Copper, aluminium prices hold at highs after stock falls

Base metals pushed higher in LME trading on the morning of Friday, October 28, with investors turning increasingly friendly towards commodities.

A softer dollar helped to underpin gains – the dollar index recently traded at 98.84, down 0.11%, although it remains not far from multi-month highs.

“Prices, having held on to important support levels at the end of last week, now look set to move up in range. [There have been] incrementally positive data over the past few weeks, while a positive stock picture with drawdowns and cancelled warrants are making a case for the upside for now,” an LME trader said.

“A period of sideways action is probably needed to consolidate the good work achieved already before attempting to move higher,” he added.

LME Week will start in earnest this weekend, with metal participants gathering in London to discuss recent trends. The recent price rises may boost sentiment after a tough year, market participants said.

Key US data due later today includes third-quarter advance GDP growth, the advance GDP price index, the employment cost index and revised UoM consumer sentiment and revised UoM inflation expectations.

Market attention will then switch to Chinese PMI data on Tuesday as well as developments from LME Week, market participants noted.

The three-month copper price recently traded at $4,798 per tonne, its highest in two weeks. The SHFE copper price has rallied also this week, rising its strongest in almost three months at 38,250 yuan on Tuesday on improved risk sentiment following positive global economic data. The December contract recently traded at 37,820 yuan.

LME stocks fell a net 5,050 tonnes to 326,400 tonnes and cancelled warrants rose 18,700 tonnes taking total cancelled warrants to 133,425 tonnes, a move centred on Asia. On-warrant – or available – material is now at 192,975 tonnes, the lowest since August 23.

The three-month aluminium price was around a two-month high above $1,700 per tonne – recent trade at $1,706 was $7. Inventories dropped 4,850 tonnes to 2,143,500 tonnes and cancelled warrants fell 6,775 tonnes to 771,300 tonnes.

Spread has narrowed, with the benchmark cash/threes at a small contango of $0.75 per tonne. Cash/Dec and cash/Jan were recently level.

On the SHFE, December aluminium closed at 13,860 yuan per tonne – the metal had climbed to a two-year high of 13,995 yuan on Tuesday.

The three-month nickel price climbed $45 to $10,405 per tonne. There is a backwardation in cash/Nov of $2. Stocks fell 540 tonnes to 361,710 tonnes and cancelled warrants fell 1,884 tonnes to 123,780 tonnes.

The International Nickel Study Group (INSG) upwardly revised its estimate of the global market’s supply deficit in 2016 to 67,000 tonnes but Commerzbank said it expects prices to rise above $11,000 only if Indonesia does not relax its mineral ore export ban and if the Philippines maintains its hard-line stance on miners.

The three-month tin price was at its the strongest since December 2014 – it recently traded at $20,580. Tightness persisted in tin with the cash/threes at a backwardation of $215 as inventories continued to be drawn down. Stocks declined 10 tonnes to 2,895 tonnes.

The three-month zinc price at $2,371 per tonne was $7 higher; stocks and cancelled warrants were both 175 tonnes lower 451,425 tonnes and 63,050 tonnes respectively.

Lead recently traded at $2,062 per tonne, a price rise of $17 – stocks increased 850 tonnes to 189,150 tonnes after 1,100 tonnes arrived into Rotterdam.

Steel, cobalt and molybdenum were neglected.

(Editing by Mark Shaw)