Aside from some egregious losses in the tin market, it has been a robust day for LME metals, with a raft of factors including China stimulus hopes, an oil rally, a weaker dollar and dovish comments from the ECB all providing support throughout the day.
The full closing prices were as follows:
|5PM Evening evaluations|
|Closing price ($/t)||Change from prvs day ($)|
Sticking to the subject of big days, tin has collapsed this afternoon, losing $800 between the officials and the closing bell, at which point the soldering metal was priced at $15,000 per tonne. On a close-to-close basis, tin is showing a 6% loss, on a day when all other metals posted healthy gains. This is how the markets looked as copper finished trading at 16:55:
|Intraday trading activity|
|Open ($/t)||Low||High||Last||Change (%)|
A lot of the attention has been on copper and aluminium today, but as a floor trader pointed out earlier, it has been a big day for zinc as well. The galvanizing metal is currently trading above both its 100-day and and 200-day moving averages. The three-month price topped out at $2,240 per tonne earlier, up 1.75% from its opening level.
The 4% rally in aluminium prices this week is having a knock-on effect in the secondary aluminium market. Pure-grade scrap prices, which traded above LME aluminium prices for short periods in 2014 and are now at about $1,500-1,600 per tonne, could be dragged higher if the aluminium rally continues.
“The LME might start to affect the pure-graded scraps, if it continues climbing,” one market source told Metal Bulletin on Thursday.
But it will have to climb a lot more if it is to start pushing up secondary aluminium ingot prices, which sit at the equivalent of $2,150-2,200 per tonne in UK and continental European markets, having risen independently over the last few weeks on very strong European demand.
The last time that the cash-to-three-month copper spread traded in a contango in the officials was February 11, when it settled at $3.50c. The latest quote for the spread on Select is $3 back. The spread has not closed in contango since July last year. Cash-to-threes and tom/next spreads for all metals are as follows:
C3M spread ($)
And what of tin, which was the only market that fell in today's official pricing session? One LME trader said:
"It’s what we’ve been saying. Indonesia has lost its grip on tin. Consumption is not brilliant right now – the traditional consumption base is dwindling.
“I suppose we could find that there might be some technical support that might come into the market. I can’t imagine it will be [immediate] but it will be there at some stage.
“We’ve not been down at this level for years. Looking at the support [levels] going back to 2009, it’s been in the area of $14,500-15,500 – I would have thought any short term weakness would be contained in that area.
“We’re approaching the point where there ought to be some buying interest. I don’t see it dropping big time from here. Most of the damage has probably been done. We need some consolidation now.
232 lots of tin traded or about 10% of stocks
He added this on copper too:
“Copper has gone like a train this morning. It follows the comments from [China] regarding the economy…stimulating the economy is what tilted the sentiment a bit. I don’t think anyone expected it to go up $125 from last night’s close. It’s taken the others with it.
And he played down the suggestion that the only move from here is down:
“$6,150 is the next target on the charts.
“There’s a possibility that we will be falling back again, but bearing in mind the performance over the last three, four, five months, the market still looks oversold. There’s a little bit of life in it.”
Big talking points as the ring closed were the copper spreads after the market traded in an $8-per-tonne contango, the direction of outright copper prices (after prices rallied roughly $200 from yesterday's lows) and the aluminium spreads.
Outright copper prices
"It's rallied strongly on expectations of China stimulus and Draghi's comments that QE will be a marathon not a sprint but I think it's likely it's topped out after moving $200 from the lows on Wednesday," one ring-dealer told Metal Bulletin beside the exchange's open outcry floor, shortly after the ring session finished.
Another trader from a category I firm echoed the view: "The trend from here must be down, we're around $6,100 but I don't see the market testing the year's highs of $6,294 at this point. We've hit the top end of the range for now."
Rising stocks on the LME and short-covering of the three-month contract were seen as the chief factors in putting the official session into that $8 contango.
"Previously the spread stopped at a $5 backwardation but this time we've moved into a contango, so I think the stocks are starting to have an effect," a second ring-dealer said. "Lots of people were lending in the ring and nobody was borrowing, because they're waiting to see where it levels out."
