Daily Nickel/Stainless Wrap-up

  • Baltic Dry Index – minus 32 to 1,506. (chart)
  • Dollar graph in lower right corner of this page – (chart of dollar index) (live java chart)
  • Headlines & leaders – (Bloomberg) Toyota `Shocked’ by Credit Markets, Borrows From Japan to Fund U.S. Sales  // Indonesia Cuts Benchmark Rate for Fifth Month to Sustain Consumer Demand // Asian Stocks Extend Global Rally as G-20 Widens Efforts to End Recession // European Stocks Decline, Led by Credit Suisse, Deutsche Bank, Novo Nordisk // Unemployment in U.S. Reaches 25-Year High as Service Industries Contract  // Fed Struggling to Win Over Investors Wary of `Sharks’ in TALF Aid Program // Most U.S. Stocks Rise as Bernanke Says Central Bank Programs Are Working //
  • The US Dollar continues to trade higher against the Euro, up by 2/10th’s of 1%. NYMEX crude is trading about even, while gold has slipped under $900/ounce, and down nearly 1%. Silver is down 1-1/2%. Base metals bucked the trend and all ended higher. Traders told Dow Jones that “the rally in metals this week was mostly due to a recovery in confidence, as better U.S. economic data and a pledge by G20 countries to stimulate the global economy raised hopes the recession is nearing an end.” Indicator charts show nickel was quiet early on, slipping into the red, before an afternoon jump took it well into the green. Dow Jones reports three month nickel ended the day at $4.96/lb , up 11% for the week. Sucden’s day old chart shows nickel’s upward trend over the past few days (here). The RSI and SStoch show the market heavily overbought, but with fund money looking for a home, the technicals were overlooked today. The Baltic Dry Index should be going up with all this enthusiasm in the market, and while analysts report more shipping activity than a few weeks ago, it continued its decline, down 32 points to 1,506. LME inventories of nickel slipped overnight, but remain about the 107,000 mark. Wall Street has so far today traded confused, as the employment numbers came out with some distasteful numbers, and the March ISM services index came in lower than expected. The bulls like their winning streak, and while the markets could easily afford a minor correction, the bears would look to take any turn as a momentum buster. Thus the tug of war is on today. The volatility index will not let go of the 40 range, so anxiety abounds on Wall Street, although safe haven gold slumped under $900/ounce today as traders flock back into the equity markets. The G-20 meeting did nothing to quell the optimism world markets have been experiencing over the past few weeks, and it was truly refreshing, in our humble opinion, to see the President from the United States, work cordially and respectfully with other world leaders. Will the bull continue to dominate next week? Stay tuned. In the mean time, have a safe and enjoyable weekend!! 

  Reports

  • (Read Ed Meir’s complete morning base metals report here)

  Commodity/Economic Comments

  • (WSJ in reference to today’s employment report) But the Labor Department’s most comprehensive gauge of unemployment surpassed even its early 1980s levels. The government’s broader measure, known as the “U-6? for its data classification, hit 15.6% in March — a big leap from 14.8% in February. The comprehensive measure of labor underutilization accounts for people who have stopped looking for work or who can’t find full-time jobs. The March figure is the highest since the Labor Department started this particular data series in 1994. It’s also above a discontinued and even broader measure that hit 15% in late 1982, when the official unemployment rate was 10.8%. (That data series goes back to the 1970s.)
  • U.S. Employment Situation (March 2009) – “Temporary Help Services Employment was 1,816,800, or down 3.8 percent, from the previous month. Year-to-year loss was nearly 27 percent. Since December 2006, Temporary Help Services has lost more than 850,000 jobs, or 32 percent.” – more
  • Graph courtesy Econompic – here
  • Stephen Stanley, RBS – “The labor market is not a leading indicator, so employment will not be the canary in the coalmine for a recovery (technically, payrolls are a coincident indicator and the unemployment rate is lagging). That being said, it will difficult to sustain any moderation in the contraction for very long while jobs are hemorrhaging. In any case, at a minimum, this report will put a damper on the “green shoots” talk for a time.”
  • David Greenlaw, Morgan Stanley – “The only notable surprise relative to consensus forecast was a slight dip in the average workweek to 33.2 hours. This was consistent with our own estimate but is the lowest on record (the data stretches back to 1964). The average work week is considered to be a leading indicator of labor demand. So, the ongoing weakness does not auger well for a turnaround in employment growth anytime soon.”
  • Nomura Global Economics – “Arguably the most striking feature of the employment report is the drop in hours worked. The aggregate hours index fell 1%. Manufacturers cut an average of 12 minutes from the workweek, which fell to the lowest level since 1983. The declines in employment, hours and overtime point to another large decline in industrial production.”
  • Nigel Gault, IHS Global Insight – “We do expect the economy’s rate of decline to soften in the second quarter, and for it to hit bottom in the second half of the year. But we don’t expect the turnaround to be rapid enough to prevent the unemployment rate hitting 10% before it peaks.”

