Precious Metals

Gold hung in at $900 until London opened, then declined modestly until about an hour into the New York session, after which it was hammered, falling as low as $873 before making a small comeback during the Globex to finish at $877.00/oz., down $22.90. Overnight, gold has been flat.

Platinum was off sharply in Europe, falling well below the $2000 mark, but clawed its way back in New York to almost retake the level, ending at $1999/oz., down $70. Overnight, platinum has edged lower.

Silver got whacked from London straight through the NYMEX, only leveling off in Globex trading into a close at $16.60/oz., down 81 cents. Overnight, silver has edged higher.

It was a third straight down day for the precious metals, and it was a bad one as gold tumbled to a two-week low.

That it would be a down day was no shocker, considering that falling oil prices and a firming dollar aligned the stars against gold and its sisters. But the extent of the damage may have caught some by surprise.

There was also strength in the equities markets to deal with, as well as an avalanche of selling across the board in commodities.

But analysts were mostly abandoning talk that gold will follow oil, and focusing instead on the role of the dollar, which has been buoyed of late by suggestions that an interest rate hike might come before the end of the year.

“With the dollar stabilizing, gold could fall quite a bit,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There’s a lot of talk about inflation, which works both ways for gold. If the Fed does start tightening, that will strengthen the dollar and could really pop the commodity bubble.”

It’s an interesting equation, for sure. Inflation is dead certain to pick up as the effects of record-high oil and gasoline prices work their way through the economy. One sign of things to come arrived on Wednesday, with the announcement by Dow Chemical that it was raising prices of its products by 20%. Everyone uses Dow products.

So, will gold emerge in its traditional role as a hedge when inflation really starts to pick up? Or will the Fed’s response, which has to be tightening interest rates, hurt gold by propping up the dollar? Stay tuned.

Currencies and Economic News

In the currency market, the dollar firmed for a third straight day against the euro. Late Thursday, the euro was trading at $1.5501 vs. $1.564 on Wednesday.

The direction of interest rates was on everyone’s mind.

Dallas Federal Reserve President Richard Fisher, who has voted against the Fed’s three most-recent rate cuts, hinted in a Wednesday speech that the central bank is done cutting interest rates and is prepared to raise them.

“If inflationary developments and, more important, inflation expectations continue to worsen, I would expect a change of course in monetary policy to occur sooner rather than later, even in the face of an anemic economic scenario,” Fisher said.

“Those remarks made it more evident that the Fed’s propensity to take the overnight funds rate below 2% [is] smaller and ever smaller,” wrote Dennis Gartman, publisher of the Gartman Letter.

The job market continues to be difficult. The Labor Department reported that initial claims for state unemployment benefits rose 4,000 to 372,000 in the week ended May 24. While, according to Bear Stearns economists, claims haven’t moved into “recession territory … they continue to bounce around close to the 375,000 level that we believe is consistent with mildly recessionary conditions.”

Energy

In the energy market Thursday, crude for July delivery retreated, closing at $126.62/barrel, down $4.41. June reformulated gasoline lost 5 cents, to $3.40/gallon.

The day’s action was more than a bit counterintuitive, since the Energy Information Administration’s weekly inventory report had crude supplies plummeting by 8.8 million barrels for the week ended May 23, the biggest drop since 2004. Analysts were looking for a 750,000 barrel gain in stocks.

However, “Lower oil stocks were due to problems offloading oil in the Gulf of Mexico, and this week’s deficit will show up in next week’s report as the tankers offshore are unloaded,” wrote James Williams of WTRG Economics.

Meanwhile, the Commodity Futures Trading Commission said that it started a wide-ranging investigation of U.S. oil markets six months ago, with a focus on possible price manipulation. The CFTC said it took the unusual step of publicizing the probe “because of today’s unprecedented market conditions.”

