12 November 2002 03:21
AAP MARKETS REPORT for Tuesday Nov 12, 2002 =3 Sydney
COMMODITIES In LONDON, Aluminium jumped to its highest level since mid-June during Monday's open outcry session
on the London Metal Exchange (LME) in a mainly technical move, though a stock fall in Western smelters to a 12-year low
aided the move, traders and analysts said. "Aluminium started off strong and led the complex higher ... but
it's been more of a technical move than anything else," Lawrence Eagles, analyst with GNI Research said. With
some US markets closed to mark Veteran's Day, trading was also thin, which Eagles said could have exaggerated the
upmove. News that total stocks of aluminium at Western world smelters fell to their lowest levels in twelve years in
September helped the upmove, although analysts were not convinced that this indicated improving market fundamentals.
With the metal having straddled several resistance levels, the next upside targets were pegged at June's high of
$1,422 and March's peak at $1,459 a tonne. "The real break point for aluminium would actually be $1,472, which
could push the market sharply higher," Eagles said. "The problem is, once you get above that level, it will
start to become cost effective for some of the smelters in the U.S. North West to restart." "That is a
situation ... that you don't want to see and I think prices are going to be naturally restrained below
$1,500." Three months aluminium finished the kerb at $1,398 a tonne, gaining $23, having scored an intraday peak at
$1,401, the highest since June 11. The metal is now some $113 above a 13-month low scored on October 10. Nickel finished
at $7,410 a tonne, gaining $60 on Friday. Eagles noted that for the metal bounced off its upward trend line earlier in
the day at $7,320. "Everyone is looking for nickel to be the star performer for next year, and I think, with
justification," he said, adding that there was still the big question mark overhanging the market regarding Russian
stocks. Russia's Norilsk has 60,000 tonnes of metal to be used as collateral against a $200 million loan from
Western Banks and has the option to sell part of this before the 3-year loan expired -- which might cap a significant
rise in prices next year. In other metals, copper rose $13 to $1,585 a tonne, while zinc stood at $761/62 from $760. Tin
ended at $4,270 from $4,240/250. Lead was flat at $441. In the aluminium alloys, standard finished the kerb session at
$1,307 a tonne, while North American was last indicated at $1,440/50. In NEW YORK, New York palladium skidded to
contract lows below $300 an ounce early Monday as the illiquid NYMEX market tried to digest a run on futures and the
auto industry reduced its reliance on the metal. "Supposedly there was a couple of hundred lots of selling on the
exchange, which is pretty big given that it usually trades like 15 lots a day," said a bullion trader. "It
just goes to show you can't offer a couple of hundred lots." COMEX gold and silver meanwhile were mixed in
light trade, with the closure of the US bond and financial futures markets for Veteran's Day keeping investors on
the sidelines. December palladium at 0910 EST was down $15.25 at $288 an ounce, after setting a new low of $285.20.
Futures followed London spot palladium, which fell to its lowest since May 1999 amid an increasingly bearish outlook for
the volatile and hard-to-procure metal, which is used chiefly in catalytic converters to remove pollutants from motor
vehicle exhausts. It is also used in electronics and dentistry. Spot palladium was quoted at $290/300 an ounce.
Ironically, palladium once suffered the exact opposite problem. In January 2001 it hit record highs around $1,100 an
ounce as industrial users were stockpiling frantically because of worries that Russia, which produces about two-thirds
of all palladium, could not export enough to meet requirements. NYMEX January platinum was off $8.40 at $574 an ounce.
Spot platinum was quoted at $575/580. On COMEX, December gold was off 30 cents at $321.40 an ounce, having touched
$322.10 and $320.10. Spot gold was indicated at $320.85/1.35, compared to $321.30/80 late Friday. London dealers fixed
Friday's morning spot reference price at $321.10 an ounce. December silver was 3.8 cents firmer at $4.57 an ounce,
trading $4.52-$4.57. Spot silver was quoted $4.55/57, up from $4.52/4.54 late Friday. It fixed at $4.53 an ounce. In NEW
YORK, NYMEX crude oil futures were sharply higher at midday on Monday, pushed up by defiant rhetoric from the Iraqi
parliament as it considers a tough new UN resolution passed on Friday demanding Iraq disarm. Iraq's parliamentary
speaker Saadoun Hammadi said on Monday a new UN resolution to disarm Iraq was "provocative, deceitful and a
preamble for war". Hammadi was speaking at the opening session of an emergency session of parliament to decide on a
tough UN resolution demanding Baghdad disarm or face possible military action. Despite expectations that Iraq will
ultimately accept the UN resolution, the head of an Iraqi parliamentary committee on Monday recommended that the
assembly reject it. At 12:20 EST p.m (1720 GMT), NYMEX December crude was up 66 cents at $26.44 a barrel, just under the
session high at $26.50, considered a key resistance area. The session low as $25.68, one cent above the ACCESS low. In
London, December Brent crude was up 63 cents at $24.21. "On a nearer-term basis, should issues about a potential
military entanglement between U.S.-led forces and Iraq become part of the market's psyche, we could see some
leveraged upside buying pressure in crude prices develop," said Merrill Lynch analyst Michael Rothman in a Monday
morning research note. Perceptions of OPEC overproduction beyond its current quotas, variously estimated between 2.5
million and slightly more than 3 million barrels per day (bpd) have tempered crude's futures uptick, as crude
futures tried to pierce resistance at the $26.50 level being eyed by technical chart watchers. Big cargoes of refined
products, particularly of gasoline, reported to be fixed to arrive in the United States this month are also weighing on
prices, traders said. Technical analysts on Monday expected NYMEX crude oil futures to extend Friday's advance. But
only a break above $26.50 is likely to trigger key buy stops, they said. NYMEX December gasoline was up 0.92 cents at
72.20 cents a gallon, having hit a session high at 72.70 cents and trading as low as 70.70 cents. NYMEX December heating
oil was up 1.12 cents at 70.00 cents a gallon, trading as high as 70.15 cents. The session low was 68.50 cents. MORE
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