LIVE FUTURES 27/10: LME aluminium price down 3.3% in high volume

The three-month aluminium price on the London Metal Exchange was the underperformer during morning trading on Wednesday October 27, but all the base metals were weaker amid growing macroeconomic headwinds.

Aluminium was down to $2,734 per tonne at 9am on Wednesday, with over 15,000 lots of the light metal traded, accounting for three quarters of the total volume traded on Tuesday, of 20,371 lots.

Aluminium was at its lowest since the start of September, still weighed down by declining prices in China for thermal coal, on which aluminium smelters depend for energy generation.

Furthermore, “the National Development and Reform Commission issued another statement today saying coal producing provinces such as Shanxi, Shaanxi and Inner Mongolia should strengthen their control of coal storage sites,” Anna Stablum, LME Desk analyst at Marex, said.

“Declining coal prices are a short-term success,” ING’s senior commodities strategist Wenyu Yao said.

“Still, it remains to be seen whether the supply of coal and other energy will ultimately meet the demand from households, which is the priority, and then let industries operate at their scale. The heating season is only about two weeks away, and that could be a litmus test,” she added.

Zinc’s three-month contract on the LME also drifted lower by 2.3% to $3,345 per tonne as at 9am. During early trading, the galvanizing metal reached an intraday low of $3,331 per tonne, its lowest since October 14.

Zinc’s net long fund position dropped to 52,377 lots in the week to October 22, with a decrease of 5,685 long positions, according to the LME’s latest commitment of traders report.

Lead was also down this morning, dropping by 1.4% to $2,387 per tonne – the lowest since October 19.
Tightness in the lead market persists, however, with lead’s cash/three-month spread at a $37.50-per-tonne backwardation.

Nevertheless, recent trade data reflects an increase in Chinese exports of refined lead which totaled 15,545 tonnes in September, the highest since November 2007.

“We expect this trend to continue in the months ahead, with more stocks expected to land in LME warehouses,” Fastmarkets analyst James Moore noted on Wednesday morning.

Other highlights

  •  Nickel’s three-month price fell by 1.5% to $19,785 per tonne on Wednesday morning, down from $20,091 per tonne at the 5pm close on Tuesday.
  • The US Dollar Index touched a one-week high of 94.03 on Tuesday and was around that level at 93.98 on Wednesday morning.