ASIA METALS – Copper strength seen on outperforming HSBC flash PMI

Robust trading in copper was seen today, a change from previous days of low volumes amidst summer doldrums. This morning, the widely-anticipated HSBC flash manufacturing PMI outperformed forecast, giving copper prices a boost while others in the complex made small gains.

Measuring Chinese production activities, the HSBC flash manufacturing PMI for June came in at 52 instead of the consensus forecast of 51.2. It was also higher than May’s 50.7.

Earlier, Japanese trade balance and PMI numbers were also released, with the trade balance coming in at -1.08 trillion compared to a forecast of -1.11 trillion. PMI at 50.8 both undercut the expected 51.9 and last month’s 51.5.

The data agenda today is fairly heavy going into later parts of the day. The European session will see the release of French, German and Europe’s manufacturing numbers, while over in US unemployment numbers and new home sales will be eyed.

Copper prices hit a high above $7,100 per tonne this morning to last traded at $7,104, $54 higher on the previous day’s close at $7,050 per tonne, while stocks declined 825 tonnes to 156,300 tonnes and cancelled warrants at 40,525 tonnes were 1,625 tonne higher.

Cash/threes spreads have shown some tightening with the contango easing to 18-month lows of just $5.25 today versus yesterday’s $20.50.

“Metal moving to cheaper non-LME/private storage would be less visible (i.e. very visible LME stocks falling fast) and would tend to underpin base prices and tighten nearby spreads (reduce the contango…Tighter spreads are a natural consequence of the substantial financing deals that have been put into place tying up huge tonnages of metal in warehouses and necessitating a short futures hedge position on the LME,” said analyst Robin Bhar of Societe Generale.

After several days of notable gains, aluminium pared back from its highs, to slip to $2,017 on Wednesday, although current prices are up $4 to $2,021 per tonne.

Some traders of the opinion the market was looking overbought, while others are concerned on news that new starts in production could bring up supply.

Both stocks and cancelled warrants for aluminium were down 7,650 tonnes to 4,930,475 tonnes and 2,896,150 tonnes respectively.

The nickel pricxe rose $40 to $19,090 although stocks were down 498 tonnes to 310,716 tonnes. The lead price is $4 higher at $2,211 and zinc rose $2 to $2,366 per tonne.

The tin price at $22,251 is $26 higher with a 10 tonne reduction in stocks to 11,910 tonnes.  Steel, cobalt and molybdenum were all neglected.