Base metals prices consolidate, looking for support

The correction in the base metals continued yesterday, November 16, with three-month prices falling an average of 1.9%. Zinc prices led the decline with a 3.3% drop to $2,535 per tonne, lead and tin prices were down around 2.3%, aluminium prices were off 1.8%, copper prices dropped 1.3% to $5,451 per tonne and nickel prices were off 0.3%. In the precious metals, spot silver prices were down 0.5%, palladium prices were up 1% and gold and platinum prices were little changed, with spot gold closing at $1,226,30 per oz.

This morning the base metals are generally weaker with three-month prices off an average of 0.5%, led again by zinc prices that are off 1% at $2,509.50 per tonne, copper and lead prices are down 0.7%, with copper at $5,412 per tonne, aluminium prices are down 0.2% and tin is bucking the trend with a 0.2 % gain to $19,900 per tonne. Volume on the LME has been 9,166 lots. Silver and platinum prices are weaker this morning, with spot prices down 0.3% and 0.4% respectively, gold prices are little changed at $1,226.20 per oz and palladium prices are up 0.2% at $714.50 per oz.

In Shanghai, the January base metals prices are down across the board by an average of 2%, zinc prices are down 3.7%, lead prices are off 3%, the rest are down between 0.2% for nickel prices and 2.8% on aluminium prices. Copper prices are down 1% at Rmb 43,730 per tonne. Spot copper prices in Changjiang are down 1.4% at Rmb 43,580-43,780 per tonne, the spread has narrowed to an equivalent of $7 back per tonne. The LME/Shanghai copper arbitrage ratio is wider at 1:8.1, which should mean the arb window is open for some trading.

In other metals in China, January iron ore prices are down 4.2% on the Dalian Commodity Exchange, on SHFE the January contracts of steel rebar are up 0.2%, gold prices are little changed and silver prices are off 0.1%. In international markets, spot Brent crude oil prices are up 0.17% at $46.39 per barrel.

Equities were weaker yesterday, November 16, with the Euro Stoxx 50 closing down 0.8% and the Dow closed down 0.3%. In Asia this morning, most of the marekets are firmer, the CSI 300 and ASX200 are up 0.2%, the Kospi is up 0.1%, the Nikkei is little changed and the Hang Seng is off 0.4%.

In FX, the dollar index remains buoyant at 100.32, the euro is weaker at 1.0700, as are the yen at 109.30, the aussie at 0.7470 and sterling is easier at 1.2431. The yuan was recently quoted at 6.8848, the other emerging market currencies are consolidating after their recent downside moves.

The economic agenda is busy, China’s foreign direct investment was up 4.2%, EU car registrations were all but flat in October, with Jan-Oct showing a 7.2% gain, later there is data out on Italy’s trade balance, UK retail sales, EU CPI and US data includes CPI, housing starts, building permits, initial jobless claims, the Philly Fed manufacturing index and natural gas storage. FOMC members, William Dudley, Lael Brainard and Fed Chair Janet Yellen are all speaking this afternoon.

The corrections in the base metals prices continue, but underlying tails on recent daily candlesticks suggests there is dip buying around, so we wait to see where support is finally found. We do see these corrections as pullbacks from overbought levels, we remain broadly bullish for the base metals’ fundamentals and therefore do not expect downward price trends to unfold. That said given the gains of late, it may be that prices trade sideways-to-higher for a while, rather than extend their gains. Tin could be the exception, given its very low exchange stocks.

Gold, silver and platinum spot prices continue to look for support levels that hold, the strong dollar does seem to be adding downward pressure. Palladium prices are bucking the trend as their rally is looking robust. Given the level of uncertainty still around politics and the markets, we would expect gold prices to find a base before too long.  

 

Overnight Performance
GMT	06:51	+/-	+/- %	Lots
Cu	5412	-39.5	-0.7%	2651
Al	1695.5	-4	-0.2%	1353
Ni	11250	-80	-0.7%	887
Zn	2509.5	-25.5	-1.0%	3835
Pb	2145	-16	-0.7%	404
Sn	19900	35	0.2%	36
	Average		-0.5%	9,166
Gold	1226.21	-0.09	0.0%
Silver	16.935	-0.045	-0.3%
Platinum	937.2	-3.8	-0.4%
Palladium	714.5	1.5	0.2%
	Average PM		-0.1%

 

SHFE Prices 06:51 GMT	RMB	Change	% Change
Cu	43730	-440	-1.0%
AL	13340	-380	-2.8%
Zn	20560	-780	-3.7%
Pb	17730	-540	-3.0%
Ni	91380	-220	-0.2%
Sn	142560	-2120	-1.5%
Average change (base metals)	0		-2.0%
Rebar	2794	5	0.2%
Au	276.4	0.05	0.0%
Ag	4144	-6	-0.1%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
2:46am	China	Foreign Direct Investment ytd/y	4.2%		4.2%
	EU	Passenger car registrations (Jan-Oct)	7.20%
	EU	Passenger car registrations (Oct)	0.02%
9:00am	Italy	Trade Balance		2.85B	2.52B
9:30am	UK	Retail Sales m/m		0.5%	0.0%
10:00am	EUR	Final CPI y/y		0.4%	0.4%
10:00am	EUR	Final Core CPI y/y		0.8%	0.8%
12:30pm	EUR	ECB Monetary Policy Meeting Accounts
1:30pm	US	Building Permits		1.20M	1.23M
1:30pm	US	CPI m/m		0.4%	0.3%
1:30pm	US	Core CPI m/m		0.2%	0.1%
1:30pm	US	Philly Fed Manufacturing Index		8	9.7
1:30pm	US	Unemployment Claims		257K	254K
1:30pm	US	Housing Starts		1.16M	1.05M
1:50pm	US	FOMC Member Dudley Speaks
3:00pm	US	Fed Chair Yellen Testifies
3:30pm	US	Natural Gas Storage		34B	54B
5:30pm	US	FOMC Member Brainard Speaks

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