LIVE FUTURES REPORT 07/08: LME copper price slides 1% amid spread tightness; German export numbers impress

The three-month copper price on the London Metal Exchange was lower during morning trading on Friday August 7, with continued tightness across the front end of the metal’s forward curve deterring interest, while a marked improvement in German industrial production remains a key indicator of improving economic conditions in Europe.

Copper’s outright price on the LME was recently trading at $6,416 per tonne on Friday morning, a decline of more than 1% from the metal’s morning high of $6,495 per tonne, while turnover was moderate at more than 6,100 lots exchanged as of 10.20am London time.

Persistent tightness across the front months of the metal’s forward curve continues to deter buying interest, with LME copper’s benchmark cash/three-month spread recently trading at $1.75 per tonne backwardation.

LME copper’s price decline this morning comes despite a continued drawdown in exchange stocks, with a 3,000-tonne removal today, the bulk of which left LME-registered warehouses in Rotterdam.

Deliverable LME copper stocks now sit at just 49,050 tonnes, while 68,900 tonnes of the LME’s 117,950 tonnes of total copper stocks are now cancelled, indicating the dwindling availability of LME copper warrants.

“Today has started on a negative note with the metals eying Asian equities that are down, reacting to President Trump’s bans on Chinese tech firms Tik Tok and WeChat and further stoking tensions between Washington and Beijing, which were already tense enough,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

“After a week with rallies that saw some of the metals hit their 2020 highs it is not unreasonable to expect some selling to appear as traders square up in front of the weekend as most of the week’s activity has been from the speculative side of the market,” he added.

Elsewhere in the complex, the three-month zinc price was marginally lower over the morning, but kept firmly above the $2,400-per-tonne threshold despite a 9,775-tonne inflow into New Orleans this morning.

Total on-warrant zinc stocks now stand at 180,375 tonnes, while the galvanizing metal’s cash/three-month spread continues to indicate a $13.25-per-tonne contango, supporting steady buying and the retention of material.

Meanwhile, a sharp improvement German manufacturing over July spurred hopes of economic recovery in Europe. Industrial production from Europe’s largest economy improved by 8.9% over July, topping expectations for an 8.3% rise.

Germany notched the largest month-on-month increase in exports in close to three decades, with exports over July improving by 14.9%, and led by mostly Chinese demand.

Other highlights

  • In other commodities, Brent crude oil futures were down by 0.60%, recently trading at $44.82 per barrel.
  • The West Texas Intermediate (WTI) was recently at $41.63 per barrel, a decline of 0.94%.
  • Meanwhile, the dollar index remained in negative territory, recently trading at 93.20.
  • In economic data due from the United States later today, the country’s unemployment rate over July, along with its non-farm employment change and average hourly earnings will be on offer.
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