ASIA METALS – Metal prices consolidate higher as optimism on demand lifts complex

Singapore 17/02/2014 – The base metals complex continued to tread higher on Friday’s strength, given last week’s optimistic trade numbers coming from China. Trading this week may be patchy, as US celebrates President’s day on Monday and the February ‘third Wednesday’ prompt falls on this week.

“We keep a watchful eye on high-frequency China data for signs of a slowdown in specifically the manufacturing sector… total exports data for China rose strongly in January, and total import numbers were also much stronger than expected, [indicating] that world demand for Chinese products, and Chinese domestic demand for imported goods, may be stronger than thought,” analysts at Standard Bank said.

The week ahead is a data-heavy one, headlined by the FOMC minutes released from the January meeting and the February Markit US PMI Prelim survey and CPI inflation data both out on 20th February. In Asia, investors are also likely to keep their eye on the HSBC flash manufacturing PMI from China which is forecast to be in contraction this month due to the unexpected dip to 49.5 previously.

In metals prices, the copper price closed the open-outcry session at $7,150 per tonne on Friday with prices holding easily above $7,100, averting a test of the $7,016 two-month low set last week. This morning prices continue to move higher, with current trade at $7,175 per tonne, up $25 from Friday’s kerb close.

The aluminium price was last at $1,752 per tonne, up 7.50 from Friday’s $1,745.50 and well supported above $1,700. Prices are highest in two weeks now and Cash/threes are at $44 back and cash/March at $15.50 back as well.

According to analysts from Commerzbank, negotiations on second-quarter premiums between producers and consumers will begin in the next few days and that “Japanese aluminium consumers will probably have to prepare themselves for higher premiums”.

Zinc ended at $2,040 last week and this morning prices jump $9 higher although trading remains within a range of $6. Inventories fell for a 15th successive day, dropping 4,150 tonnes to 803,375 tonnes, the lowest again since December 2011,

The lead price concluded Friday at $2,138, with stocks down by their customary 500 tonnes to 203,925 tonnes, a fresh low since September 2013. This morning prices followed the rest higher as well with an increase of $7.25 to $2,145.25.

Nickel was last at $14,340, up $90, while stocks fell 276 tonnes from what were all-time highs to 268,980 tonnes. Tin closed at $22,975, a $400 advance in Friday and currently bid at $22,950.

Investors are worried Indonesia may now turn their attention on tin solder exports after a surge of shipments, said analyst Leon Westgate at Standard Bank in London.

“Any action to clamp down on solder exports would temporarily reduce tin availability, with production already impacted by weather patterns anyway,” he said in a note.