LIVE FUTURES REPORT 06/08: LME base metals prices gather momentum in positive morning trade; lead nears $2,000/t

Three-month base metals prices on the London Metal Exchange were collectively higher during morning trading on Tuesday August 6, with lead futures leading the way with a 1.4% uptick.

Pressuring the lead price lower in recent weeks, fresh inflows of just under 30,000 tonnes staggered across July 30-August 2 led the commodity to shed around 6% of its price and slip below the $2,000-per-tonne support level.

Since then, lead’s outright price on the LME has improved, trading at an intra-morning high of $1,993 per tonne, while more than 1,000 lots have been traded as of 9am London time.

“While many controls have been put in place to avoid a re-run of the banking crisis, it does not stop the global equity markets having a substantial correction and the metals markets will be dragged into any substantial de-risking whether they like it or not,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

“Many of the metals, with the exception of nickel, are well down from their recent highs and if there is a flash crash in the global equity markets the metals will have further to fall, with nickel having potentially the most to lose,” he added.

Continuing its upward trajectory however, nickel’s three-month price has held in positive territory throughout August, appreciating to trade at an intra-morning high of $15,090 per tonne and up by more than 1% against Monday’s closing price of $14,880 per tonne.

Some 4,381 lots of nickel have traded over the morning, second to copper’s 5,500 lots. Nickel volumes have averaged more than 10,000 lots a day throughout August so far.

Yet amid the commodity’s upward price momentum, strong cash-buying in nickel has led to the metal’s benchmark cash/three-month spread narrowing to a contango of just $2 per tonne, from around $45 per tonne on Monday, making financing of the commodity more costly.

Equally, nickel’s far forward spreads have also tightened as a result, with the August/three-month spread now in a $5 per tonne backwardation, the September-October spread in a $17 per tonne backwardation and the September/three-month spread in a $30 per tonne backwardation.

Meanwhile in macro news, the Chinese yuan has stabilized over the morning after currency woes on Monday saw the yuan breach the 7-per-dollar level for the first time in 11 years, while the People’s Bank of China (PBoC) has on Tuesday denied accusations that the move was engineered to counter US trade frictions.

Other highlights

  • The dollar index was higher over the morning, recently seen up by 0.20% at 97.53.
  • In other commodities, Brent crude oil futures were up by around 0.10% this morning, recently trading at $60.10 per barrel.
  • In data on Monday, the United Kingdom’s services purchasing managers’ index (PMI) for the July period was better at 51.4, improving from 50.2 the prior month. In the United States, the ISM non-manufacturing PMI level for the July period stood at 53.7, missing an expected level of 55.5 and down from 55.1 previously.
  • In data from the European Union this morning, German factory orders on a month on month basis for the July period were better than expected with a rise of 2.5%, topping a 2% drop in the prior month.
  • Later, the Jolts job openings and IBD/TIPP economic optimism from the US are of note.
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