Base metals prices weaken, ali under pressure after stocks jump again

Base metals prices apart from lead were in negative territory on Thursday, October 20, with LME aluminium around a one-month low after another rise in inventories this morning.

The-three-month aluminium price recently traded at $1,615 per tonne, down $16.50 on Wednesday’s close and its weakest since September 22. More than 5,000 lots have changed hands on Select so far, the highest in the complex.

This morning, stocks jumped by a net 36,800 tonnes to 2,147,350 tonnes – a move again centred on Asia, with 25,000 tonnes delivered into warehouses in Gwangyang, 16,750 tonnes into Kaohsiung and 3,100 into Port Klang. Cancelled warrants fell 4,950 tonnes to 805,575 tonnes.

The metal also came under pressure from speculation that Chinese producers will boost output thanks to cheap domestic energy prices.

Chinese aluminium production reached a 15-month high of 2.75 million tonnes in September, according to National Bureau of Statistics data that was published yesterday.

“This puts it within spitting distance of its record high. Production increased because previously idled production plants were put back into operation, and new low-cost smelters began production after aluminium prices rose noticeably,” Commerzbank noted.

Today, all eyes will be on the European Central Bank’s monetary policy decision and press conference today although the ECB is unlikely to announce any extension of its bond-purchasing programme of 80 billion euros per month until December, Commerzbank noted.

The economic agenda is fairly busy. The German PPI at -0.2% undershot while the EU current account was better than expected at 29.7 billion euros.

US data this afternoon includes initial jobless claims, the Philly Fed manufacturing index, existing home sales and natural gas storage.

In currencies, the dollar index has found some fresh strength this morning – it was recently quoted at 97.93, up 0.1%.

“The base metals have pulled back from resistance levels in recent days and weeks. Zinc, lead and tin have already found support and are rebounding while nickel and copper are now consolidating, leaving aluminium prices still under pressure,” Metal Bulletin analyst William Adams said.

In the other metals, the three-month copper price recently traded at $4,651 per tonne, down $20. Around 4,000 lots have changed hands so far.

Stocks fell 2,050 tonnes to 348,575 tonnes while cancelled warrants were up 2,725 tonnes to 104,725 tonnes.

Three-month nickel fell $95 to $10,215 per tonne. Stocks increased 1,548 tonnes to 362,826 tonnes.

The three-month zinc price recently traded at $2,297 per tonne, down $11. Both stocks and cancelled warrants fell 375 tonnes to 455,100 tonnes and 34,000 tonnes.

Three-month lead climbed $7.50 to $2,005 per tonne – it was the only price in positive territory this morning. Stocks fell 675 tonnes to 189,725 tonnes and cancelled warrants increased 3,075 tonnes to 34,075 tonnes.

The three-month tin price at $19,850 was down $75. The backwardation is widening again – it has recently been quoted at $82-102b per tonne, out from an average of $49b last week – which is attracting some more metal into LME-registered warehouses.

Three-month steel, cobalt and molybdenum prices were neglected. Cobalt stocks increased 12 tonnes to 620 tonnes.

(Editing by Mark Shaw)