Copper price rises, more metal exits Asia; rest sideways to higher

Base metals other than nickel were in positive territory in LME premarket trading on Thursday, October 27.

After a quiet Asian session, sentiment and prices have picked up slightly, traders said.

“We would expect more sideways-to-higher trading for most of the base metals – the market is now likely to focus on Chinese PMI data out on Tuesday and well as developments from LME Week,” Metal Bulletin analyst William Adams said.

In wider markets, the off-shore yuan exchange rate against the dollar fell to 6.7920 during morning trade, a new record low, while the on-shore yuan exchange rate against the US dollar slipped to 6.7790.

The dollar index was little changed at 98.58.

In today’s data, EU M3 money supply was as expected at 5% while private loans disappointed at 1.8%. Core durable goods orders, unemployment claims and pending home sales are due from the US later.

The three-month copper price recently traded at $4,775 per tonne, $40 higher than Wednesday’s close.

As well as increased CTA buying, “the price action since breaching the $4,750 area indicates some spec stops may have been triggered”, Marex noted.

Available metal in LME sheds declined – stocks fell a net 4,775 tonnes to 331,450 tonnes and cancelled warrants increased 7,725 tonnes to 120,425 tonnes. The cancellations were centred on Asia – 7,550 tonnes were freshly cancelled in Gwangyang while the Busan total increased 6,300 tonnes.

Spread activity was mixed – the sensitive ‘Tom’/next was recently at a small contango of $1.74, having flared out to a backwardation of $25 yesterday.

But the benchmark cash/threes tightened to a contango of $8.25, having started the week above $20.

The three-month tin price remains around 22-month highs – the contract recently traded at $20,460 per tonne, up $35. ‘Tom’/Next was recently at a backwardation of $12 while cash/threes is tight at $240.

“The story here is simple – 19-year lows on warehouse stocks, steep backwardation discouraging any speculators from shorting the market and producers seemingly happy to sit back and wait for further price roses before making any forward price fix hedges,” Triland noted.

The three-month aluminium price at $1,683 per tonne was up $4. The most-traded SHFE aluminium contract closed at 13,530 yuan per tonne, down 0.95% on the opening price. Yesterday, it peaked near 14,000 yuan on fears of a shortage caused by new transport regulations – and higher logistics costs – in China.

In spreads, the LME cash dates look tighter – cash/Nov was at a small contango of $1, while cash/Dec and cash/Jan were recently trading at level.

The three-month zinc price is holding up well, recently trading at $2,355 per tonne, up $16. SHFE zinc recently traded at 18,875 yuan per tonne, having peaked Tuesday at 18,945 yuan, its highest since September 2011. The metal has found support from a drawdown in both LME and SHFE stocks and talk of supply tightness in China.

“Zinc concentrate and metal markets both saw an increase of freight rates particularly in southern China, resulting in tight ore supply and low refined metals inventories,” CitiBank said in a note.

The three-month lead price was recently at $2,066 per tonne, up $14. Stocks and cancelled warrants both fell 150 tonnes to 188,300 tonnes and 33,075 tonnes respectively.

The three-month nickel was lower, however, slipping $65 to $10,195 per tonne. A small backwardation has appeared in the ‘Tom’/next spread, which recently traded at $1 per tonne. Stocks fell 234 tonnes to 362,250 tonnes.

Steel, cobalt and molybdenum were ignored.

(Editing by Mark Shaw)