Base metal rally pauses, copper arrivals into Asia restart

Base metals were mostly lower on Friday morning on the LME, coming under pressure from profit-taking ahead of the weekend.

A softer dollar had supported commodity price on Thursday after the US FOMC kept interest rate unchanged although the market had widely expected it to stand pat. The dollar index was last at 95.41, however, off yesterday’s one-week lows.

“The simple fact that the dollar weakened broadly against major currencies was enough to encourage commodity buying by funds who re-allocated money to assets that should benefit from the lower for longer interest rate situation,” Triland said in a note.

In data today, the EU flash manufacturing PMI at 52.6 was better than expected but the flash services PMI undershot at 52.1. Later, the US will release its flash manufacturing PMI.

In the metals, copper at $4,845 per tonne was down $8 on Thursday’s close but remained around multi-week highs.

Stocks jumped to a one-year high, up 10,825 tonnes at 356,875 tonnes – the trend of sizeable deliveries into Asian listed warehouses restarted in a tug of war between two trading houses, with one trading house and smelters continuing to deliver while another trading house attempts to tighten the market by cancelling stocks.

Stocks rose 4,475 tonnes at both Busan and Port Klang and 1,900 tonnes at Gwangyang There was also a 1,000-tonne parcel into Rotterdam. But cancelled warrants also jumped 6,575 tonnes to 59,800 tonnes.

According to Citi Bank, market participants expect around 100,000-150,000 tonnes to arrive in Asian sheds over the coming months.

Aluminium at $1,638 was $5 higher while stocks continue to fall – inventories dropped 6,700 tonnes to 2,146,725 tonnes while cancelled warrants were down 7,875 tonnes to 877,800 tonnes. Should these trends continue, aluminium stocks would be below two million tonnes by LME Week.

Tin at $19,625 was $130 higher, finding support from dwindling available stocks. Inventories slipped 30 tonnes to 3,715 tonnes and cancelled warrants jumped 1,100 tonnes to 1,860 tonnes. On-warrant material is now at its lowest since 2005 at 1,860 tonnes.

Nickel at $10,710 was $50 higher and holding around multi-week highs, buoyed by talk that the Philippines could shut at least 10 more mines due to environmental issues. Stocks fell 1,686 tonnes to 363,216 tonnes and cancelled warrants dropped 1,758 tonnes to 113,166 tonnes.

Lead was $12 lower at $1,938; stocks fell 25 tonnes to 191,000 tonnes. Stock moves have gained significance amid talk that a large amount of metal will be put back on warrant in LME warehouses. The most recent LME data showed that there are two holders at 30-39 percent for warrant holdings ‘Tom’ and for cash there is one holder at 30-39 percent and another at 40-49 percent.

Zinc at $2,289 was $5 lower – stocks fell 1,200 tonnes to 442,650 tonnes. Steel, cobalt and molybdenum were neglected. Cobalt stocks and cancelled warrants both fell one tonne to 625 tonnes and 90 tonnes respectively.

(Editing by Mark Shaw)