In OPEC news, the United Arab Emirates says that current crude prices are going too fast too high, according to a Reuters news report Thursday, and that the UAE is “willing and well prepared” to raise output if there is a supply shortage, according to the report. And Indonesia, struggling to keep up with its oil production quotas within OPEC, said it will withdraw from the cartel by the end of the year.

Base Metals

The base metals endured a serious bloodbath on Thursday. Copper fell off a cliff at the open of the New York session and never recovered, finishing at its intraday low of $3.6416/lb., down 10 1/2 cents. Nickel followed suit, sinking below the $10 mark, but recovered slightly to edge back over it and close at $10.0115/lb., down 22 cents. Zinc was pounded, barely coming off its intraday low to end at $0.8951/lb., down 5 1/4 cents. Aluminum wasn’t spared, shedding 3 1/4 cents to $1.2899/lb., while lead cratered as well, giving up nearly 4 1/2 cents, to $0.8629/lb.

The base metals took an absolute hammering on Thursday, as traders cast an eye on the relationship between rising stockpiles and potentially diminishing demand, and came away with a lot of negative thoughts.

The stock increases are seemingly happening across the board.

Copper inventories monitored by the LME were up 600 metric tons (0.5%) yesterday, to 126,400 tons. It’s the highest level since March 13, and the metal has gained 14% just this month. Analysts are also expecting Shanghai to report an increase of some 7,000 tons this Friday.

Among the other metals, lead inventories showed an increase of 1,550 metric tons yesterday, while zinc was up a hefty 7,850 tons.

Lead is also “weaker at present in part because demand is seasonally soft,” said Lehman Brothers analyst Michael Widmer.

Factor in currency as well. “The stronger dollar is of course undermining [copper],” said Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey. “The bond market is heading down, which means interest rates are going up.”

And Ed Meir, of MF Global, cited “the sluggish pace of recent imports” into China.

In company news, Rio Tinto remained on the offensive against BHP Billiton’s takeover bid. Rio CEO Tom Albanese predicted seven years of near-double-digit annual production growth as he argued that BHP’s bid is too low.

Rio can expect compound annual output growth of 8.6% through to 2015, and the company is well placed to take advantage of an expected doubling of world demand for metals and minerals by 2022, Albanese said.

That’s what’s happening … see you tomorrow!

——————————————————————————–
NEWS YOU CAN USE
——————————————————————————–

First Majestic Silver Corp is committed to building a senior Silver producing mining company based on an aggressive acquisition and development plan with a focus on Mexico. The Company presently owns or operates three silver mines in Mexico: The La Parrilla Silver Mine; The San Martin Silver Mine and the La Encantada Silver Mine. Annual production from these three mines is anticipated to be 5 million ounces in 2007.

lately i got a lot of request about china steel market.
firstly I highly recommand that you keep your eye on the china tag of this website .http://supplier-steel.com/tag/china
I have not got the time to produce a full report. here is something to share for the time.
as known the ironstone of china is mainly import from other contry, china import the iron stone process them to steel and export them.but so far the smithery of china is not so advanced, so most high level steel is mainly import other contry. but the low level steel like construction used steel bar steel plate is largely exported to other contry.
At year 2008, chinese gorvernment launch many policy which is negitive for steel export like no tax refound for steel export.the reason why china goverment do that is steel industry is not quite enviromental friendly and also is cost a lot of energy of china like coal. the steel export speed increase 110% from 2005-2006, increased 90%  2006-2007. this speed is way to fast for chinese goverment.  in long term, the steel export amount tend to low down. chinese goverment will encourage other product export with more value add. like car part export , or salor 

