Copper price breaks above $6,000/t; zinc cancellations jump

Base metals extended their rallies in LME premarket trading on Friday November 11, with copper hitting its highest since June last year.

The three-month copper price peaked at $6,025 per tonne, an increase of $424.50 or 7% on Thursday’s close. It recently traded at $5,972 per tonne, still up $371.

The metal has set fresh highs each day for the past 14 days during which time it has climbed $1,363 or 20.3%.

“Even though we have seen prices move higher this week, most did not expect it to get above $6,000 – the rally had been looking overdone but has had a fresh shot in the arm as the weekend nears,” an LME floor trader said.

Copper has found favour among CTAs and algorithmic traders, particularly from China. There have also been reports of producers closing their short positions and using these higher prices to hedge.

Business on Select has been robust – close to 30,000 lots have changed hands so far. Turnover this week has been strong – Select volumes hit an all-time high above 53,000 lots on Wednesday.

LME inventories fell a net 4,100 tonnes to 270,850 tonnes but cancelled warrants fell 5,475 tonnes to 99,650 tonnes. The move was centred on Asia but there were smaller drops in US warehouses and in Hull in the UK.

“We believe the recent run-up of LME prices was primarily driven by Chinese speculative arb-trading on the back of the fee hikes by China’s major commodity exchanges, and we expect to see a pull-back in the near term once the speculative trading flow cools off,” Citi Bank said in a note.

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. Still, there is no fundamental foundation for the rise, making the metals vulnerable to a correction.

“As soon as the dust has settled, market participants are likely to start focusing on the fundamental data relevant to metals again. And they have not changed since the outcome of the US election. In our view, this has generated considerable correction potential in the short term,” Commerzbank noted.

US data due later on Friday includes preliminary UoM consumer sentiment and preliminary UoM inflation sentiment.

The three-month zinc price at $2,555 per tonne was up $30 – earlier, it hit its highest since February 2011 at $2,560 per tonne. Stocks fell 800 tonnes to 446,650 tonnes and cancellations jumped by 11,500 tonnes to 73,525 tonnes, with 12,050 tonnes of fresh cancellations in New Orleans. On October 24, there was a jump of more than 30,000 tonnes cancelled warrants there.

The three-month aluminium price gained $11 to $1,781, the highest since May 2015. Stocks fell 6,300 tonnes to 2,105,350 tonnes and cancelled warrants dropped 7,200 tonnes to 762,075 tonnes.

Aluminium spreads have tightened along the nearby curve due to forward selling. Cash/Nov, Cash/Dec, Cash/Jan and Cash/3-mth are backwardated at $1, $3.90, $0.75 and $0.50 per tonne respectively.

The three-month nickel price at $11,900 per tonne was its highest since July 2015. Stocks were unchanged at 364,410 tonnes but cancelled warrants increased 300 tonnes to 122,760 tonnes.

The three-month lead price reached its highest since September 2014 at $2,193 per tonne, up $39. Stocks and cancelled warrants were both 150 tonnes lower at 187,500 tonnes and 31,175 tonnes respectively.

The three-month tin price increased $235 to $21,740 per tonne. Stocks were unchanged at 187,500 tonnes.

Steel, cobalt and molybdenum were neglected.

(Editing by Mark Shaw)