  Analyst: Stainless steel output to shrink 16% – Stainless-steel production will shrink 16% this year, forecasts veteran researcher Heinz H. Pariser Alloy Metals & Steel. Global stainless output will retreat for the third consecutive year to 22 million metric tons, extending last year’s 7.7% decline to 26.2 million tons. – more

  Ferrochrome sector likely to stabilise by third quarter – analyst  – South Africa’s ferrochrome industry – heralded for producing about three- quarters of the world’s supply of the anticorrosive alloy – hit a slump in 2008, which spurred an unprecedented shutdown of operations in the country. – more

  Morgan Stanley: World steel prices will drop 41% – World steel sheet prices this year will drop by 41% to an average $502/metric ton in 2009 from last year’s $854 average, forecasts Morgan Stanley in a new report. – more

  World steel output plunges 22% – World steel output fell 22% in February from the same month last year but China defied the trend and reported a 4.9% increase, the World Steel Association said on Friday. – more

  Morning Briefing (8:00 AM CST is 1PM in London)

  • Indicators at 7:30 am CST show 3 month nickel trading around $.06/lb lower, with the rest of the base metals complex mixed. The unemployment report for the US had world markets on edge this morning, and has just been released, so markets have yet to have time to fully react. The US Dollar is up 1/10th of 1% against the Euro, while NYMEX oil futures are down nearly 1% but still over $52/barrel. Gold is down 1/2 of 1% after the G-20 supported  a plan by the IMF to sell some of its gold reserves. Silver is down nearly 1-1/2%. Asian markets ended slightly higher overnight, while European markets have moved higher since the US unemployment numbers came in as expected. On the back of the report, US futures also show a slightly higher opening. The aforementioned report, which worldwide markets were on pause awaiting its issue, came in as expected with a loss of 663,000 non farm jobs lost, and a rise in overall unemployment to 8.5%.  In about an hour we will get the ISM Non-Manufacturing PMI, which is forecast to read 41.9. The numbers were bad today, but as they came in as expected, the news will not be enough to castrate the bull. It is interesting to note that while most economists will tell you unemployment lags an economic recovery, there are a few signs inside the report that tell you if the economy is picking up or not. Take hours worked for instance. If factories are working more, they may not be hiring people back yet, but the employees they do have will be working longer hours. In January the average hours worked for manufacturing employees was 39.8 hours. In February that number fell to 39.5. In March the number fell to 39.3. Another section to watch is temporary help. These should be climbing if the economy is picking up. Instead 72,000 temporary jobs were lost in March, and 767,000 have ben lost since Dec 2007. If the market is recovering, it is not being seen in US manufacturing yet.
  • Bloomberg morning base metal news – more

  Reports

  Stainless Steel Output May Shrink 16% in 2009, Pariser Predicts – Stainless-steel production will shrink 16 percent this year, contributing to an 11 percent drop in nickel consumption, researcher Heinz H. Pariser Alloy Metals & Steel forecast. – more

  Commodity/Economic Comments

  • Edward Meir of MF Global Morning Comments – pending release, no issue was published yesterday as Ed is traveling
  • (JMB) Japanese steel makers started fiscal 2009 ending March 2010 under severe business condition. The raw steel production is expected to be less than 100 million tonnes for the year for the first time in 10 years.
  • (Interfax) Chinese steel mills could secure a 40 percent decrease in 2009/2010 contract iron ore prices from the world’s three largest miners as they are already currently purchasing iron ore at such price levels, according to Chinese analysts.
  • (SG) It is reported that Chinese steel traders are now being caught in dilemma by the present steel market. As on the one hand, there is little transaction for their export steel products and on the other hand, they dare not to import any resource, citing the downward steel price.
  • (MB) Jinchuan ups nickel price to above $13,000/T on tight supply
  • METALS INSIDER: Copper lurching from one crisis to the next? – more
  • Deal delay leads broker to suggest dumping Rio shares – more
  • Interfax – China to close markets for national holiday on April 6
  • US Steel suspends $1B coke plant project – more
  • (China) Vice Premier warns of ‘grave’ employment prospects – more
  • Commodity Prices Rising, But No Spike – more
  • Commodity Mutual Funds Favored Over Hedge Funds on Regulation – more
  • Dry bulk market’s weakness more persistent than estimated – more
  • A big bear: Markets ‘way too optimistic’ – more

  CRU/CESCO-LME CEO says storage capacity sufficient – The London Metal Exchange is well equipped to handle rising inventories in its warehouses and is even adding capacity globally as the international financial crisis pummels demand for industrial metals. – more

  China’s top steel maker cuts May prices as demand remains weak – China’s top steel maker, Baoshan Iron & Steel Co. Ltd. (Baosteel), said it would cut prices for a second straight month in May as there was no end in sight to a deepening demand decline in the world’s No. 1 consumer.  – more

  Residents accused of misplaced nickel concerns – The Member for Kalgoorlie, John Bowler, has accused a group of Esperance residents of scaremongering over concerns about nickel dust emissions. – more

  • BHP faces probe for sacking 1,800 staff – The federal government is investigating the sudden sacking of 1,800 workers at BHP Billiton’s Ravensthorpe nickel mine in Western Australia. – more

  Yes, I think ferrochrome will definitely stabilise by third quarter – Cadiz’ Peter Major – South Africa’s ferrochrome industry – heralded for producing about three- quarters of the world’s supply of the anticorrosive alloy – hit a slump in 2008, which spurred an unprecedented shutdown of operations in the country. – more

  • Steel price down on low demand – Only a recovery in fundamental industrial demand would stimulate the steel market, said Shoaib Vayej, a portfolio manager for Sanlam Investment Management (SIM). – more
  • Vehicle, mining industries face “enormous difficulties” – Pretoria – South African Finance Minister Trevor Manuel said on Friday the mining and automobile sectors would face “enormous difficulties” but this was not unique to local industries. – more

  S Korea’s ferroalloy trade picks up on higher steel export demand – Spot trade of some ferroalloys imported into South Korea picked up in March due to increases in Korean steel exports thanks to the weaker Korean currency, market sources said Thursday. – more

  Morning Nickel Inventory and Price Statistics & Figures

  • London Metal Exchange inventory figures/changes – (for today’s figures see MF Global report above) (charts and archives)
  • Today’s almost official prices here  /  Yesterday’s actual LME official prices here or here (chart)
  • Shanghai Jinchuan nickel price – available here   (charts)
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