LIVE FUTURES REPORT 06/06: LME zinc price climbs 2%; lead approaches $1,900/t

Zinc’s three-month price on the London Metal Exchange climbed by more than 2% during morning trading on Thursday June 6, breaching its nearby $2,500 per tonne resistance level while the metal’s forward spreads begin to show signs of easing.

June 6, 2019

By Hassan Butt

Volumes traded in the galvanizing metal were strong over the morning, topping the complex with more than 6,500 lots exchanged as at 9.45am London time.

Prompting the uptick in price action, a fresh cancelation of just under 16,000 tonnes earlier this week pushed total zinc canceled stock to around 41% of LME inventory, which now sits at just under 100,000 tonnes.

Yet despite a downturn in deliverable material, zinc’s cash/three-month spread is now showing signs of easing, narrowing from a backwardation of $161 per tonne two weeks ago, to recently trade in a backwardation of $117 per tonne.

“For the greater part of [Wednesday] the metals ignored external influence and slid to the downside during the morning. This then accelerated in the afternoon when poor US data showed a further slowing of the economy,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

“Zinc had another 16,000 tonnes of warrants cancelled, [which is] now generally accepted to be the dominant long trying to neutralize the effect of a rumored delivery of over 70,000 tonnes,” he added.

Meanwhile, sister-metal lead has also had a run of positive price action over the morning session, trading just under $1,900 per tonne.

In contrast to zinc, lead’s cash/three-month spread has exhibited tightness over the week, moving from a contango of around $6 per tonne on Monday, to recently trade in a backwardation of $39 per tonne – its widest backwardation since 2017.

Other highlights

In US data on Wednesday, the ADP non-farm employment change disappointed with the addition of just 27,000 new positions in May, well below the forecast 185,000 new positions added. The ISM non-manufacturing PMI was better than expected at 56.9 last month, up from 55.5 in April.
In EU data of note on Thursday, German factory orders month on month for the May period were up by 0.3%, beating an expected rise of 0.1%.
Other data of note out later includes the European Union’s revised gross domestic product reading, monetary policy statement from the European Central Bank as well as US releases that include Challenger job cuts, revised non-farm productivity and unit labor costs, trade balance and unemployment claims.
In addition, Bank of England governor Mark Carney and US Federal Open Market Committee member John Williams are speaking.