Base metals under pressure, fall to multi-week/month lows

Base metals were under pressure on Tuesday morning on the LME in low turnover, with some hitting multi-week and multi-month lows while sentiment remains weak, market participants said.

Concerns about global growth, higher US interest rates and the UK’s possible exit from the EU are weighing, a trader said.

The Federal Open Market Committee’s (FOMC) hawkish April meeting minutes raised the odds of a US rate rise in June or July, boosting the dollar – the dollar index has held above 95 since Thursday and was last at around seven-week highs at 95.34.

An increasing number of Federal Reserve officials also appear to be backing the case for the normalisation of US interest rates this year.

Market participants currently see a 30-percent chance of a June rise, with 58 percent expecting it in July, according to CME Group FedWatch.

Markets will this week focus on a speech on Friday by Fed chair Janet Yellen, which is likely to shed more light on the US central bank’s view on monetary policy.

It is a light day for data today. German ZEW economic sentiment disappointed at 6.4 as did EU economic sentiment at 16.8. US new home sales and the Richmond manufacturing index are of note later.

In the metals, copper continues to trade around three-month lows – it was last at $4,585 per tonne, up $23 on Monday’s close. Around 7,000 lots have changed hands on Select so far.

In today’s warehouse data, stocks rose a net 2,250 tonnes to 157,250 tonnes while cancelled warrants increased 11,450 tonnes to 42,350 tonnes – a move centred on New Orleans.

According to the International Copper Study Group (ICSG), the global refined copper market was in a surplus of 76,000 tonnes (seasonally adjusted surplus of 1,000 tonnes) in the first two months of the year compared with a surplus of around 134,000 tonnes (70,000 tonnes seasonally adjusted) a year earlier.

Aluminium edged $1 higher to $1,555. Stocks and cancelled warrants were down 5,550 tonnes to 2,549,700 tonnes and 1,133,700 tonnes respectively.

Nickel slipped to a seven-week low of $8,330 before recent trade at $8,360, down $30. Stocks fell 384 tonnes to 402,504 tonnes – a five-month low – while cancelled warrants dropped 9,012 tonnes to 127,320 tonnes.

“We remain very sceptical of any meaningful price upside being sustained into the second half of the year,” Citi’s David Wilson said.

Zinc fell to a six-week low – it was last at $1,824, down $17 – but remains the clear outperformer of the complex, Wilson noted. Stocks fell 100 tonnes to 385,675 tonnes and cancelled warrants increased 1,900 tonnes to 31,275 tonnes.

Lead slumped to its lowest in five months – it was last $14 lower at $1,643. Stocks climbed 5,575 tonnes to 185,550 tonnes and cancelled warrants edged down 50 tonnes to 74,025 tonnes.

Tin continues to trade below $16,000 after collapsing below that level yesterday for the first time since March 1 – it was last at $15,795, down $280 and its lowest since February 18.

“It is difficult to tell how much of this fall is stop loss or funds adding new shorts, but the metals users have welcomed the fall,” Triland noted.

Stocks climbed another 75 tonnes today to 6,885 tonnes.

Steel billet, cobalt and molybdenum were neglected.

(Editing by Mark Shaw)