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Information below from Export Tax Advisors

Macro background...

December's reading of the nation's industrial production (IP) met expectations but it's also important to note that the data was revised upward for prior months. Overall production was up 2.3% in the past year.

Led by the automotive industry, the manufacturing sector grew 0.8% in December, better than expected. The factory operating rate rose to 77.4% a rate 1.4 percentage points below its long-run average

Readers know we pay attention to IP, especially the manufacturing component of IP, since we belive it's a metals-intensive.

Category December November October September August
Total Industrial Production: %chg. 0.3% 1.0% -0.3% 0.2% -1.0%
Manufacturing 0.8% 1.3% -0.9% 0.1% -0.9%
Utilities -4.8% 0.2% 1.2% -0.8% -2.2&
Total Industry Capacity Utilization 78.8% 78.7% 78.0% 78.4% 78.3%
Manufacturing 77.4% 76.9% 76.0% 76.7% 76.8%

Here's the manufacturing component of IP matched against the LMEX: 


And while we remain optimistic about growth this year, those who should know (?) continue to forecast below trend GDP growth going forward. Virtually all economists expect to see QlV 2012 GDP at only around the 1% mark.

As for this year, speaking at the Hong Kong Asian Financial Forum, Chicago Fed President Charles Evans expects the U.S. economy to grow 2.5% in 2013 with the unemployment rate pegged at 7.4%. Last month, Fed policymakers said they expected this year's GDP growth of between 2.3% - 3% this year, and 3% - 3.5% in 2014.

And just last week, the World Bank lowered its U.S. forecast by 0.5%. The U.S. is now forecast to grow 1.9% this year while the euro area, the say, will contract 0.1%. Further, China's growth was cut to 8.4% from 8.6%. China's economy grew 7.8% last year, down from 9.3% recorded in 2011.

Meanwhile, Wall Street is having a heck of a January. How come? The guesses seem to center around: Positive corporate earnings; an improving housing market; an accommodative Fed policy; renewed economic confidence; and a lack of attractive investment alternatives...

Are we soon due for a pullback? Maybe so, but are we also experiencing a long dormant bull market psychology where investors simply discount all negative news?

Finally, visit the current issue of tED magazine, http://www.tedmag.com for a recap of their "2013 Economic Roundtable" that featured ETA's Bob Garino, along with Ken Simonson, Tim Gill, Robert Murphy, and Steve Bieszczat.  

Moving on...


London Metal Exchange (cents/lb)

Commodity 2012 Cash Averages December 2012 Averages YTD Averages*
Aluminum $0.915 $0.946 $0.95
Copper $3.61 $3.61 $3.67
Lead $0.935 $1.03 $1.08
Nickel $7.95 $7.90 $7.90
Zinc $0.883 $0.924 $0.95
Tin $9.57 $10.36 $11.04
No.1 HMS composite* $365.83 $347.50 $352.50

*as of January 21st

We'll have more on price forecasts for 2013, but in the meantime, here's what our friends at Macquarie are thinking in terms of annual LME cash averages. To us, this looks to be a fairly conservative (and safe) outlook:

Copper: $8,063/mt = $3.66/lb.
Aluminum: $2,075/mt = $0.94/lb
Zinc: $2,063/mt = $0.94/lb
Nickel: $17,000/mt = $7.71/lb
Lead: $2,300/mt - $1.04/lb
Tin: $23,438/mt = $10.63/lb 

It always amazes us to see lead valued above aluminum, but these two base metals have stayed pretty close in price since 2009. And that trend continues today...

Looking to invest in copper? INTL FCStone recently noted that copper users including AmRod, Southwire, and Encore Wire, have called on the SEC to reverse its approval of JPMorgan's plan to launch a copper ETF (see our November 20th issue.) The SEC, however, rejected the argument, and it looks like trading could begin on the NYSE this first quarter.

We've been following this fascinating story for some time because we think the potential copper price implications are huge. A principal worry and the subsequent consequences rests with the amount of physical copper that could be taken out of the marketplace in order to meet the assumed demand for this investment. By some estimates, it could be as high as 183,000mt given the plans announced by both JPMorgan and BlackRock. Current LME plus COMEX copper inventories stand at 425,498 tons.

Domestic users are convinced that these new financial instruments will distort the supply/demand fundamentals and thus exacerbate price volatility. Not all, however, believe that physically-backed ETF's will inevitably lead to red metal price spikes given the vast amount of so-called "invisible" copper not accounted for on the global exchanges. Stay tuned...


At mid-month, ferrous scrap looks to be marking time this month, showing little change from what buyers and sellers were saying last month. There is a bit of an upward bias to the scrap market but that's mostly coming from the export side. Most sources are reporting No.1 HMS is low-to-mid $350/gt range with shredded closer to $380/ton and No.1 bushelings $5.00-$10.00/ton above that.

An 80/20 mix, earmarked for Turkey was recently quoted at slightly north of $400/mt, delivered.

In contrast to scrap, we're hearing a modest downward bias in the spot market for finished steel as we head towards February. We understand the current market remains in the low-to-mid $625/st, f.o.b., mill.

Nevertheless, yesterday, and despite what we thought about a lack of conviction for most steel products, AK Steel announced a $40/ton increase on all flat rolled products, effective immediately. More than a few were speculating that the mills would first see where scrap was going in February.

NOTE: TEDMAG.com provides the above prices for your information only. Do not use the above data to trade commodities. TEDMAG has made every effort to obtain accurate prices from responsible public sources, but these prices may not reflect actual transactions or prices available to you if you seek to trade.

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