Base metals prices off highs but fund buying provides support

LME premarket trading was volatile on Thursday, November 10 while the metals continue to build on recent rallies, with most setting fresh multi-month highs.

Business has been robust – around 50,000 lots have changed hands across the complex on Select so far. Still, this is down on yesterday when around 66,000 lots had traded by around 10:00 GMT.

By the end of yesterday’s trading, total trading across all platforms was the second-highest on record at 1,010,679 lots. The highest volume was on January 13 when 1,110,210 lots traded.

“There has been a lot of influential buying from funds and algorithmic traders – they have been gone big into metals this week. Let’s see if it can last,” an LME trader said.

The run-up in prices surprised many market participants who had expected downward pressure after Donald Trump pulled off a stunning victory in the race for US presidency.

But Trump’s promise to spend massively to overhaul the US’ crumbling infrastructure will boost demand for metals, market observers reckoned.

“Even though there may have been catch-up potential for metals prices, and above all for copper, we regard the latest price rise as exaggerated, especially as it was presumably driven in part by speculation,” Commerzbank said.

In data today, US unemployment claims are of note. In currencies, the US dollar index at 98.85 was up 0.28%.

The three-month copper price at $5,666 per tonne was up $253 on Wednesday’s close. It peaked earlier at its strongest since July 2015 at $5,714 per tonne, up more than 5% on the session low.

More than 18,000 lots have changed hands on Select so far. Yesterday was a record day for Select copper volumes – more than 53,000 lots changed hands by the close.

“Prices obviously broke some technical levels there, which prompted CTA funds to add to their long positions. Also, the move was fuelled apparently with some producers closing their short hedge positions in the hope that prices can move higher later,” Triland noted.

LME stocks and cancelled warrants both fell a net 7,650 tonnes to 274,950 tonnes and 105,125 tonnes respectively.

Three-month nickel peaked at $11,900 per tonne – its strongest since July 2015. The price was recently at $11,850 per tonne, up $275.

A record 22,487 lots changed hands on Select by the close on Wednesday. More than 8,200 lots have traded so far today.

Stocks rose 1,248 tonnes to 364,410 tonnes – metal arrived in Gwangyang. Cancelled warrants fell 366 tonnes to 122,460 tonnes. Still, there is a small backwardation in the cash/Nov spread at $0.50 per tonne.

The three-month aluminium price was up $16 at $1,768 per tonne – it hit a session high of $1,783 per tonne earlier, the highest since May 2015. Stocks and cancelled warrants were both 4,950 tonnes lower at 2,111,650 tonnes and 769,275 tonnes respectively.

Tightness is emerging in the nearby dates – cash/Nov, Cash/Dec, cash/3-mth and Nov/Dec are backwardated at $2.00, $3.90, $0.50 and $2.50 respectively.

The three-month zinc price at $2,558 per tonne was $68 higher and holding around five-year highs. Stocks and cancelled warrants both dropped 350 tonnes to 447,450 tonnes and 61,975 tonnes respectively.

The three-month lead price hit its highest since September 2014 at $2,188 per tonne before recent trade at $2,179 per tonne, an increase of  $38. Stocks slipped 75 tonnes lower to 187,650 tonnes.

The three-month price of $21,720 per tonne was up $445 but it is the only metal not to set a multi-month peak today – it hit $22,000 per tonne on Monday, its strongest since August 2014. Stocks rose 65 tonnes to 3,100 tonnes after metal arrived in Port Klang, Malaysia.

Steel, cobalt and molybdenum were neglected. Cobalt stocks and cancelled warrants were both 19 tonnes lower at 590 tonnes and 51 tonnes respectively.

(Editing by Mark Shaw)