Base metals hit by seasonal slowdown, dollar strength

Base metals were hit by the seasonal slowdown on Tuesday as prices drifted in recent ranges in quiet trading conditions. With much of Europe shuttered for August summer holidays just 4,500 lots of copper had changed hands on Select.

A stronger dollar index is also weighing on prices – it was last at 96.54- as it maintained gains following a strong non-farm payroll report from the US last Friday.

With the rest of the globe struggling to avoid a potential recession and lingering fears over the UK referendum, the July US non-farm employment report last Friday shattered expectations with 255,000 Americans joining the labour force – bettering the 180,000 forecast.

Meanwhile, in data today, Chinese CPI and PPI were both above expectations at a 1.8 percent increase and 1.7 percent decrease respectively.

Later there will be the US preliminary nonfarm productivity figures and preliminary unit labour costs, as well as wholesale inventory data.

Copper at $4,776 per tonne was down $24 on the Monday close. Stock moves were marginal – inventories increased a net 325 tonnes to 205,350 tonnes and cancelled warrants fell 2,300 tonnes to 50,525 tonnes.

Aluminium at $1,640 was down $3, while stocks and cancelled warrants both fell 2,925 tonnes to 2,256,400 tonnes and 943,375 tonnes respectively. Tightness in spreads has eased with cash/August last level, having been at a small backwardation yesterday.

Nickel at $10,790 was $20 higher, although stocks increased 1,926 tonnes to 371,154 tonnes, due to arrivals in Singapore.  Cancelled warrants were 744 tonnes higher at 114,234 tonnes.

“Nickel tried once more to rally but ran into an as yet unexplained wall of selling at $10,850 [yesterday] which always seemed to have between 300-600 lots on offer on the Select system – which when attacked twice was always added to,” Malcolm Freeman at Kingdom Futures said.

Zinc at $2,267 was down $12, despite small pockets of tightness. Both the cash/Oct and the Aug/Sept spreads were in a backwardation at $0.10 and $0.50 respectively.  The most recent warrant holding data showed there is one dominant holder across all three reported positions in the 30-39 percent bracket. Stocks were down 150 tonnes to 429,275 tonnes.

Lead at $1,789 was $2 lower, while both stocks and cancelled warrants fell 75 tonnes to 188,100 tonnes and 69,600 tonnes, respectively. Tin at $18,150 was down $150 while stocks fell 210 tonnes.

Steel, cobalt and molybdenum were neglected with no changes to stocks.

(Editing by Martin Hayes)