Metals up on ECB and Fed news

Commodities , Metals Sep 09, 2012 No Comments

MetalMetal prices on the London Metal Exchange have significantly increased last week, boosted by measures from the European Central Bank (ECB), infrastructure spending in China and hopes to see U.S. Federal Reserve (Fed) do more.

The week started with a new stronger than expected decrease of the manufacturing activityin the USA and in China, the largest consumer of metals in the world.

These indicators have put metal prices under pressure Monday and Tuesday, but this decline did not last long, because these statistics also enhanced the likelihood of support measures by the central bank of China and the U.S.

Central banks support to the economy are likely to stimulate investment in commodities. Also, such actions by the Fed tend to dilute the value of the dollar, making metals denominated in U.S. currency more attractive.

And indeed, Mario Draghi, the president of the ECB, did not disappoint by unveiling a new plan on Thursday to redeem public debt to support the weaker countries of the eurozone.  Already gaining after the ECB meeting, metal prices rose sharply on Friday.

Chinese media unveiled new massive government spending in the country’s infrastructure, which undoubtedly also explains some of the enthusiasm recorded Friday on the metals market.

According to official media, China has given the green light to a range of investments of more than one trillion yuan ($158 billion) to develop 55 infrastructure projects, from highways to subway lines, which should increase Chinese demand for metals.

With ECB measures, infrastructure spending in China and the potential for monetary easing in the United States, metal prices should be on a rising trend in the foreseeable future.

The Fed meeting on September 12th and 13th will now focus the attention of the market, after this week U.S. labor market numbers.

Friday, the highly anticipated monthly report on employment showed an unexpected decline in the unemployment rate in the United States in August to 8.1%, but a greater than expected decline in hiring, leading to a weaker dollar.

Copper reached Friday 7,895 dollars per tonne, the highest since May 14, while aluminum reached 2,004 dollars per tonne, the highest in three months.

On the LME, the ton of copper for delivery in three months traded at $7,822 compared with 7,563 dollars a week earlier at the same time.

Other metals were also up on the week:

  • Lead: 2,079 dollars per tonne vs. 1,952 dollars.
  • Tin: 19,915 dollars per tonne vs. 19,450 dollars.
  • Nickel: 16,300 dollars per tonne vs. 15,905 dollars.
  • Zinc: 1,960 dollars per tonne vs. 1,824 dollars.
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Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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