LIVE FUTURES REPORT 02/11: LME base metals begin consolidating; nickel retreats from $13,000/t

Base metals prices on the London Metal Exchange dropped lower across the board this morning, Wednesday November 2, while LME Week comes to a close.

The three-month nickel price hit its highest since June 2015 yesterday, but prices retreated $165 per tonne this morning while high LME warehouse stocks put downward pressure on prices.

Nickel stocks in LME-listed warehouses stood at 381,570 tonnes at the start of business on November 2, which is “near the top of this year’s range,” according to Metal Bulletin senior analyst William Adams.

Copper prices also retreated while consolidation set in after bullish support during LME Week. Zinc, lead and aluminium prices also dipped lower while tin remained unchanged.

“This week’s rally in nickel, which seems to have dragged other metals’ prices higher too, may struggle to hold onto gains and further consolidation may follow,” Adams said.

“Our view of late has been to remain quietly bullish, but we expect trading to become choppier because prices are generally in high ground, so we should expect more bouts of scale-up selling along the way,” he added.

Nickel retreats

  • The three-month nickel price was down $165 to $12,260 per tonne.
  • Stocks were up 126 tonnes to 381,570 tonnes.
  • Support for the metal this week had come from the general bullishness in the nickel market due to strong physical premiums in China and elsewhere, as well as optimism surrounding electric vehicle (EV) battery demand.
  • There are headwinds for the nickel market too, INTL FCStone analyst Edward Meir warned.
  • “It is important to note that EV sales remain a modest percentage of the market. In addition, sales remain critically dependent on subsidies, practically the world over,” Meir said.
  • Another factor to consider in the EV battery market is that with any rise in input costs, nickel faces the threat of import substitution, demand miniaturization or even destruction, and in extreme cases a complete overhaul of the make-up of the battery, according to Meir.

Base metals prices

  • The three-month copper price was down $49 to $6,881 per tonne. Stocks were up 175 tonnes to 273,850 tonnes.
  • Aluminium’s three-month price dropped $18.50 to $2,166.50 per tonne. Inventories declined 2,250 tonnes to 1,184,200 tonnes.
  • The three-month zinc price was most recently up $66.50 to $3,210.50 per tonne. Stocks declined 3,125 tonnes to 250,900 tonnes.
  • Lead’s three-month price was down $25 to $2,457 per tonne. Inventories dipped 475 tonnes to 148,775 tonnes.
  • The three-month tin price was unchanged at $19,400 per tonne. Stocks dipped 5 tonnes to 2,090 tonnes.

Currency moves and data releases

  • The dollar index was down 0.12% to 94.64.
  • In other commodities, the Brent crude oil spot price was down 0.43% to $60.21 per barrel.
  • The economic agenda is heavy today with manufacturing PMI data out across Europe, UK construction PMI, the Bank of England’s (BoE) monetary policy summary and official bank rate and US data that includes unemployment claims, preliminary non-farm productivity and preliminary unit labor costs.
  • In addition, BoE governor Mark Carney and US Federal Open Market Committee member William Dudley are speaking.
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