LIVE FUTURES REPORT 07/06: LME lead price falls 1.4% in lackluster morning trading; tin nears $19,500/t

Lead’s three-month price on the London Metal Exchange was lower during morning trading on Friday June 7, with price action falling back to $1,860 per tonne after breaching the nearby $1,900 per tonne resistance level on Thursday following a 2% climb.

The announcement of Nyrstar’s decision to declare force majeure at its Port Pirie smelter in Australia sent lead futures surging on Thursday.

Over the morning session however, the three-month lead price reached a low of $1,855 per tonne, while volumes have been moderately high over the morning, with more than 1,500 lots traded as of 10:15am London time.

Lead’s forward curve also remains tight, with its cash/three-month spread continuing to trade in a backwardation of $21.50 per tonne, while its nearby cash-July spread was recently seen in a backwardation of $37 per tonne.

“The strong reaction of the lead price to this [Port Pirie] news is partly due to the fact that lead stocks in the LME’s warehouses recently declined to a ten-year low. Market participants are becoming increasingly concerned that the global lead market is undersupplied,” Commerzbank Research said in a morning note.

“The lead forward curve at least does indicate a shortage; it has turned significantly into backwardation at the front end in recent days. The rise in the lead price also pulled the zinc price up with it; the latter has regained the $2,500-per-tonne mark,” it added.

Elsewhere, tin’s three-month price is continuing to climb despite an uptick of more than 80% in LME stocks over the May period.

The three-month tin contract is now above $19,400 per tonne and reached a high over the morning of $19,500 per tonne, trading more than 4.5% higher than last week, when price action dipped to around $18,600 per tonne.

Despite recent inflows into LME warehouses, Chinese customs data now shows that imports of tin concentrates – predominantly sourced in Myanmar – into China, the world’s largest tin producer and exporter, were down by around 20% year on year in April, indicating supply pressure.

In addition, exports from Indonesia, the world’s second largest tin producer after China, remain subdued, with state-owned PT Timah continuing to exhibit dominance in the market.

Other highlights

  • The US dollar index was up by 0.07% at 97.07, while Brent crude oil futures are trading 0.85% higher at $62.75 per barrel.
  • In EU data of note on Friday, German industrial production on a month on month basis for the May period fell by 1.9%, down from a rise of 0.5% previously. The German trade surplus narrowed over the same period to €17 billion ($19.1 billion), down from €20 billion previously.
  • Meanwhile, French industrial production month on month for May improved by 0.4%, up from a drop of 1.1% in the prior reading. The French trade deficit over May narrowed to €5 billion, improving from €5.5 billion previously.
  • Later, the US will be releasing data on average hourly earnings, non-farm employment change and its unemployment rate.