Farm Equipment Manufacturers Association (FEMA) reports:
Kiplinger.com reports that the largest steel users can expect to pay as much as $1,200 a ton for hot-rolled steel, and $1,300 for cold-rolled by July. This is about double the cost since the first of the year. Small companies can expect to pay an additional $200 on top of the already high prices.
Some hope is on the horizon however, after summer’s peak prices, hot-rolled prices will fall to $900 per ton by December, due to the usual seasonal slackening in demand, the report said. Analysts expect that as the dollar starts to post firm gains against other currencies later making imports more attractive, the price outlook for steel will start to change for the better.
This assumption hinges on a strong dollar and lower steel prices, and that China and India don’t decide to ratchet up manufacturing, and that labor problems don’t shut down coal or iron mines in Australia.
Brazilian and Australian suppliers of key steelmaking ingredients iron ore, iron pellets and coking coal, have boosted prices more than 60% since January to offset the dollar’s decline. Further sharp price hikes are certain by midyear. Domestic prices for scrap metal used in mini-mills that make about half of U.S. steel, have soared 80% since January.
The steel pricing cycle is now out of balance, analysts say. Manufacturers and other steel users still have a demand for steel, but expensive imports aren’t much of an option.
Steel users are continuing to buy steel, but they’re keeping inventories low because they believe the dollar will strengthen and prices for key steelmaking inputs such as iron ore will fall sometime later this year.
Steel users don’t want to get stuck with steel they bought for $1200 a ton if prices fall to half that amount.
With steel inventory strategies turned upside down, steel users will have to keep paying up for the commodity until the dollar begins to recover

DALLAS, May 9 /PRNewswire-FirstCall/ — Keystone Consolidated Industries, Inc. (OTC Bulletin Board: KYCN - News), reported net income of $13.6 million, or $1.39 per diluted share, in the first quarter of 2008 as compared to $14.5 million, or $1.45 per diluted share, in the first quarter of 2007. The decrease in earnings was due primarily to a lower pension credit during the first quarter of 2008 of $19.0 million as compared to the $20.4 million pension credit recorded during the first quarter of 2007.
Because the amount of the Company’s net periodic defined benefit pension and other postretirement benefit (”OPEB”) expense or credits are unrelated to the ongoing operating activities of the Company, Keystone measures its overall operating performance using operating income before net pension and OPEB expense or credits. A reconciliation of operating income as reported to operating income adjusted for pension and OPEB credits is set forth in the following table.

Three months ended
March 31,
(In thousands)

2007 2008
Operating income as reported $24,291 $22,776
Defined benefit pension credit (20,378) (18,996)
OPEB credit (2,200) (2,198)
Operating income before pension and OPEB $1,713 $1,582

The Company’s sales volumes and per-ton selling prices for the first quarter of 2007 and 2008 were as follows:

Sales Volume Selling Prices
Three months Three months
ended ended
March 31, March 31,
2007 2008 2007 2008
(000 tons) (Per ton)
Fabricated wire products 34 30 $1,068 $1,180
Wire mesh 12 13 879 941
Industrial wire 23 17 733 846
Coiled rebar 6 3 526 624
Bar - 5 - 710
Wire rod 86 106 517 621
Billets (1) 1 132 255
All products 161 175 693 764

(1) Less than 1,000 tons.

Operating income before pension and OPEB for the first quarter of 2008 was slightly lower than the first quarter of 2007 primarily due to the net effects of the following factors:

— lower shipment volumes of fabricated wire products as a result of
customer resistance to Keystone’s price increases;
— lower shipment volumes of industrial wire due to exceptional shipment
volumes during the first quarter of 2007 as a result of competitor
production problems;
— increased costs for ferrous scrap;
— increased costs for electricity and natural gas;
— severance costs of $800,000 related to a reduction in force at
Keystone’s largest manufacturing facility during the first quarter
of 2008;
— higher shipment volumes of wire rod due to lower quantities of import
product available for sale and higher prices for import products as
well as the weak U.S. dollar;
— higher per-ton product selling prices primarily in reaction to the
increased costs for ferrous scrap.

The 2008 pension credit is lower than the pension credit for 2007 due to the component of the pension credit related to the expected return on plan assets; Keystone’s plan assets decreased $19.5 million during 2007.

