Mind The Metals-----24% Plunge In 2015 Portends Global Economic Slide

Industrial metals fell, capping the worst year since 2008, as production cuts and signs of improving demand in China came too late to counter falling consumption and excess supplies.

Aluminum, copper, zinc, tin, nickel and lead capped annual losses, with nickel dropping 42 percent, the worst performer on the London Metal Exchange LMEX Index. The gauge fell 24 percent this year.

Copper declined for a third straight year, the longest slump since 1998, amid growing supply gluts after demand faltered in China, the world’s biggest metals user. While producers in the Asian nation and elsewhere have pledged production cuts, investors spooked by wavering global economic growth and the possibility of persistent metals surpluses have been slow to return.

"There are a lot of questions about China and what the smelters are doing over there,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “There are still tremendous unknowns, and we will enter the new year with metals not being a favored asset class.”

Copper for delivery in three months slid 0.6 percent to settle at $4,705 a metric ton ($2.13 a pound) at 2:50 p.m. on the LME. Aluminum, tin and zinc also declined, while lead and nickel advanced.

Copper futures for March delivery fell 0.5 percent to $2.135 a pound on the Comex in New York.

China’s growth will drive raw materials demand in the long term, according to Glencore Plc Director John Mack, who said the company has cut copper output and other suppliers need to do the same if prices are to recover. Nine of the nation’s copper producers have agreed to cut sales by 200,000 metric tons in the first three months of 2016, people with knowledge of the matter said Tuesday.

The official purchasing managers index in China for December is scheduled to be released on New Year’s Day, followed by the Caixin manufacturing index on Jan. 4. Both are expected to show a smaller contraction in manufacturing, according to economists surveyed by Bloomberg.

“Chinese economic data has improved a bit already,” Angus Nicholson, market analyst at IG Markets Ltd. in Melbourne, said by telephone. “Along with the bounce back in industrial production, the hope is you will also see an improvement with the forthcoming PMIs in January.”

http://www.bloomberg.com/news/articles/2015-12-31/metals-set-for-first-monthly-rise-since-april-to-pare-2015-slump

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.

Get Access