**Quarterly Overview**

Base Metals and Industrial Commodities – Q1 Overview – Q2 Outlook 2022 PDF


Base Metals & Industrial Commodities

Base Metals and Industrial Commodities Weekly Component Report PDF-06.29.2022

Base Metals and Industrial Commodities Weekly Component Report Spreadsheet-06.29.2022

Comments:

Lumber rallied as the July contract rolled to September. Cameco’s physical uranium price remained steady at the $47.75 level over the past two weeks. Iron ore and the Baltic Dry Index moved lower, and base metals prices plunged with tin, copper, and nickel leading the way lower. Higher rates, a strong dollar, and the threats of recession weighed on industrial metals and mineral prices. Copper’s price action is signaling economic contraction. LME copper stocks rose while COMEX inventories moved lower over the period. The combined inventories edged higher by 489 metric tons since June 14. Aluminum inventories continued to fall. Zinc and nickel stocks declined, while lead and tin inventories moved higher. Higher rates increase the cost of carrying inventories, which is bearish for the sector. Meanwhile, the strong US dollar only added to the selling pressure. The industrial metals are signaling danger for the worldwide economy.

Trends:

Short-term trends are now decidedly lower. As I wrote on June 15:

“In the current environment, the potential for lower lows in high as the sector has become a falling knife over the past week. Rising inflation is bullish, but tight monetary policy is bearish.”

The industrial sector followed through on the downside and remains in a bearish trend as of June 15.

Recommendations:

  • We are long FCX at $11.37. At $30.29 I rate the position a hold but as have written over the past weeks, “I recommend protecting profits.”
  • We are long the PICK ETF product at $23.38 per share. I rate PICK a hold at $36.69 but also recommend protecting profits.
  • We bought CCJ at $22.60 level adding to long positions below the $20 level and rate the uranium producer a hold at $21.76. I would leave room to add to the position on further declines.
  • We bought the DBB ETF product at the $22.38 level. DBB holds long copper, aluminum, and zinc positions. I rate DBB a hold at $20.13 and would leave room to add to the position on further declines over the coming weeks. I suggest sitting tight on DBB in the current environment.

GLNCY, BHP, and RIO posted declines over the past two weeks. I remain flat these companies as of June 29 as the short-term trend is bearish. I will begin nibbling on these stocks in July at lower levels to build long positions.

A Final Note

Markets require caution over the coming weeks and months. Expect some window dressing on June 30, and holiday-inspired conditions on Friday and next week. The summer season could see less liquidity and more volatility in the current environment. Approach markets with a risk-reward plan and stick to the program.

I returned from Florida with a case of COVID and am on anti-viral meds. Be careful in those airports, they are petri dishes for this virulent virus!

Happy Fourth of July!

Thank you for your continued support!

 

Warm regards,

Andy Hecht

 

 

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.