LME lead, zinc prices rally; others follow in wake

Base metals prices on the London Metal Exchange pushed higher during Tuesday January 10 trading as a softer dollar and positive data from China attracted participants back to the market.

“Overall the mood is mildly bullish – good incremental data from China providing support, worker/supply disruptions at mines, are also showing as positive factors,” an LME trader said.

“Prices had been in consolidation mode post-holiday. Lead and zinc are the stand out performers so far leading the charge higher,” he added. 

Positive PPI data from China has helped push the metals higher – December’s data came in at 5.5%, against the expected 4.6%. It was also higher than November’s rate of 3.3%.

“Perhaps we can draw two conclusions, firstly Chinese manufacturing industry margins should be improving, which can only help the stock market. Secondly, there may be inflationary pressures heading towards the consumer market which may say something for the outlook for Chinese interest rates,” John Browning at Bands Financial said.

Lead and zinc prices at multi-week highs on supply fears

  • The three-month lead price was the strongest since December 22 when it hit $2,143 per tonne – it recently traded at $2,143 per tonne, up $35. Stocks were unchanged at 193,300 tonnes.
  • The three-month zinc price recently traded at $2,731 per tonne, up $64, hitting the highest since December 16. Stocks and cancelled warrants were both 800 tonnes lower at 426,425 tonnes and 114,075 tonnes respectively.
  • Both lead and zinc prices hit multi-week highs on Tuesday amid talk that there could be cutbacks to production.
  • “Zinc rose strongly after news of further supply cuts in China. Yunnan Chihong announced it will cut some lead and zinc smelting output due to the low treatment charges for concentrate”, ANZ said.

Copper price recovers; strike talks eyed

  • The three-month copper price recently traded at $5,655 per tonne, up $64 on the previous day’s close. Business has picked up from quiet trading noted yesterday and more than 6,500 lots had changed hands on Select.
  • “Copper has been fickle so far this week as its being led by different factors with oil, iron ore, currencies all being drivers at any particular point,” the same LME trader added.
  • Stocks were down 1,500 tonnes to 293,400 tonnes and cancelled warrants were down 3,775 tonnes to 88,275 tonnes.
  • There are also concerns surrounding mine supply as the threat of strikes at Chile’s Escondida, the world’s largest open pit copper mine. Workers are demanding a 7% pay rise and have until January 23 to negotiate an agreement.
  • Citi Bank projects copper mine supply growth rates of little over 1% this year to around 21.1 million tonnes. This, it said, will sustain price moves above $6,000 per tonne later this year.
  • The arbitrage for copper imported into China was put at -$148.98 (-1,034.64 yuan), according to Metal Bulletin calculations.

Aluminium spreads tight despite stock rise; nickel moves back into contango

  • Aluminium was $9 higher at $1,735 per tonne and the strongest since December 16 despite the increase of stocks into LME sheds today.
  • LME stocks were 16,800 tonnes higher at 2,232,725 tonnes after 17,775 tonnes were delivered into Busan. Cancelled warrants were down 4,375 tonnes to 655,550 tonnes.
  • Tightness in nearby spreads remained a feature despite the stock arrivals – the sensitive ‘Tom’/next spread recently traded at a backwardation of $2.40. Cash/Jan, cash/Feb, cash/march and cash/three-month were at backwardations of $5, $12, $11 and $9.25, respectively.
  • The most recent LME data showed that there is one member across all three reported positions for warrant holdings in the 50-79%.
  • Nickel also pushed higher – it hit the highest level since December 23 at $10,475 – it recently traded at $10,440 per tonne, up $50.
  • Stock availability has fallen, net stocks were down 48 tonnes, while cancelled warrants were up 2,034 tonnes – the increase was centred on Kaohsiung.
  • Nickel tightness has eased on the nearby dates – the ‘Tom’/next was last at $0.85 contango having traded at a backwardation of $4 yesterday.
  • Tin was unchanged at $21,120 per tonne, while stocks fell 70 tonnes to 3,815 tonnes. Still, available metal was up as cancelled warrants declined 195 tonnes to 455 tonnes.
  • The tightness in spreads has eased for tin – cash/three-month was at a backwardation of $40, having been at more than $100 the previous week.
  • Steel, cobalt and molybdenum were all neglected with no change to stocks.

Data releases and currency moves

  • Chinese consumer price inflation (CPI) for December fell to an annual rate of 2.1%, from 2.3% in the preceding month – 2.2% had been expected.
  • The US dollar index stood at 101.82, down 0.1% against the last trading session’s close.
  • The central bank of China recently set the yuan middle rate against the US dollar at 6.9234, down slightly from 6.9262 on Monday.

(Editing by Wei Jun Lau)