LME Week 2011 Roundup

Chatter up and down the Lane

The global metal industry descended on London this week for its annual round of seminars, meetings and glad-handing, which centred on the LME Dinner that took place on Tuesday evening at the plush Grosvenor House hotel.

By Friday, as the movers and shakers checked out and headed for the airport, temperatures in the UK were back to normal, having cooled over the week, but prices were warming up as was some of the talk surrounding the LME.

Listed below are some of the comments made round and about the various events.

THE WEEK ENDS

“It’s all strange (Friday price firmness), given the bearish tone we saw earlier in the week as the LME’s annual party kicked off. Perhaps it’s just because the bears are all on a plane at the moment and unable to sell this rally” – RBC Capital Markets.

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“Despite the negative tone in the base metals markets in the run-up, the
overall message from our meetings with producers and consumers was cautionary as opposed to bearish, as illustrated by copper prices which are on target to post the biggest LME week increase this century” – Barclays Capital.

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“The distillation of the many meetings and events during the LME Week is that base metal markets, are witnessing a dislocation between bearish price expectations and healthy underlying market fundamentals” – Nick Moore of RBS Global Banking & Markets

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“Will it be CME Week, SGX Week, ICE Week when we meet all again next year? I hope not – LME Week is a nice tradition. It would be a shame to end it” – merchant trader.

AT THE DINNER

“I know about as much about base metals as Gordon Brown knows about precious metals” – Lord Davies, keynote speaker at the LME dinner.

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“Policy makers, keen to be seen to take action in the face of inflation affecting voters’ pockets, rush into ill thought-through reactions, resulting in bad regulation” – Sir Brian Bender, LME chairman

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“There is some unease about the proliferation of algorithmic trading systems, the potential for more high frequency trading and the implications of proximity hosting” – LME CEO Martin Abbott

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POSSIBLE LME SALE AND OTHER ISSUES

“The elephant in the room here is the LME as a target for potential acquirers” – Abbott

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“There is going to be a mountain to climb and I look forward to people trying to climb it” – Abbott

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“We will keep our shareholders appropriately informed, and will be keen to hear their views. As we consider the various options, the board will be determined to achieve the best outcome for our shareholders and users” – Bender

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“The LME [warehousing] system works and works well; we will ensure that changes made in response to temporary or short-term conditions do not threaten the long-term health and growth of the business” – Abbott

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“The only way in which the LME can truly overcome any conflict of interest, and be seen to overcome such a conflict, is to return to the situation where warehouses are independent – in other words owners of warehouses who have an interest in the market should divest themselves of their LME registered warehouses” – Anthony Lipmann, MD of Lipmann Walton

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“I think we should wait until we have a footprint established and an increase in liquidity on the initial contracts before we consider going out with new (LME-SGX) contracts” – LME managing director for Asia, Liz Milan

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“LME gains a wider audience with our Asian know-how, while our customers can benefit from trading of LME-SGX metals contracts as they are in smaller lot sizes and are settled in cash on the full-size LME prices” – Julie Heng, head of commodities at SGX

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ABOUT PRICES

“We have to see if the (copper) price is low enough for China to start restocking. If it is the case, then prices should stabilise and then start moving slowly back up in 2012. Europe will push the balance one way or the other. If they can get their act together and control the situation, we should be OK in terms of supply and demand. We think there is tightness.” – Codelco CEO Diego Hernandez.

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“For next year the price is going to be lower. It will take at least three to six months to know whether we have touched the bottom or not. People are very cautious” – Antofagasta CEO Marcelo Awad.

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“It’s unanimously bearish this year, which probably means it’s time to buy… but the markets aren’t making any sense at the moment. It’s so driven by speculation” – Hedge fund manager.

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“Depending on how the financial markets behave and the European crisis evolve, we could get [copper at] $6,000 or $8,000 to $9,000 by the end of the year” – Maciej Tybura, vice-president of KGHM’s board

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“All eyes on China’s commodity imports and if you listen carefully you can hear the drumming of its hooves riding to the rescue” – RBS’s Moore.

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“Most traders will be eager to put September behind them – unless they were fortunate to have been massively short from the outset – as both the month and the quarter itself was one of the worst for commodity bulls since the 2008/2009 financial crisis” – Ed Meir of MF Global

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“The tightness in concentrates will stay for several years. There’s new supply coming on stream but a lot more smelting capacities in the pipeline as well” –
Javier Targhetta, vice president of marketing and sales at Freeport-McMoRan

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(Compiled by Clara Denina, Barbara Davis, Perrine Faye, Gregory Holt, Martin Hayes, Tom Jennemann, Kathleen Retourne, Angela Sharda and Yoke Wong)