LME base metal prices struggle as risk appetite wanes

Base metals traded on the London Metal Exchange struggled during Friday January 6 amid selling pressure from profit-taking and a stronger dollar.

The three-month copper price recently traded at $5,557 per tonne, down $23 on the previous day’s close – yesterday the metal had flirted with the $5,700 level.

Stocks continued to decline, posting the tenth consecutive day of losses. Today’s LME data showed that both copper stocks and cancelled warrants were down 6,650 tonnes at 295,125 tonnes and 95,475 tonnes, respectively.

Take-up has been thin and fewer than 3,500 lots had changed hands on Select so far as some investors prefer to wait on the sidelines ahead of the blockbuster US non-farm payroll data.

“Base metal volumes are very uninspiring after some decent volatility the past three days… We are getting closer to the Chinese New Year and appetite for fresh risk right now is diminishing by the day,” Marex Spectron said on Friday.

Copper supply issues cap losses

  • Workers at Escondida, the world’s largest open-pit copper mine, have rejected the company’s initial wage offer as collective talks begin. 
  • The mine – controlled by BHP Billion – produced 762,384 tonnes in the first nine months of 2016.
  • Earlier this week it was announced that operations at Konkola Copper mines in the Zambia were suspended following a strike over pay.
  • In other supply news, Glencore confirmed yesterday that it is mulling the possibility of purchasing an additional stake in the DRC’s Mutanda mine

Aluminium nearby dates tighten, price back above $1,700 per tonne

  • The three-month aluminium price crawled back above $1,700 per tonne – it recently traded at $1,791 but was still down $1.50 on the previous day’s close.
  • The nearby dates have tightened as the sensitive ‘Tom’/Next spread moved into a backwardation of $0.70, while the cash/Jan recently traded at $7 back.
  • “The markets keep testing how bad the spreads can get, and it’s very bearish when bad spreads don’t attract inventory, because it means the next backwardation will be worse,” a trader said.
  • Aluminium stock moves were routine as net stocks fell 5,425 tonnes to 2,217,025 tonnes, while cancelled warrants were down 5,350 tonnes to 663,000 tonnes.

Rest of complex drifts lower, tin spreads ease on rising availability

  • The three-month nickel price was down $95 at $10,200 per tonne. Net stocks were unchanged at 370,920 tonnes but cancelled warrants fell 1,560 tonnes to 125,322 tonnes.
  • The three-month zinc price was down $29 at $2,589 per tonne. Both stocks and cancelled warrants were down 75 tonnes at 427,600 tonnes and 115,250 tonnes, respectively.
  • Sister metal lead was at $2,037 per tonne, down $17, and stocks fell 175 tonnes to 193,700 tonnes.
  • The three-month tin price was unchanged on the previous close at $21,075 per tonne.
  • Stock availability increased as net stocks were 75 tonnes higher at 3,880 tonnes, while cancelled warrants fell 100 tonnes to 670 tonnes.
  • The benchmark cash/three-month was last at a backwardation of $78 having been at more than $100 earlier this week.
  • Steel, cobalt and molybdenum were all neglected.

Currency moves and data releases

  • The US dollar index was up 0.1% at 101.54.
  • The key data today will be the US non-farm employment change which is forecast at 175,000.
  • The USA will also release its average hourly earnings, unemployment rate, factory orders and trade balance data.
  • In other data, the EU retail sales underperformed expectations at -0.4% against a forecast -0.3%.

 

(Editing by Wei Jun Lau)