LIVE FUTURES REPORT 05/10: LME base metals prices mixed amid dollar strength, tight fundamental backdrop

Three-month base metals prices on the London Metal Exchange were mixed during early trading on Friday October 5, with a barrage of strong economic data from the United States as well as hawkish rhetoric from the US Federal Reserve continuing to prop up the dollar and limiting any upside moves in the metals’ prices.

The base metals moved in opposite directions this morning; the three-month aluminium and nickel prices defied a firm dollar to rise by 0.2% and 0.9% respectively, while the three-month lead price fell by 0.2%, copper by 0.8% and zinc by 1.3%. Tin was untraded.

The dollar, at 95.77 as at 9am Shanghai time, remains in relative high ground after hitting a peak of 96.12 on Thursday, nearing a high of 96.70 reached on August 15.

After reporting a higher-than-expected purchasing manager’s index for September, the US published on Thursday 2.3% month-on-month growth in factory orders and 207,000 weekly unemployment claims compared with a forecast of 214,000.

These upbeat numbers were followed by confident statements from US Federal Reserve Chair Jerome Powell that implied more US interest rate increases were coming, strengthening the dollar and thus putting downward pressure on emerging markets currencies.

In addition, investors are likely to adopt a cautious approach to trading today ahead of the blockbuster jobs report from the US, which could have a bearing on the dollar’s direction, and in turn on base metals prices.

Despite supply cuts in China generating a structural tightness in the short term, the three-month zinc price fell the most on Friday. According to data from China’s National Bureau of Statistics, refined zinc production totaled 3.957 million tonnes in January to August, down 6.6% year on year. Total LME zinc stocks have fallen to 203,675 as of October 4, down 14.2% month on month.

Meanwhile, concerns over significant supply disruptions stemming from the suspension of Norsk Hydro’s alumina operations in Brazil provided the three-month aluminium price enough support to buck the overall downward trend seen in the LME base metals complex this morning.

Nickel joined aluminium and also rose Friday, with support from robust fundamentals propping up the former; nickel faces a deficit of 96,500 tonnes in the first seven months of 2018, according to Fastmarkets MB research analyst Andy Farida.

“The falling global inventory level, a market deficit and a robust underlying demand from the stainless steel industry as well as rising consumption in the production of batteries for electric vehicles should help reduce the selling pressure and potentially help LME nickel price to eventually recover higher,” Farida said.

Base metals prices diverge

  • The three-month copper price dropped $50 per tonne to $6,240 per tonne
  • The three-month aluminium price rose $4.50 per tonne to $2,174 per tonne.
  • The three-month zinc price fell $35.50 per tonne to $2,618.50 per tonne.
  • The three-month lead price slipped $3 per tonne to $2,003 per tonne.
  • The three-month nickel price increased $110 per tonne to $12,600 per tonne.
  • Three-month tin was untraded.

Currency moves and data releases

  • The dollar index was relatively unchanged at 95.77 as at 9am Shanghai time.
  • In other commodities, the Brent crude oil spot price was at $85.02 per barrel as at 9am Shanghai time.
  • In US data Thursday, weekly unemployment claims came in at 207,000, below the forecast of 214,000. Factory orders grew by 2.3% month on month, while natural gas storage came in at 98 billion cubic feet, more than double the previous figure of 46 billion cubic feet and topping the forecast 47 billion cubic feet.
  • The US is also expected to release today data on its average hourly earnings, non-farm employment change, unemployment rate, and trade balance.
  • In European data on Friday, Germany will report on its factory orders and producer price index, France will publish data on its government budget balance, Italy will release retail sales data, and the UK’s Halifax Bank of Scotland will publish its house price index.