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For the week ending Friday, December 2nd
Commodity markets were bolstered this week not only by a concerted effort by 6 major central banks to improve liquidity conditions, but also by a more synchronized message from European leaders on fiscal reform, reduced reserve ratios in China and a slew of positive economic data out of the U.S. Leaving aside concerns about a Chinese “soft landing” and other economic worries for now, the markets cheered the news pushing prices sharply higher.

In London, LME official 3-mo. copper jumped from $7,230/mt last Friday to $7,826/mt by Thursday morning, while LME official 3-aluminum, which had dipped below $2,000/mt earlier the week, recovered above $2,100/mt in the second half of the week. Other commodity prices trended higher too as NYMEX crude for Jan delivery broke through $100/bbl on Wednesday and COMEX Feb gold closed up at $1,750/to. Stock prices surged higher as well, with the Dow Industrials posting their strongest daily gain since March 2009 to close 490 points higher at 12,045.68.

After having taken a breather on Thursday, markets climbed higher again on Friday morning following statements by German Chancellor Angela Merkel on closer fiscal policy coordination in Europe and a bigger than expected drop in the U.S. unemployment rate to 8.6%. Reuters reports that, with the exception of tin, base metal prices in London opened firmer this morning including firmer official 3-mo. copper ($7,920/mt), aluminum ($2,143.50/mt), nickel ($17,215/mt), zinc ($2,053.50/mt) and lead ($2,116/mt) prices. In New York, COMEX copper for March delivery, which saw a remarkable intra-day trading range on Wednesday ($3.3055-$3.635/lb.), was also firmer this afternoon around $3.60/lb. Precious metal and oil prices steadied this morning as well, while the Dow Industrials were holding onto modest gains this afternoon as the U.S. Dollar Index strengthened over 1/3 percentage point to 78.60.

Macro news…
After last week’s relatively quiet, holiday-shortened week, there were plenty of new economic announcements/releases this week and by-and-large they were positive. Although potentially of greater symbolic importance than anything else, the Federal Reserve, Bank of Japan, European Central Bank, Bank of England, Bank of Canada and Swiss National Bank announced this week they agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points effective December 5. While this raised some alarms that the global financial system may be undergoing more stress than previously realized, it was intended to signal that central bankers are on the case.

Even if it didn’t restore your faith, the markets jumped on the news as the Dow surged over 4% and COMEX copper was up nearly 20 cents on the day Wednesday. Coincidentally, the People's Bank of China also announced on Wednesday that it was cutting banks’ reserve ratio by 0.5 percentage points for the first time since December 2008 after official figures showed China’s PMI dropped from 50.4 in October to 49.0 in November. European PMI figures have also disappointed recently, although statements late this week by leaders of France, Germany and the European Central Bank that closer fiscal integration in Europe is the way forward and may open the door to a more aggressive stance by the ECB sounded good at least.

As opposed to other regions, manufacturing in the U.S. continues to show signs of strength as reflected in this week’s better than expected Chicago PMI (62.6) and ISM Index (52.7 in Nov, up from 50.8 in Oct) figures. The ISM report, by the way, is a national survey of purchasing managers which covers such indicators as new orders, production, employment, inventories, delivery times, prices, export orders, and import orders. It’s one of the first comprehensive economic releases of the month, with levels higher than 50 signaling expansion; levels below 50 signal contraction. November reportedly witnessed the 28th consecutive month of expansion in the U.S. manufacturing sector.

And last but not least was today’s much anticipated employment report which shows that nonfarm payrolls and private sector payrolls increased by 120,000 and 140,000 in November, respectively, largely in line with expectations, while the unemployment rate unexpectedly dropped from 9.0% to 8.6%. We won’t go into all the details of employment report here, but combined with this week’s improved manufacturing, motor vehicle sales (up to 10.34 mln SAAR in Nov) and construction spending (+0.8% in Oct) numbers, the still-vulnerable but steady expansion in the U.S. economy remains on track.

Ferrous…
As has been reported, a range of scrap prices, including ferrous scrap, came under pressure in recent months as reflected in the ISRI Index below. Following consecutive slides in October and November, many in the industry were looking for ferrous scrap prices to rebound in December as the mills introduced flat rolled price hikes and as supply and demand levels re-aligned.

Early this week, Scrap Price Bulletin was reporting steady composite prices for No. 1 HMS and No. 1 dealer bundles at $372.50/gt and $450.83/gt, respectively, although shredded was reportedly down to $410.83/gt. As the week progressed reports began to circulate of rising scrap tags and The Steel Index today raised its reference price for shredded by $13/ton to $428/lt del Midwest, based on an improving export front and rising finished prices.

There were reports of higher hot rolled steel prices this week as well as Platts raised its midpoint price for HRC by $10/ton this week to $660/st ex-works Indiana. We’ll keep you posted on prices as the tricky month of December unfolds. Also of interest this week, and as you may have seen, Carl Icahn has offered to purchase the remaining 90% or so of CMC shares he doesn’t own for $2.6 billion. Of note, Bloomberg reports that the offer, while at an 18% premium to CMC’s 20-day average stock price, is “the lowest valuation for a steel takeover since 2007… leaving the door open for rival bidders to snap up a recycling bargain.” Also of note, Goldman Sachs in a recent presentation indicated they expect global steel demand to expand less rapidly in 2012 than the 8% growth forecast for 2011 as elevated input costs are expected to depress steel mill margins.

Nonferrous…
For the month of November, average nonferrous prices were mixed, with LME 3-mo. copper, lead and zinc all posting gains, while aluminum, nickel and tin prices lost ground.

As indicated, base metals are off to a better start this month, with LME 3-mo. copper and aluminum trading back up over $7,850/mt and $2,100/mt, respectively, today. (Of note, Basemetals.com reports today that there was a glitch in the LME’s electronic trading platform this morning, “…triggering a series of drastic error trades that forced the exchange to close the system at 1203 GMT and cancel all electronic trades from 1146 GMT to the cut-off time,” but was turned back on at 1300 GMT.)Looking into 2012, our friends at Macquarie viewed the recent cut in Chinese banks’ reserve ratios as supportive of Chinese demand going forward and look for base metal demand to be supported by Chinese apparent demand next year.

This week copper scrap spreads reportedly moved out a little, with Platts indicating Bare Bright at 9 cents under COMEX, No. 1 at 26 cents under and No. 2 at 38 cents under, while AMM had brass ingot makers scrap prices for Bare Bright @ 345-347 cts., No. 1 @ 331-333 cts., No. 2 @ 314-317 cts., and radiators @ 219-222 cts. Secondary aluminum prices were reportedly pretty flat this week with sheet and cast indicated around 67-70 cents, siding in the upper 60 to low 70 cent range, and MLC in the low 70’s. 5

Recovered Paper and Fiber…
This week, RISI reports that Chinese imports of recovered paper dropped nearly 23% from the preceding month to just over 1.9 million tonnes, while still up 9% from the October 2010 level. For the year-to-date, RISI reports that China Customs data show Chinese RP imports were up 10% through October to 22 million tonnes. Weakness in overseas demand was identified as one of the causes in the sharp drop in RP prices this fall, as The Paper Stock Report reported in November weaker mill buying prices for Mixed Paper (1) $98.33/st, ONP deink quality (8) $111.67/st, OCC (11) $126.67/st and Sorted office paper (37) $156.25/st, all FOB seller’s dock.

Of note, the Paper Stock Industries chapter of the Institute of Scrap Recycling Industries, Inc, (ISRI) approved the following proposed changes to ISRI recovered paper specifications at its Fall 2011 meeting.