LME Week, the metal world’s biggest annual gathering, will start on October 12 for busy five days of meeting, events and functions, all centred on Tuesday’s gala dinner in London’s West End.
This year, the metals industry meets against a backdrop of gathering gloom over the economic outlook while global equity markets tumble, concerns around China dog the market and metal prices trade at multi-year lows amid slow demand and a risk-off sentiment.
Here are some of the key quotes and messages so far:
THE WEEK STARTS
“I am going to miss LME Week this year but to be honest I am not too sad as it will be another disappointing event with commodity prices as low as they are” – trader.
“I’m not sure how good LME week will be for the producers. I imagine consumers like these prices but it will be a mixed bag of views” – SocGen analyst Robin Bhar
“History shows that the markets can play some weird games price-wise when people’s backs are turned and eyes are off the ball. Definitely a time to ensure all GTCs, stops and resting orders are checked, placed and not forgotten” – Malcolm Freeman of Kingdom Futures
THE EVOLVING LME
“We’ve had conversations with not just producers who want to hedge but consumers too” – LME head of sales Paul MacGregor on the potential of India
“The LME looks vulnerable now. With the fee increase and the monthly contracts, which remove the uniqueness of LME, other platforms could have a go at metals contracts” – industry source
“To be a global exchange like the LME, the exchange must be for everyone and must reflect everyone’s views. You need more people to participate in trading, including foreigners” – Shanghai-based commodities analyst
“China wants to attract overseas funds and internationalise the renminbi. And whether China has a bigger say in determining global metal prices will depend on its forex policies” – Beijing analyst
THE BIG PICTURE
“The whole commodity market is on the back foot – there is no happy news out there. Look at Glencore – I don’t think this is going to change anytime soon” – a physical trader
“Many of us are likely to keep our heads down and take the safe route. There are too many uncertainties for next year – China, Glencore, LME policies etc” – another physical trader
“Glencore is the main talk. A lot of people are looking at their exposure amid concern that they will start liquidating positions. Several large hedge funds have been massively shorting Glencore stocks and that is not helping” – LME trader
“Rather than heralding impending Armageddon and the end of global commodity trading as we know it, maybe Glencore is simply trading as a mining company – which it is, albeit with some trading and effectively merchant banking business thrown in – and has simply caught down with its peers after a tough commodity trading environment” – ICBCS analyst Leon Westgate
PRICE OUTLOOK FOR THE METALS
“It’s hard to see what will be supportive of it at the moment; it’s likely that prices will trudge along the bottom end of ranges for a while yet” – trader.
“Our forecasts from last year were well off the mark… although our projected highs were not that far off, all six metals crashed well below our forecast lows, while our average 2015 price forecasts also missed by… 20%-30% compared to the year-to-date averages” – INTL FCStone analyst Edward Meir
“There were a lot more people selling metal [at the conference in Vancouver last month] than who were looking to buy. I think things are going to get much worse before they get better” – US-based trader on aluminium premiums and prices
“Several of the trading houses are in big trouble and are looking to sell. They can’t move metal into warehouses as easily so now they are turning to consumers. We’re going to wait until just before Christmas break because we think there’s a good chance we can pick up some good deals” – aluminium consumer
“Everybody will talk about the slowdown in China and the resulting overcapacity – it’s the biggest issue facing the industry” – analyst
“When Chinese copper growth drops from 10 percent to 5 percent, and is now possibly flat, or even negative, the ‘extra’ copper that is generated from a 10 percent high-to-low move stands at a staggering one million tonnes. A similar one percentage move in aluminium is the equivalent of 250,000 tonnes of unsold metal and in the case of zinc, the demand displacement works out to roughly 140,000 tonnes” – Meir
“Even if China contagion fears have been overblown and a global recession does not unfold, it is clear that growth in China will not continue at the robust pace seen recently and no other combination of emerging markets is likely to pick up the slack, which is likely to adversely impact commodity demand in the near term” – Citi Bank
“I can’t see what the demand will be for the new premium contracts – personally, I think they are doomed for fail but we will watch this space” – warehouse operator
“They will work if they launch products the market wants and not what the exchange wants” – broker
“We have some plans there. We will announce that in due course” – LME’s MacGregor
“The LME has handled the warehouse situation very well but [QBRC] is unnecessary and really a step too far. It is a pretty aggressive move and it is not needed” – senior LME member source said.
“People wanted us to go a bit further and for a specific anti-abuse system to be in place” – Matthew Chamberlain, LME head of business development, on the anti-abuse QBRC proposal
“Interest rates may impact metal and behaviour but the exchange needs to be the master of its own destiny and should work out practices whatever the economic outlook” – Chamberlain on Fed rate hikes impact on warehouse queues
“It’s inevitable that LME business will decline with the new rules in place” – warehouse source
“When the queues were at their absolute longest, the LME rejected calls to cap rents. Obviously, they are well aware of the legal hurdles that must be overcome. It was only when [the CFTC] pulled their [FBoT application] did they start this [QBRC] consultation” – US-based aluminium trader
“[It’s] less of a free-for-all than in previous years – it looks like stricter door policies and less events in general” – broker.
(Compiled by the FastMarkets global reporting team)