LIVE FUTURES REPORT 04/10: LME zinc prices strengthen; aluminium, copper consolidate

The three-month zinc price is currently trading at $12 per tonne higher and hit a new ten-year high peak of $3,295.50 per tonne earlier this morning. The metal is continuing to find support from renewed bullish sentiment amid further stock declines.

Aluminium prices climbed $13 higher as they continue to consolidate at current levels and the three-month nickel price also strengthened – trading at $10,650 per tonne this morning. Strong gains were seen for nickel in July-September on the back of strong demand and supply-side developments.

“Nickel having spent the last couple of weeks being ‘battered’ down from the recent highs also started to pick up off the lows helped by the news of a temporary cutback in [nickel pig iron] production by Shandong Xinhai,” noted Malcolm Freeman of Kingdom Futures.

Copper prices continue to consolidate, the three-month price dipped $25 per tonne this morning as it fights to stay above the $6,500-per-tonne barrier with little fundamental direction.

Lead prices were following zinc’s upward trend and hit highs of $2,620.50 per tonne earlier this morning but the three-month price has since retreated.

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.

Zinc prices higher again

• The three-month zinc price rose $12 to $3,276 per tonne.
• Stocks declined a further 475 tonnes to 251,750 tonnes, stocks have fallen every day this week including over 16,000 tonnes being cancelled in Antwerp.
• Warrants are in tight hands with one market player holding 90-100% of tom/next warrant holdings and cash positions. One market player also holds 50-70% of warrant holdings.
• “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.

Base metals prices

• The three-month copper price dipped $25 to $6,495 per tonne. Stocks dipped 3,525 tonnes to 298,525 tonnes.
• Aluminium’s three-month price was trading $13 higher at $2,144 per tonne. Inventories declined 3,775 tonnes to 1,251,700 tonnes, with 3,925 tonnes re-warranted.
• The three-month nickel price was up $30 to $10,650 per tonne. Stocks increased 5,094 tonnes, the majority in Johor, to 387,828 tonnes. 43% of available nickel stocks are currently held in Johor.
• Lead’s three-month price was down $20 to $2,571 per tonne. Stocks declined 500 tonnes to 156,400 tonnes.
• The three-month tin price dipped $15 to $20,785 per tonne. Inventories increased 25 tonnes to 2,070 tonnes.

Currency moves and data releases

• The dollar index was down 0.14% to 93.46 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 0.29% to $55.55 per barrel.
• The economic agenda today sees a host of services purchasing managers’ index (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.