News

August 25, 2008

Commodities Kick Against Dollar Strength, As Supply Tightens And The Chinese Gaze Looks Up From The Olympics

By Rob Davies

A rampaging dollar and strong demand for bank shares last week seemed to signal – to some market watchers at least - that the commodity game was about to come to an end. That is, until the end of the week, when metals prices shot back up again. Over in Australia, they’re attributing a lot of that late surge to the Chinese, who are either back into the market, or thought to be about to get back into the market. However, a further major contributing factor must be the steady newsflow about mines being closed because of low - yes low - metals prices. The latest to cease operations is Xstrata’s 29,000 tonne a year Falcondo nickel mine in the Dominic Republic. Its dependence on oil makes it particularly vulnerable, and the four month suspension of operations will be used to refurbish the plant and examine options for converting the project to coal firing.

That news, and the general supportive sentiment in the sector, pushed nickel up 10.7 per cent to US$21,095 a tonne. Other metals responded in a similar way, with tin making an even bigger jump, up 12.4 per cent to US$21,350 a tonne. Copper was the most subdued of all, putting in a modest 2.7 per cent increase to US$7,841 a tonne. Zinc rose 11 per cent to US$1,804 a tonne, and lead by 6.8 per cent to US$1,890 a tonne. Aluminium retained its status as the world’s most boring metal – or middle...