[copious.abundance]

Cheaper oil rigs could be just around the corner?

--> WSJ <--

Steel Buyers Gain Some Relief
Downturn Means Lower Prices, Enabling Users To Better Weather Weaker Times
By ROBERT GUY MATTHEWS

There is an upside to the weakening U.S. and global economies, at least if you're an American steel consumer. The commodity is more available, and prices have fallen 20% in the past three weeks.

[...]

In addition, steel prices in the rest of the world are falling faster than they are in the U.S., prompting foreign producers to direct more of their output to the U.S. market. In India, for example, prices for some grades of steel have fallen 40% since June. In the Middle East, prices have fallen by as much as half.

[...]

[yesplease]

If they're even in demand. Happen to know much about the economics of specific projects?

[mefistofeles]

I have to admit that for the most part I'm a pesimist. But from what I have been seeing lately in the commodities sector, it seems to have bottomed out.

Oil seems to be holding is its value $85+ nymex, gold seems to be doing well, of course.

Seeing oil hold its price while stocks plunge seems to indicate that we really are peak oil.

So I guess the only question is this. When will the rally begin in earnest?

[rockdoc123]

I don't think it necessarily says anything about peak oil, what it does say is if oil stabilizes around $85 then everyone recognizes the fact that the marginal cost of a barrel in most of the world is not much lower. Yearend might be telling, if prices stay in this range companies which are heavily wieghted to heavy oil may end up taking reserve downgrades (ie. P1 is defined as being economically recoverable).

[Falconoffury]

It's difficult to call, but we may have another 6 to 12 months for the credit contraction to fully run its course. I don't think we are near the end of the write downs.

I think we will see some sharp moves up and down, as the Fed and Treasury keep fighting the deflation. Eventually, they will beat the deflation, but that will not solve the economic problems or peak oil. I just have no idea how fast that will happen.

Nobody can really call the bottom right now. All I know for sure is that precious metals are a good long term investment. The trade imbalance will definitely correct itself within a few years, which would be inflationary as the dollar loses value globally.

[Heineken]

It all depends on what happens with housing. Housing is most of the game.

My own feeling is that the average price of a house will have to fall to about $75,000 to begin to fit into the radically revised box that people can afford and that banks will be willing to lend.

That's a 70% drop from here.

Connect the dots, as they say.

[shady28]

The short answer to your question is no, commodities have not bottomed out.

[Micki]

Precious metals are doing nicely as they are once again regaining their safehaven status (protection from counterparty risk AND fiat money debasement).
So gold/silver can continue to appreciate even in a slowing economy, while energy most likely would fall as demand drops faster than supply.
A couple of years ago I stated that the really interesting time for energy would come when the economy tries to recover from a slump only to discover that there isn't enought energy available.

This is caused not only by depletion but also by expensive sources being shut down as prices drop. Should however oil production also have gone into steeper decline during the slowing economy and we hadn't noticed it as it was hidden by the dropping demand, then we could quickly face a nightmarish scenario as realisation of PO hits quickly and low oil price discouraged alternatives.

[copious.abundance]

And scrap steel prices have collapsed!

--> News from Milwaukee <--

Prices of some scrap metal materials have fallen more than 50% since August
By RICK BARRETT
Posted: Oct. 7, 2008

Scrap metal prices have plummeted, resulting in pain for some but hope for others.

Prices of some materials have fallen more than 50% since August, hitting their lowest levels in years.

The price of No. 1 heavy-melt scrap, a common type of steel, has dropped from $523 a ton in July to $251, according to the Institute of Scrap Recycling Industries in Washington, D.C.

Other prices have fallen, too, as the global economy has slowed and reduced the demand for scrap materials used to make new steel and other products.

Some scrap metal dealers have reacted to the plunging prices as if learning they had terminal cancer, said Marty Forman, president of Forman Metal Co., a Milwaukee metals recycler. Forman buys scrap and sells it to steel mills.

“Prices for every single thing I sell are falling more quickly than I can respond to,” Forman said Tuesday.

“Most of the people who buy my scrap will not quote prices, and a lot of the mills will not accept delivery. It’s looking like October prices for a whole lot of items could very well be less than half of what they were in August. There are people I speak with daily who are making it sound like the gloom and doom duet has become the national chorus.”

The explosion of developing nations, including China, Russia and India, has throttled back a bit and eased the demand for scrap materials. When industrial production slows, either in the United States or overseas, metal prices will react accordingly, said Bob Garino, commodities director for the Institute of Scrap Recycling Industries.

[...]

[Heineken]

Precious metals have not reacted in the way I would have thought, Micki.

Silver, platinum, and palladium are in the doghouse, since they're basically industrial metals.

Gold is basically just holding its own.

The spreads are huge, however. Retail purchasing has become very difficult IMO. Some dealers have stopped selling platinum, I guess because the price is so low. They bought it higher and so have retired it to the vault, hoping prices recover.

[Micki]

Precious metals have not reacted in the way I would have thought, Micki.

Silver, platinum, and palladium are in the doghouse, since they're basically industrial metals.

Gold is basically just holding its own.

The spreads are huge, however. Retail purchasing has become very difficult IMO. Some dealers have stopped selling platinum, I guess because the price is so low. They bought it higher and so have retired it to the vault, hoping prices recover.

Too bad you aren't in AUD, here we have record high gold prices.
I've said it before, I say it again. PM's will be under pressure as long as TPTB has means and interest in surpressing the price.
It is in the interest of both governments and large short holders.
That is why I have been following TOCOM (other thread), which is the only transparent commodity exchange to see what they are doing, and there is a long term trend of short covering. In fact, Goldman sachs recently went NET LONG for the first time since joining TOCOM. Estimated loss of their trades there is just $100M, so they got lucky there but having that said TOCOM is not the biggest market.

It is reasonable to expect that the big bullion banks that are first out of short positions and going long are going to put more pressure on the remaining shorts.

Thirdly, look at the lease rates. CB's are not so interested in leasing out metal now. So if lease periods expire leased out gold needs to be returned.

There are so many more reasons why I am bullish gold/silver no matter what the price does today or next week.

(By the way at writing; POG up $920 and Silver $12.25)