Base metals firmer despite dollar rebound

The base metals are firmer this morning, Wednesday February 8, with the three-month London Metal Exchange prices up an average of 0.7%.

Gains varied between 0.4% for tin and zinc prices and 1.4% for copper prices that are up $80 per tonne at $5,887 per tonne – boosted by news that workers at Escondida are set to strike from Thursday. Volume has been average with 8,777 lots traded as of 07:09 GMT.

Precious metals prices are little changed this morning, with spot platinum up 0.4% at $1,006.50 per oz, while the rest are either side of unchanged with gold prices at $1,231.10 per oz.

On Tuesday, the LME base metals were generally weaker, down by an average of 0.5%, led by a 1.4% drop in tin prices to $18,985 per tonne, although at the day’s lows prices were down 3.2% at $18,630 per tonne. Precious metals were also weaker on Tuesday, with palladium prices off 1.6% at $759 per oz, platinum prices were down 0.9%, silver prices were off 0.3% and gold prices were off 0.1% at $1,231.90 per oz.

In Shanghai this morning, tin prices are off 0.3%, while the rest are up an average of 1.3%, led by a 2.2% rise in lead prices, while copper prices are up 1.4% at 47,460 yuan per tonne. Spot copper prices in Changjiang are up 1.4% at 47,170-47,370 yuan, meaning the spread is in a small contango, while the LME/Shanghai copper arb ratio is at 8.06.

In other metals in China, May iron ore prices are up 4.3% on the Dalian Commodity Exchange, on Shanghai Futures Exchange steel rebar prices are up 3.5%, while gold prices are up 0.5% and silver prices are up 0.1%. In international markets, spot Brent crude oil prices are little changed at $54.68 per barrel.

In equities on Tuesday, the Euro Stoxx 50 closed down 0.1% and the Dow closed up 0.2%. Asia this morning is more bullish, the Nikkei, ASX 200 and CSI 300 are up 0.5%, the Hang Seng is up 0.7%, while the Kospi is off 0.5%.

In FX, the dollar index at 100.55 is rebounding again – if this is more than just a counter trend move then this could weigh on metals prices. The euro is weaker at 1.0661, as is the Australian dollar at 0.7628, albeit it after a strong rally this year, while sterling (1.2498) and the yen (112.37) are fairly flat. The yuan is weaker at 6.8512, while other emerging market currencies are also slightly weaker having been strong of late.

Data out today showed a drop in Japan’s economic watchers sentiment to 49.8 from 51.4, US crude oil inventory data is out this afternoon, the market will be looking for any signs that inventory is building and later this evening there is data out on Japan’s core machinery orders and M2 money supply – see table below for more details.

The base metals have to varying degrees been consolidating in recent days, but they have taken on a firmer tone again this morning and they for the most part remain well placed to tackle overhead resistance. The exception is tin that seems to have reacted to confirmation from companies that China has removed the 10% export duty on tin. Rumours had been in the market for some time so we are surprised prices have fallen as much as they have, especially as tin prices in China are at a premium of some $1,900 per tonne to LME prices. China has also been a net importer of refined tin in recent years so there may not be much incentive to export even if the 10% export tax is removed.

Gold prices have continued to show strength by extending the rally in recent days, silver and platinum have been following gold’s lead while palladium continues to trade its own fundamentals. Given the strength in the precious metals of late, we would not be surprised if the stronger dollar proves to be a headwind, but overall we expect the geopolitical uncertainty to underpin uptrends in the precious metals.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

Overnight Performance
GMT 07:09 +/- +/- % Lots
Cu 5887 80 1.4% 3912
Al 1839 8.5 0.5% 1385
Ni 10420 70 0.7% 1104
Zn 2810 11 0.4% 2032
Pb 2353 17.5 0.7% 320
Sn 19055 70 0.4% 24
Average 0.7%         8,777
Gold 1231.07 -0.83 -0.1%  
Silver 17.65 0 0.0%
Platinum 1006.5 4.5 0.4%
Palladium 760.1 1.1 0.1%
Average PM 0.1%

 

 

SHFE Prices 07:09 GMT RMB Change % Change
Cu 47460 650 1.4%
AL 13700 80 0.6%
Zn 22920 310 1.4%
Pb 19210 415 2.2%
Ni 86820 600 0.7%
Sn 143960 -370 -0.3%
Average change (base metals) 0 1.0%
Rebar 3239 110 3.5%
Iron ore 641 26.5 4.3%
Au 276.95 1.4 0.5%
Ag 4161 6 0.1%

 

Economic Agenda
GMT Country Data Actual Expected Previous
5:00am Japan Economy Watchers Sentiment           49.8           51.9           51.4
1:00pm UK MPC Member Cunliffe Speaks
3:30pm US Crude Oil Inventories 2.7M 6.5M
11:50pm Japan Core Machinery Orders m/m 3.2% -5.1%
11:50pm Japan M2 Money Stock y/y 4.0% 4.0%