Copper price softens, availability continues to rise

Base metals prices held in a sideways pattern during Friday December 16 trading while a strong dollar weighed on the complex amid quiet trading conditions.

“A low volume day for the base complex as the weekend looms and risk appetite wanes. Despite the lower volumes the chop has been providing opportunities to make or break the day traders as the algo’s take advantage of the liquidity gaps on reduced participation,” Matt France at Marex Spectron said.

While the dollar index was down 0.1% at 103.01, it was still holding close to the near-14-year highs it hit yesterday. The greenback has soared after the US FOMC raised interest rates on Wednesday and hinted at three increases to come in 2017.

In other currencies, the yuan also declined against the dollar. The central parity of the yuan against the dollar fell sharply by 219 basis points to 6.9508 on Friday, hitting a new low since May 2008, following a fall of 263 basis points on Thursday.

And Chinese media have suggested that the opening of the capital account as a policy will be contained.

“The argument is if the Fed continues to raise rates throughout next year, renminbi depreciation and outflows will only worsen. Beijing has already brought in capital account controls to stem the decline in foreign exchange reserves, higher interest rates must follow. But unlike the US where higher rates are seen as a positive confirmation that the economy is doing well, in China maybe the converse is true,” John Browning at Bands Financial said.

In data today the EU will release its final CPI, final core CPI and trade balance. From the USA, there will be building permits and housing starts.

The three-month copper price was at $5,688 per tonne, down $44 on the previous day’s close – business has been slow, with fewer than 3,000 lots changing hands on Select.

Stocks continued to build – more than 93,000 tonnes have been delivered into registered warehouses this week. Total stocks were up 11,775 tonnes to 307,075 tonnes, but that was offset by a jump of 10,375 tonnes in cancelled warrants to 102,875 tonnes.

On the SHFE, a net 12,076 tonnes were delivered this week, taking the total to 144,026 tonnes.

The three-month aluminium price was down $1.50 at $1,734 per tonne. The light metal found support from a continuing backwardation – its benchmark cash/three-month spread finished yesterday at a backwardation of $7.21.

Next week marks ‘Third Wednesday’ when the December date will become prompt, so spread activity will see increased significance.

Inventories have increased as people deliver against the backwardation – total stocks were up 28,075 tonnes to 2,117,500 tonnes. Port Klang was up 21,225 tonnes to 190,925 tonnes and Busan increased 12,125 tonnes to 320,750 tonnes.

China’s domestic alumina price has jumped by 68% since mid-August due to increased imbalance between alumina and aluminium capacity, and the price ratio between the two has increased to a one-year high.

“Both of the two meetings called for more discipline among producers in terms of production and raw material purchase, but none of them announced production cut plans yet,” Macquarie said.

The zinc price was at $2,779 per tonne, down $39 on the close. Stocks were down 1,825 tonnes at 430,950 tonnes.

The three-month nickel price was recently at $11,330 per tonne, up $30. Stocks were down 120 tonnes at 371,286 tonnes and cancelled warrants at 132,636 tonnes were up 4,236 tonnes.

“Data showing the nickel market was in surplus in October weighed on prices. However, news that the Philippines government cancelled permits for another three mines saw some of those losses reversed,” ANZ said.

Lead prices declined $58 to recently trade at $2,290 per tonne. Stocks and cancelled warrants were both 50 tonnes lower at 187,075 tonnes and 47,675 tonnes respectively.

The three-month tin price fell to $21,150, $80 lower. Still, its spreads remained tight despite the recent run of deliveries into LME sheds – cash/three-month was at a backwardation of $120. Stocks were unchanged today at 3,415 tonnes but cancelled warrants were up 30 tonnes at 995 tonnes.

Steel, cobalt and molybdenum were neglected.