LIVE FUTURES REPORT 05/09: LME tin price climbs 2% amid news of China production cut; nickel falls 2.5%

Tin’s three-month price on the London Metal Exchange was up by more than 2% during morning trading on Thursday September 5, climbing to its highest level since late-July amid news of planned smelter production cuts in China, while a 2.5% downturn in nickel has prompted another switch between the two metals.

Three-month tin futures were recently seen trading at $17.460 per tonne, while an intra-morning high of $17,740 per tonne is the metal’s highest price since July 26. The metal has climbed some 4.6% from its intra-morning low of $16,950 per tonne.

Volumes traded in tin were also high over the morning period, with a flurry of buying activity spurring some 500 lots of tin exchanged as at 9.30am London time, which is close to the entirety of Wednesday’s turnover at 585 lots.

Prompting the upward move, fourteen smelters in China have agreed to slash production due to the metal’s sliding price in recent months, with the smelters set to cut refined tin output by a combined 20,020 tonnes, a figure first reported by Bloomberg this morning.

More specifically, China’s largest refined tin producer, Yunnan Tin Co, has pledged to cut 10% of its output from its 2019 target, with the agreement taking place at the Asia Tin Week conference in the Chinese city of Xi’an.

“Once the [LME tin] price breaches $18,500 per tonne it is a clear path to $21,600 per tonne,” a European-based tin trader told Fastmarkets.

“We expect commodity trading advisor (CTA) short-covering in the near term. CTA’s are 4,000 lots (20,000 tonnes) short,” the trader added.

Elsewhere in the complex, a steady decline in nickel futures has led to a 2.5% downturn in its three-month price this morning, with the commodity recently trading at $17,600 per tonne.

Participants dealing in the nickel market are now beginning to price in an expedited Indonesian raw materials ore ban set for the end of this year, while spread tightness in the metal’s forward curve has further dampened buying momentum this week.

Nickel’s benchmark cash/three-month spread was recently seen in a $15-per-tonne backwardation, while its nearby cash/September spread was recently trading in a $5-per-tonne backwardation.

As a result, a converging of the three-month nickel and tin price has re-emerged, with the two commodities now showing just over $100 per tonne between them. The spread differential had reached more than $1,000 per tonne at the end of August.

Other highlights

  • Elsewhere in the complex, copper’s three-month price continues to trade in an uptrend, breaching the nearby $5,800-per-tonne resistance level and consolidating around that mark. The red metal’s outright price fell to its lowest level since January 2017 earlier this week at $5,518 per tonne.
  • The dollar index was lower over the morning, falling by 0.04% to 98.37.
  • In other commodities, Brent crude oil futures were up by 0.45% over the morning, climbing to $60.70 per barrel.
  • In European data on Wednesday, the United Kingdom’s services purchasing managers’ index (PMI) came in at 50.6 for August, missing an expected 51. In contrast, the European Union’s final services PMI over the same period was better than expected at 53.5 - beating the forecast 53.4.
  • In data released the morning, Germany’s factory orders month on month for the August period fell by 2.7%, missing an expected fall of 1.5%.
  • Later on Thursday, a host of US releases including ADP non-farm employment change, revised non-farm productivity, revised unit labor costs, unemployment claims, final services PMI, the Institute for Supply Management (ISM) non-manufacturing PMI, factory orders and crude oil inventories are due.
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