LIVE FUTURES REPORT 01/10: LME base metals prices down amid firm dollar, China holiday

Three-month base metals prices on the London Metal Exchange were down across the board during early trading on Monday October 1, pressured by a firmer dollar and the absence of Chinese participants due to a week-long holiday in China.

The LME base metals complex was largely weighed down by the dollar, which has maintained an upward trajectory since the latter stages of last week. The US currency touched a high of 95.22 on Monday morning and remains well away from its recent low of 93.81 reached on September 21.

The combination of a firmer dollar and holidays in China has limited trade activity this morning and kept prices under pressure.

Despite a 3.2% week-on-week drop in LME stocks last week, the three-month zinc price showed the most weakness with a decline 0.7%, falling to $2,595 per tonne as at 9.02am Shanghai time from last Friday’s close of $2,062 per tonne.

Supply cuts in China have created a structural tightness for this zinc in the short term, according to Fastmarkets MB analyst James Moore, but Vedanta Resources’ Gamsberg mine project and the resumption of operations in Century mine in Australia are expected to increase supply flow.

“Rising supplies will lead the market to gradually rebalance,” Moore said, adding that Fastmarkets MBR projects the refined zinc market to record a 13,000-tonne surplus in 2019 from a 215,000-tonne deficit in 2018.

The three-month aluminium followed zinc’s lead, falling almost 0.4% to $2,054 per tonne compared with last Friday’s close.

Bearish factors have emerged to pull the price of aluminium lower, primarily the United States’ decision last week to extend the deadline for companies to wind down operations and contracts with Russian light metal producer UC Rusal from October 23 to November 12, and a resolution last Friday to end the nearly two-month strike at Alcoa’s Western Australian alumina operations.

The other LME base metals registered minimal falls, with the three-month nickel and copper prices both down by 0.3%, while lead dipped by 0.1%. Tin was untraded so far this morning.

The Shanghai Futures Exchange is closed due to the Golden Week holiday, to mark China’s National Day. The exchange will reopen on October 8.

Base metal prices down

  • The three-month copper price fell $18 per tonne to $6,240 per tonne
  • The three-month aluminium price slid $8 per tonne to $2,054 per tonne.
  • The three-month zinc price dropped $17 per tonne to $2,595 per tonne.
  • The three-month lead price dipped $2 per tonne to $2,034 per tonne.
  • The three-month nickel price slipped $40 per tonne to $12,560 per tonne.

Currency moves and data releases

  • The dollar index was relatively unchanged at 95.15 as at 9.07am Shanghai time.
  • In other commodities, the Brent crude oil spot price was at $83 per barrel as at 9.08am Shanghai time.
  • In US data on Monday, the Institute for Supply Management is releasing its purchasing manager’s index (PMI) and the Census Bureau is publishing its month-on-month construction spending report.
  • In Europe, we have several reports on PMI from Spain, Italy, France, United Kingdom, and the European Union.
  • Germany is also releasing data on its retail sales, Italy on its unemployment rate and the UK on its net lending to individuals, M4 money supply, and mortgage approvals. The EU is also announcing unemployment data.