Base metals upbeat on weaker dollar, copper hits 2-wk high

Base metals were all in positive territory on Wednesday, supported by a weaker dollar – copper hit a two-week high.

Under pressure from weak US data, fell as low as 94.76 on Wednesday – its softest since August 26 – and was last at 94.91.

On Tuesday, the US ISM non-manufacturing PMI at 51.4 undershot the forecast 55.4, as did the IBD/TIPP economic optimism index at 46.7 – a reading of 48.6 had been anticipated. Expectations of a US rate rise in September, which were already low, have receded further.

“Recent data releases reinforce our view that the Fed will stand pat in September and hike December assuming data and financial condition remain supportive,” National Australia Bank said.

Market participants are awaiting key Chinese economic data. Chinese trade data is due on Thursday ahead of CPI and PPI inflation readings on Friday while industrial production, retail sales and fixed asset investment readings are scheduled at the start of next week.

“Any further signs of a slowdown [in the forthcoming Chinese data] are bound to renew downside pressure on metals prices,” Malcolm Freeman, director at Kingdom Futures, said.

Data due later today includes US JOLTS job openings.

In the metals, copper hit its highest since August 24 earlier at $4,688.50 on short-covering – it recently traded at $4,671 per tonne, up $51 on Tuesday’s close. More than 6,000 lots have changed hands on Select so far.

In today’s warehouse data, copper stocks rose a net 4,625 tonnes to 339,600 tonnes – 3,150 tonnes were delivered into Hull and 2,000 tonnes into Port Klang. Cancelled warrants fell 600 tonnes to 43,775 tonnes.

Aluminium at $1,596 was $7 higher. Stocks fell 2,175 tonnes to 2,210,100 tonnes but cancelled warrants fell 4,825 tonnes to 913,300 tonnes.

Nickel at $10,220 was up $110 and at its highest since August 24 – it remains supported by the Philippines mining audit; further mine suspensions are anticipated. Stocks fell 144 tonnes to 367,752 tonnes and cancelled warrants were up 3,942 tonnes to 115,170 tonnes.

Zinc traded recently at $2,339, an increase of $18, with stocks unchanged at 449,925 tonnes. Lead edged $2 higher to $1,948.50; stocks fell 500 tonnes to 186,500 tonnes.

Tin was last at $19,565, up $115. Yesterday it set fresh 2016 highs at $19,670.

LME spreads remain volatile – cash/threes tightened to $226 backwardation yesterday, having fluctuated between contango and backwardation in July and August. It was last at $226.

Meanwhile, the 3-15 month spread has tightened into the recent strength to $177 back from $110 back on August 24, suggesting forward selling from marginal producers.

Stocks continue to decline – they fell 20 tonnes to 4,390 tonnes, their lowest since March this year. Available tin stocks are at their lowest since June 2004.

Steel billet, cobalt and molybdenum were neglected.

(Editing by Mark Shaw)