Base metals prices open higher, now drifting

FastMarkets

Three-month base metals prices are up an average of 0.5% on the London Metal Exchange this morning, Tuesday May 2, with aluminium and lead prices slightly weaker while the rest are up between 0.3% for tin prices and 1.4% for zinc prices, with copper prices up 0.7% at $5,777 per tonne.

This comes after a 0.5% average gain on Friday, April 28.

There is price weakness across the board in the precious metals this morning, with spot prices down between 1% for gold and 1.7% for silver.

Metals prices on the Shanghai Futures Exchange are for the most part higher this morning, the exception is aluminium, where prices are down 1.3%, while the rest are up an average of 1.9%, led by a 2.6% gain in zinc prices, with copper prices up 1.1% at 46,730 yuan per tonne. Given poor Chinese manufacturing PMI data, that dropped to 50.3 from 51.2, it is surprising metals have climbed as well as they have.

Spot copper prices in Changjiang are up 1.4% at 46,820-46,970 yuan per tonne and the LME/Shanghai copper arb ratio is weaker, trading at around 8.09.

In other metals in China, September iron ore futures are up 3.9% on the Dalian Commodity Exchange, while on the SHFE, steel rebar prices are up 1.9% and gold and silver prices are weaker by 0.7% and 1.8%, respectively.

In international markets, spot Brent crude oil prices are down 1% at $51.31 per barrel and the yield on the US ten-year treasuries has climbed to 2.32%.

The Dow closed slightly weaker on Monday at 20,913. In Asia this morning, the Nikkei and Kospi are both up 0.6%, the CSI 300 is off 0.5%, the ASX 200 is off 0.3% and the Hang Seng little changed.

The dollar index at 99.05 has halted its slide but it is not getting any lift with prices consolidating. There is resistance at 99.33 and a gap up to 99.89. The euro at 1.0920 is holding below recent highs, as is sterling at 1.2897, the yen is weaker at 112.06, while the Australian dollar is firmer at 0.7533.

In emerging market (EM) currencies, the yuan is little changed at 6.8963, the peso is strengthening again as is the ringgit, while the rest are little changed.

In addition to the Chinese PMI data, Bank of Japan core CPI fell 0.1%, later there is manufacturing PMI data out across Europe, plus there is data on Italian and EU unemployment and US total vehicle sales.

Most of the base metals spiked higher this morning but some selling seems to be taking advantage of the higher prices with prices giving back some of the early gains. This may well be on the back of the weaker than expected Chinese PMI data. On balance, the tone across most of the complex is firmer, the exception is aluminium where prices are weaker, but that said, aluminium has been by far the strongest metal this year, so this current weakness is relative.

Chinese PMI data is an issue, it helps explain the overall sluggish start to the seasonally stronger second quarter – we wait to see what European PMI data holds.

Gold prices are retreating and with the yen also weakening it does look as though demand for havens has waned. President Donald Trump’s offer to meet North Korean leader Kim Jong-un in appropriate circumstances, may have eased tensions somewhat. Silver and platinum are looking weaker too, while palladium is off its highs, but remains strong overall.

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