Summary
Rio announcing major job cuts and expense reduction has major bullish inclination to base metal pricing.
Analysis
December 10, 2008
Indicators Show Base Metal Prices are Establishing a Floor
Any interested party realizes that commodity prices, including oil and base metals are off as much as 75% from their recent 2008 highs. All along the way down, there have been opportunities to sell into this bear trend, but major producers have till now been loath to cut back on production. But, now the prices have hit the level where cutting back production is the better economic decision. This is true because, the cost of mining and processing is not much less than the current market prices for many products.
Consumers of base metals, specifically copper have begun to tighten their formulas. Just this morning, a major brass mill reduced their buying formula for scrap by $60 per ton from Comex value, and are inclined to even do better with a worthwhile lot. This is a bullish indicator for copper pricing. I haven’t seen this happen all the way down.
There is a lot of talk about infrastructure stimulus. This is wonderful news to the commodities. But, this will not have meaningful effect for at least 6 months. The most likely pop in the market will be when
