Base metals mostly weaker in quiet trading, Chinese data mixed

Base metals were mostly weaker on Friday morning on the LME in low volumes while awaiting fresh direction after more Chinese data and before a Fed meeting later this month.

This morning, China’s August CPI came in at 1.3 percent, below July’s reading of 1.8 percent and market forecast of 1.7 percent.

The Chinese August PPI fell 0.8 percent, improving from a drop of 1.7 percent in July and better than consensus of a one-percent drop. August, however, marked the 54th straight month of decline.

“This suggests that China’s central bank is likely to ease further its monetary policy stance in coming months, resulting in a weaker yuan,” FastMarkets analyst Boris Mikanikrezai said.

“While a weaker yuan tends to be negative for base metals prices denominated in the dollar, we also think that a stabilisation of the Chinese economy could boost domestic demand for base metals, thereby supporting prices,” he added.

The improvement in PPI is largely due to stronger producer prices in the ferrous and nonferrous metals industry – growth rates turned positive in August from negative in July, the National Bureau of Statistics noted.

More Chinese data is due for release next week, including foreign direct investment, industrial production, fixed asset investment, retail sales, new loans and M2 money supply.

In the US, the Federal Reserve will meet on September 20-21 and again on November 1-2 before the country goes to the polls on November 8.

Given the looming presidential election and the forecast-missing jobs report for August, the US is widely expected not to raise rates until next year at the earliest despite increasing hawkish rhetoric from FOMC members.

In the metals, copper recently traded at $4,642 per tonne, down $22 on Thursday’s close. Business has been slow – only around 4,000 lots have changed hands on Select so far.

In today’s warehouse data, after no stock rise yesterday, copper inventories today increased a net 13,375 tonnes to 350,600 tonnes.

Deliveries solely into Asian locations seem to have paused for now – 6,875 tonnes arrived in warehouses in New Orleans, 2,550 tonnes in Gwangyang, 2,025 tonnes in Hull, 1,475 tonnes in Port Klang, 500 tonnes in Panama City and 25 tonnes in Busan.

Aluminium edged $2 higher to $1,592.50. Stocks and cancelled warrants both dropped 7,050 tonnes to 2,196,350 tonnes and 899,550 tonnes respectively.

Nickel recently traded at $10,335, down $10. Stocks rose 78 tonnes to 367,932 tonnes but cancelled warrants climbed 6,618 tonnes to 122,748 tonnes.

In nickel news, Indonesian state-owned miner PT Aneka Tambang (Antam) is eyeing the resumption of nickel ore exports on fresh talk that Indonesia might ease its ban on unprocessed ore exports.

Elsewhere, the Philippines may suspend or shut more mines next week following audits by the country’s Department of Environment and Natural Resources. Eight nickel mines have been closed since the audits began.

“This initially sparked concerns about a marked undersupply on the global nickel market, though these concerns abated significantly in recent weeks because trade data published by China indicate that Indonesian ferronickel is being used as a substitute,” Commerzbank noted.

Zinc at $2,299 was $15 lower, with stocks and cancelled warrants both falling 1,000 tonnes to 448,750 tonnes and 21,975 tonnes respectively. Lead was last at $1,905, a drop of $19, after stocks increased 1,150 tonnes to 187,850 tonnes.

Tin recently traded at $19,510, down $65. Stocks fell 100 tonnes to 4,290 tonnes. Steel billet, cobalt and molybdenum were neglected.

(Additional reporting by Vivian Teo, editing by Mark Shaw)