LIVE FUTURES REPORT 04/10: LME base metals prices mostly higher on weaker dollar; zinc, nickel gain on strong fundamentals

The LME three-month copper contract traded at $6,524 per tonne as of 03:31 BST, up $4 from Tuesday’s close, with 150 lots changing hands.

With Chinese markets, including the Shanghai Futures Exchange, closed for the country’s National Day Golden Week holiday (October 2-6), trading has been quiet.

Zinc prices resumed their run higher from the previous session, continuing to find support from renewed bullish sentiment amid further stock declines. LME zinc stocks declined a net 1,025 tonnes to 252,225 tonnes on Tuesday.

“With visible [zinc] stocks still drifting lower, the underlying fundamentals remain supportive, which should support further price gains. But there are downside risks; off-market stocks could return to the open market, additional mine supply is ramping up ahead of schedule, and there is still the question of Glencore’s shuttered mine capacity. As a result we maintain a bullish outlook, although we expect price flows are likely to become more two-way,” Metal Bulletin analyst James Moore said.

On Tuesday, Glencore announced plans to increase its stake in Peruvian zinc, lead and silver producer Volcan Compañía Minera through a deal worth more than $500 million.

In nickel, gains were seen in July-September on the back of strong demand and supply-side developments. Moore noted that while the rally was significant, “the scale of gains suggest prices have run ahead of the fundamentals, which are likely to soften as environmental-related capacity closures curb demand from Chinese steelmakers this winter.”

In other news related to the nickel market, Shandong Xinhai Technology, China’s largest nickel pig iron (NPI)-only producer, has been ordered to halve its production from November 15 to alleviate pollution, which could remove around 200,000-250,000 tonnes of NPI from the market over the four month period, Metal Bulletin understands.

Base metals prices have broadly been supported by a pause in the dollar’s recent recovery.

The dollar weakened on Wednesday morning on speculation that the next US Federal Reserve chair may be a less hawkish candidate than previously thought. Gains on the dollar stalled after Politico reported that US Treasury Secretary Steven Mnuchin favours Fed governor Jerome Powell over former governor Kevin Warsh.

Base metals prices

• The LME three-month zinc contract rose $16 to $3,280 per tonne.
• The LME three-month aluminium contract price increased $10 to $2,141 per tonne.
• The LME three-month lead contract price gained $25 to $2,616 per tonne.
• The LME three-month nickel contract price edged up $105 to $10,725 per tonne
• The LME three-month tin contract price slipped $30 to $20,770 per tonne.

Currency moves and data releases

• The dollar index was down 0.2% to 93.38 as of 02:57 BST after reaching as high as 93.92 on Tuesday, which was the highest since August 17.
• In other commodities, the Brent crude oil spot price fell 0.14% to $55.62 per barrel as of 03:07 BST.
• In EU data on Tuesday, Europe’s August producer price index rose 0.3% against a forecast 0.1% increase. The UK’s Construction purchasing managers’ index (PMI) for September was 48.1, down from the initial forecast of 51.1
• The economic agenda today sees a host of services PMI data out across Europe, the UK and USA. Other US data of note includes the ADP non-farm employment change, the ISM non-manufacturing PMI and crude oil inventory figures.
• In addition, European Central Bank president Mario Draghi and US Federal Reserve chair Janet Yellen are speaking later.