Espionage Tales And Long Positions

- July 9th, 2009

Long tin positions are a major bugbear for the tin industry. Committee members at the London Metal Exchange are angry at the LME’s lack of action on the large scale long tin positions. Market concerns centre on the September-December 2009 contracts and the amount of available metal stored in LME tin inventories, after a large number of positions were built up last week. And in other spy tales, an Australian executive with mining giant Rio Tinto was being held in China as a suspected spy.

By Kishori Krishnan Exclusive To Tin Investing News

Cloak and dagger stuff

Cloak and dagger stuff

Long tin positions are a major bugbear for the tin industry. Committee members at the London Metal Exchange (LME) are angry at the LME’s lack of action on the large scale long tin positions. Market concerns centre on the September-December 2009 contracts and the amount of available metal stored in LME tin inventories, after a large number of positions were built up last week.

The worry is that market participants who are caught short of the metal at certain dates during this period could be forced to pay very high prices to cover themselves. Looming tightness in the tin market is reflected in a backwardation — where nearer dates command higher prices than those further away — in contrast to the contango structure.

The September contract was valued at $14,405 a tonne, representing a $850 premium to December.

Essex-based hedge fund Ebullio declined to comment on market talk stating it was one of the groups behind the tightness in the tin market and held to that position on Tuesday. “Nothing has changed from our end,” Gregory Cain, a trader at Ebullio said. “We’re just continuing our day to day activities, trading as per normal.”

LME tin inventories currently stand at 17,315 tonnes — their highest since August 2003.

Spying tales

An Australian executive with mining giant Rio Tinto was being held in China as a suspected spy, Foreign Minister Stephen Smith said Wednesday. However, there was no evidence of any link between the official’s detention and commercial matters concerning Rio, which is locked in tense negotiations with China over lucrative iron ore contracts.

Earlier, four employees of the mining giant were arrested for the alleged theft of Chinese state secrets, the official Xinhua News Agency said, in a latest twist to the company’s increasingly fraught relationship with the country that is its biggest market for iron ore.

Demand hammered

Alcoa Inc. unofficially opened the earnings season by posting a loss of US$454 million, citing continued weak prices and demand for its aluminum products amid the global recession.

But the loss was narrower than expected and the stock moved higher in after-hours trading on Wednesday. Alcoa executives credited the results to the company’s efforts to slash costs and conserve cash in recent months. They pointed to signs that some aluminum markets may be stabilizing, but reiterated an earlier estimate that the aluminum industry will shrink seven per cent this year.

It was Alcoa’s third straight quarterly loss and fresh evidence of slumping orders from key customers in the aerospace, automotive and construction industries. In April, Alcoa said it had agreed to sell a business that makes electrical systems for automobiles to Platinum Equity, a Los Angeles-based private-equity firm, for an undisclosed amount.

Alcoa’s president and CEO, Klaus Kleinfeld, said the company’s ongoing efforts to cut costs and raise cash “are working. Now Alcoa has the staying power and reduced cost base to withstand the most serious downturn in history,” he said in a statement.

Stock down

Peru’s stock indexes ended sharply lower Wednesday, as weaker metals prices caused mining company shares to drop. The mining subindex decreased 2.60 per cent during the session.

Precious metals miner Compania de Minas Buenaventura SAA (NYSE: BVN) tumbled 5.6 per cent to end at 66.11 soles (US$ 21.83) as gold prices fell. Tin miner Minsur SAA (MINSURI1.VL) shed 3.6 per cent to end at PEN 6.15 on lower tin prices.

Meanwhile, steel plants in India are set to soon get iron ore mining licenses. The country is planning to double the production of steel and is set to speed up the process of granting iron ore mining licenses to various steel companies, including South Korea’s Posco, steel minister Virbhadra Singh said, on the sidelines of a steel conference.

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