massive ECB lending programmes. With both these factors now out of the way, markets are refocusing their attention on other things and, in this regard, China is again moving to the front and centre.
Here, however, the story is not as bullish. Metals demand in China is decelerating, best evidenced by the goings-on in the copper market, where Shanghai inventories have been rising steadily, now at ten-year highs. In addition, physical premiums have shrivelled, with cathode premiums reportedly at +$60 in bonded warehouse Shanghai, although numbers as low as $35 per ton, or even $20 per ton, have also been heard.
In the meantime, the arbitrage remains locked, and copper imports are likely to drop again in February following January’s dip. ....

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