Metals prices edge higher again after recent weakness

 

Some selling came into the base metals complex yesterday, October 11, where the three-month LME prices closed off an average of 1.5 percent, led by a 3.5 percent drop in zinc prices to $2,251.50 per tonne – it not helped by news that Peru’s Antamina expects to double zinc mine output next year to around 350,000 tonnes, while lead prices were off 2.4 percent as more cancelled warrants were put back on warrant, increasing availability in the market. Tin prices were off 1.2 percent to $19,800 per tonne and nickel was off 0.9 percent, while aluminium and copper were off either side of 0.5 percent with copper prices at $4,825 per tonne.

The weakness continued in precious metals yesterday, with spot prices down an average of 1.5 percent, led by palladium prices that were down three percent, platinum prices were off two percent, silver prices were off 0.8 percent and gold prices were down 0.5 percent at $1,253.90 per ounce.

This morning the base metals are consolidating yesterday’s weakness with average gains on the three-month contracts of 0.3 percent, nickel and tin prices lead the rebound with 0.5 percent gains, followed by zinc prices that are up 0.4 percent, the rest are little changed with copper prices at $44,830 per tonne.  Volume has been weak at 3,071 lots traded as of 06:03 BST, with zinc trading the most.

In Shanghai, nickel prices are bucking the trend with a 0.5 percent rise, while the rest are off between 0.1 percent for copper prices at Rmb 37,970 and 2.2 percent fall in zinc prices, see table below. Spot copper prices in Changjiang are off 0.2 percent, the spread between spot copper and the December contracts are at an equivalent of some $27 per tonne back, while the LME/Shanghai copper arb ratio is at 7.86.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are up 2.9 percent and on SHFE, January steel rebar is up 1.7 percent while December gold and silver prices are both off 0.1 percent.

In FX, the dollar continue to steam ahead, with the dollar index last at 97.63 as the market continues to anticipate a December Fed rate rise with the Fed Fund futures suggesting a 64 percent chance of a 25 basis point rate rise and a 30.5 percent chance of them staying unchanged.  Currencies are mixed with the euro weaker at 1.1038, as is the yen at 103.62, while sterling is consolidating, last at 1.2883, as is the aussie at 0.7573. The yuan is weakening, last at 6.7230, the January spike low was at 6.7566 and most emerging market currencies are edging lower too.

Equities were weaker yesterday, with the Euro Stoxx 50 closing down 0.5 percent and the Dow closed off 1.1 percent. Asia is weaker too this morning, with the Nikkei is off 0.7 percent, the Hang Seng is down one percent, the CSI 300 is off 0.3 percent, the aussie is off 0.1 percent, while the Kospi is bucking the trend with a 0.1 percent gain.

On the economic calendar there is data on Japan’s core machinery orders and machine tool orders, German WPI, French CPI, EU industrial production and US job openings. There are also three central bankers speaking including UK’s Monetary Policy Committee Jon Cunliffe and FOMC members William Dudley and Ester George, which will be followed at 7:30 pm BST by the FOMC meeting minutes that are likely to create some volatility for the dollar and markets, see table below for more details.

The base metals have once again been turned back on the approach of resistance levels, implying that there is still top of range selling to be done and the buyers are struggling to absorb it all. Key will now be whether the selling will dominate for a while and given the strength of the dollar it may well do.  We would not give up our overall bullish undertone, but it may take further better economic news to prompt buyers to chase prices higher again. We expect dips to remain well supported.

The precious metals remain in vulnerable holding patterns, at least gold and silver prices do, while the PGMs continue to retreat – the extent of which suggests the markets expect more wage agreements to follow the two-year agreement between the NUM and the Implats’ refinery operation. Whether the AMCU follows suit remains to be seen. 

 

Overnight Performance
BST	06:03	+/-	+/- %	Lots
Cu	4830	4.5	0.1%	827
Al	1679.5	-1	-0.1%	496
Ni	10495	55	0.5%	556
Zn	2261.5	10	0.4%	1099
Pb	2057.5	4	0.2%	82
Sn	19900	100	0.5%	11
	Average		0.3%	3,071
Gold	1256.09	2.19	0.2%
Silver	17.561	0.066	0.4%
Platinum	944.9	0.9	0.1%
Palladium	645.6	-0.4	-0.1%
	Average PM		0.1%

 

SHFE Prices 06:03 BST	RMB	Change	% Change
Cu	37970	-30	-0.1%
AL	12630	-20	-0.2%
Zn	17820	-395	-2.2%
Pb	15705	-85	-0.5%
Ni	82810	440	0.5%
Sn	128930	-580	-0.4%
Average change (base metals)	0		-0.5%
Rebar	2439	40	1.7%
Au	273.4	-0.15	-0.1%
Ag	3986	-3	-0.1%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:50am	Japan	Core Machinery Orders m/m	-2.2%	-5.5%	4.9%
7:00am	Germany	WPI m/m		0.3%	-0.7%
7:00am	Japan	Prelim Machine Tool Orders y/y			-8.4%
7:45am	France	Final CPI m/m		-0.2%	0.3%
10:00am	EU	Industrial Production m/m		1.5%	-1.1%
10:00am	UK	MPC Member Cunliffe Speaks
1:00pm	US	FOMC Member Dudley Speaks
2:40pm	US	FOMC Member George Speaks
3:00pm	US	JOLTS Job Openings		5.8M	5.87M
7:00pm	US	FOMC Meeting Minutes

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