Network Metals LLC

There is a big disconnect developing between higher metal prices, spurred on by the weaker dollar, and the ever present fundamental weakness, which is the actual metals demand from steel mills and fabricators in the Western world. The fact that the equity markets are percolating only exaggerates the divide.

Here is how we see things playing out between now and year-end: continued fundamental weakness will persist, but commodity prices will start to pick up in the summer as (weak) dollar-based purchasing continues globally. Western purchasing managers will then react and start to increase their inventories. In effect, the price will become a fundamental. Metal and raw material prices will increase and then we will be faced with some interesting decisions: is the demand real or just an event of re-stocking? Only the continuous monitoring of purchasing behaviors by steel mills and fabricator will tell us the true story.

Stay tuned – we will have further commentary on this topic this afternoon.