As previously reported, on March 24, 2008, Keystone received $25 million and issued an additional 2.5 million shares of its common stock pursuant to a subscription rights offering that expired on March 17, 2008. Keystone used the offering proceeds to reduce indebtedness under its revolving credit facility, which in turn created additional availability under that facility that can be used for general corporate purposes, including scheduled debt payments, capital expenditures, potential acquisitions or the liquidity needs of Keystone’s current operations.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this release that are not historical in nature are forward-looking and are not statements of fact. Forward-looking statements represent the Company’s beliefs and assumptions based on currently available information. In some cases you can identify these forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expected” or comparable terminology, or by discussions of strategies or trends. Although Keystone believes the expectations reflected in forward-looking statements are reasonable, it does not know if these expectations will be correct. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. Among the factors that could cause Keystone’s actual future results to differ materially from those described herein are the risks and uncertainties discussed from time to time in the Company’s filings with the Securities and Exchange Commission (”SEC”) including, but not limited to, the following:

— Future supply and demand for Keystone’s products (including
cyclicality thereof),
— Customer inventory levels,
— Changes in raw material and other operating costs (such as ferrous
scrap and energy),
— The possibility of labor disruptions,
— General global economic and political conditions,
— Competitive products (including low-priced imports) and substitute
products,
— Customer and competitor strategies,
— The impact of pricing and production decisions,
— Environmental matters (such as those requiring emission and discharge
standards for existing and new facilities),
— Government regulations and possible changes therein,
— Significant increases in the cost of providing medical coverage to
employees,
— The ultimate resolution of pending litigation,
— International trade policies of the United States and certain
foreign countries,
— Operating interruptions (including, but not limited to, labor
disputes, fires, explosions, unscheduled or unplanned downtime
and transportation interruptions),
— The Company’s ability to renew or refinance credit facilities,
— Any possible future litigation, and
— Other risks and uncertainties as discussed in the Company’s filings
with the SEC.

Should one or more of these risks materialize, if the consequences worsen, or if the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. Keystone disclaims any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

In an effort to provide investors with additional information regarding the Company’s results as determined by accounting principles generally accepted in the United States of America (”GAAP”), the Company has disclosed certain non-GAAP information, which the Company believes provides useful information to investors:

— The Company discloses operating income before pension and OPEB credits
or expense, which is used by the Company’s management to assess its
performance. The Company believes disclosure of operating income
before pension and OPEB credits or expense provides useful information
to investors because it allows investors to analyze the performance of
the Company’s operations in the same way the Company’s management
assesses performance.

Keystone Consolidated Industries, Inc. is headquartered in Dallas, Texas. The Company is a leading manufacturer of steel fabricated wire products, industrial wire, billets and wire rod. Keystone also manufactures wire mesh, coiled rebar and steel bar. The Company’s products are used in the agricultural, industrial, cold drawn, construction, transportation, original equipment manufacturer and retail consumer markets. Keystone’s common stock is traded on the OTC Bulletin Board (Symbol: KYCN).

KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)

Three months ended
March 31,
2007 2008
(unaudited)

Net sales $113,098 $134,139
Cost of goods sold (106,731) (127,013)

Gross margin 6,367 7,126

Other operating income (expense):
Selling expense (1,678) (1,871)
General and administrative expense (2,976) (3,673)
Defined benefit pension credit 20,378 18,996
Other postretirement benefit credit 2,200 2,198

Total other operating income 17,924 15,650

Operating income 24,291 22,776

Nonoperating income (expense):
Interest expense (1,197) (1,313)
Interest and other income, net 138 390

Total nonoperating expense (1,059) (923)

Income before income taxes 23,232 21,853

Provision for income taxes (8,768) (8,243)

Net income $14,464 $13,610

Basic and diluted income per share $1.45 $1.39

Basic and diluted weighted average
shares outstanding 10,000 9,794

——————————————————————————–
Source: Keystone Consolidated Industries, Inc.