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19 February 2020

Time Pieces



(Apologies to Eric Clapton: I couldn’t resist borrowing the title….)

Time may be a great healer, but it’s also the dimension that gives perspective to lives. It’s divisive, in that the ‘when’ largely dictates the ‘what’. In other words, when we live determines what is significant to us and what is merely of passing, historical interest. I know that’s not a particularly original statement, but a couple of recent conversations brought it home. 

For metal traders of my generation, the two standout events that caught the market unprepared were the Tin Crisis and the Sumitomo Affair. But there is now a generation of traders at all levels in the business for whom those two issues are no more than a piece of history, in the same way that for me and those of my age the controlled, largely unmoving, prices of the immediate post second world war period are just something our older friends - and possibly relatives - occasionally speak about. I felt myself in their shoes in those recent conversations when I found myself having to explain the whole Sumitomo game to a couple of (much) younger traders.

And yet these things do have a significant impact. The LME was changed substantively by both of those events, and the regulatory framework under which traders now operate was seriously strengthened. 

Time perspective works in different ways, though. For a major part of my life, I would have been confident in knowing pretty constantly the prices of LME metals - well, copper, aluminium and nickel, anyway: I could never rouse any particular enthusiasm for lead, zinc or tin, for some reason - at any given time. Now - well, I could maybe get within a few hundred dollars in copper and a few thousand in nickel.  But - and this is perhaps the interesting point - the perspective through which I now view these things gives me a much stronger view of the long-term trend in the market. The reason for that is, I think, relatively straightforward. As far as LME traders are concerned, the long-term is an irrelevance; frankly, all that matters is whether the next price movement is up or down. As (now) an investor in mining equities, amongst other things, the imperative is different; the long-term direction of the underlying commodity’s price is far more relevant than the intra-day fluctuations. 

I’m not for a moment suggesting either approach is better or worse than the other; they are different, predicated on differing demands. Time, and seeing through the perspective of time, makes us act in different ways. Which, I suppose, is one of the attributes which makes a market function.


Now, on a different subject, cobalt producers and traders beware. I’ve just seen a report that Tesla are in advanced stages of talks with a Chinese battery company to use lithium iron phosphate (LFP) batteries, which do not contain cobalt. They would be significantly cheaper than those currently used (containing cobalt) and, of course, not using cobalt neatly sidesteps all the ethical concerns of that metal. But don’t rush to sell your cobalt position yet; LFP batteries are less energy dense than those currently used, so there is a question of capacity (and weight needed to be carried) which I assume is still unresolved. This is an indication, however, that technology is moving quite rapidly. It’s also a reminder to me that I wish I had listened more carefully in my physics lessons - once these discussions go beyond the very broadest of principals, I begin to get lost very soon. But I think - with that proviso - that this is an interesting piece of news being released.    

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