Buying of the three-month contract to cover short positions in a market that moved rapidly on China stimulus hopes and stronger oil has also seen spreads ease, another source at a trading firm said.
"The covering started this morning," he told Metal Bulletin.
Aluminium traded in a $17.50 cash-to-three backwardation in the official session, denoting a tight availability of warrants for nearby delivery, which is a consequence of the long delivery times that still exist in the LME warehouse locations where there are large stocks of aluminium.
"It's the Al spread I don't understand. Looking at it you'd think there wasn't enough aluminium in the world," one LME trader said.
|LME Official settlements|
|Settlement Price ($/t)||Change from prvs day ($)|
Three-month copper has settled at $6,062 per tonne in the official session, off the day's earlier highs of $6,075, but still up $147 per tonne on Wednesday's official prices. The other officials coming soon.
This is shaping up to be quite a strong day for copper. The red metal has now overtaken aluminium as the day's best performer on the back of a continued rally in oil this morning. LME intraday activity was as follows at 11:00:
|Intraday trading activity|
|Open ($/t)||Low||High||Last||Change (%)|
The move up to $6,075 brings copper to the top of a $60 closing trading range seen since the end of March, and brings the red metal within $100 of its year-to-date high.
However, the rally looks overdone to some. From a fundamental point of view, the risks are to the downside, a base metals fund manager told Metal Bulletin:
"I can understand that commodities get bid in general when the oil price goes up, but personally I think the copper market is going to look quite scary in three months' time. China's concentrates imports have been huge, and while people are talking about the concentrates market tightening, treatment and refining charges of $100/10 don't suggest a tight market to me."
"I think we could see quite a strong counter-seasonal stock-build over the next few months. Normally you see a build in SHFE inventories in Q1 and the start of Q2, and then a draw over the summer; that trend has become well established over the past few years. I think there will be a build over the next couple of weeks, but beyond that, I think production is going to be pretty strong and financing demand is going to be weak, so I think there could be a big counter-seasonal build over the summer."
"I don't know where that would leave prices, exactly. I think $5,400 was a bit too much too soon, but it will probably be somewhere in the mid $5000s."
As Metal Bulletin's Linda Lin reports, oil had a very strong day yesterday, with the Nymex contract rallying nearly 6% to its highest level this year.
That lent support to the copper price throughout the Asian session, as did rising expectations that the People's Bank of China will soon move to stimulate growth by cutting bank reserve ratios, Lin reported earlier today.
The surge in oil came after the US Department of Energy showed that US crude stocks rose more slowly than expected last week, indicating that output from high-cost shale fields in the country may be tailing off in response to the dramatic slump in oil prices that began last year.
At 10:25 GMT, copper was trading near an intraday high of $6,065.50.
Marex Spectron's Dee Perera reviews the overnight session in a morning note:
"The dollar retreated yesterday evening following disappointing US macro data and the release of the Fed Beige Book after the close, which indicated that the economy in mid-February through to late March was improving "modestly" or "moderately" across most districts ...
"The base metal complex has opened higher and volumes have picked up overnight (so far 5,200 lots of copper have traded). Ali remains the outperformer amidst continued CTA buying (currently up 1.2%). Our speculative positioning estimates, as of 13th April, indicate that the spec short in Ali is roughly 8.5% of Open Interest. Ali turnover yesterday was the highest since 2nd December."
All LME contracts are in positive territory this morning, with copper trading back above $6,000 per tonne and aluminium hitting a two-month high of $1,835 per tonne, extending strong gains seen on Wednesday.
At 09:00 GMT, prices and spreads were as follows:
|9AM LME snapshot|
|Latest 3M Prices|
Change since close (%)
C3M spread ($)
There were sizable inflows of copper and nickel into LME warehouses, while lead and zinc saw drawdowns. Lead cancelled warrants also spiked, while zinc stocks fell below 500,000 tonnes for the first time since February 2010.
Closing stocks (t)
net change (t)
Cancelled warrants (t)
net change (t)
At 09:00 GMT, trading volumes were as follows:
|Select trading volumes (lots)|