LME metals rally runs out of steam; pockets of tightness in spreads

Base metals came off their highs in the London Metal Exchange premarket on Monday October 3, after an earlier push higher ran out of steam.

With China absent for the week-long National Day holiday, take-up has been thin – fewer than 2,500 lots of copper have changed hands on Select.

Metals had started positively on upbeat data from China – the country’s official manufacturing PMI for September was 50.4. The figure was close to expectations of 50.5, unchanged from August. An above-50 reading signifies expansion.

The Caixin manufacturing PMI for September had come in at 50.1, within expectations and close to August’s reading of 50.0.

Having stagnated in August, Chinese manufacturers signalled little change to overall operating conditions in September, Caixin Insight Group said.

From Europe, the EU final manufacturing PMI at 52.6 was better than expected. Later, the final manufacturing PMI, the ISM manufacturing PMI, construction spending, ISM manufacturing prices and total vehicle sales are due from the USA.

In the metals, copper at $4,879 per tonne was up $14 on Friday’s close, while stock were little-changed – inventories fell a net 450 tonnes to 371,775 tonnes, with arrivals in Liverpool and New Orleans offset by declines in Asia. Cancelled warrants declined by 950 tonnes to 79,175 tonnes.

Aluminium was $3 lower at $1,670 after earlier when it hit $1,679, its highest since August 24. Stocks jumped by 30,425 tonnes to 2,154,825 tonnes due to arrivals in Busan, while cancelled warrants at 871,575 tonnes were up 13,125 tonnes, a move also centred on Busan. There were also increases in Singapore and Gwangyang.

Lead at $2,095 was down $28, having peaked at $2,143 – its highest since May 2015. Nearby spreads were tight, with cash-October at a backwardation of $4 while tom/next was at $0.25.

Stocks slipped by 200 tonnes to 190,250 tonnes.

Zinc is also at its highest since May 2015, but it continues to find resistance at $2,400 – recent trade at $2,387 was up $10. The October options date – expiring next week – has around 2,092 lots of calls at the $2,400 strike. Cash-Oct was at $5.50 backwardation.

Stocks were down 675 tonnes to 438,675 tonnes while cancelled warrants jumped 6,675 tonnes to 33,250 tonnes. Cancellations climbed 5,350 tonnes in New Orleans and 2,000 tonnes in Singapore.
Nickel, at $10,455, was $120 lower. Manila has ordered suspensions at another 20 mines, which have seven days to make changes to remain open; prices may come back down if appropriate measures are made, traders said.

Inventories rose 210 tonnes to 362,004 tonnes.

After hitting its highest since December 2014 at $20,140, tin was last at $19,950. Stocks edged 50 tonnes higher to 3,510 tonnes. A backwardation remains in play, with the cash-to-three month spread last at $139.

Steel, cobalt and molybdenum were neglected.

This article was first published on www.fastmarkets.com.

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