LIVE FUTURES REPORT 07/09: LME base metals prices consolidate in low-volume trade; stock outflows keep copper above $6,700/t

Three-month base metals prices on the London Metal Exchange were mixed during morning trading on Monday September 7, with low turnover across the Asian trading session prompting sideways trading, while an ongoing drawdown in LME copper stocks kept the red metal’s underlying price elevated.

Copper’s three-month price on the LME was recently trading at $6,743.50 per tonne on Monday morning, climbing marginally from Friday’s closing price of $6,710 per tonne, while turnover topped the complex at just over 4,800 lots exchanged as of 9.55am London time.

Supporting the higher LME copper price over the morning, the red metal’s LME stocks continue to decline, after this morning’s outflow and fresh cancelation saw a total of 6,900 tonnes removed from the LME’s warehousing network, taking total LME on-warrant copper stocks down to 46,825 tonnes and close to their lowest level since 2005.

Buying momentum in LME copper also largely ignored a widening backwardation in the metal’s benchmark cash/three-month spread, which was recently at $19.50 per tonne backwardation, widening from $11 per tonne backwardation last week.

LME copper now remains the only metal trading in a backwardation across the cash/three-month spread.

“Looking at the volume on the other metals it seems that the Asian market has no desire to chase the price, maybe sensing a sell-off on US stocks when the market reopens. The fear of a collapse comes from the news that SoftBank was buying huge volumes of call options in tech stock it holds on the markets, pushing the price up as option market makers are forced to cover their delta risk,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

“You could say buying huge volumes of ‘out of the money’ call options in say copper then pulling all the stock out of LME warehouses is the same game played in a different market, the difference being that in metals there is a finite amount of each metal in the market place and certainly not endless liquidity,” he added.

Elsewhere in the complex, the three-month aluminium price was the standout performer over the morning, pushing above resistance at $1,800 per tonne and climbing 0.7% on just 2,700 lots traded as of 10.25am London time.

LME aluminium has remained broadly rangebound over the summer period, with demand largely stagnant in recent weeks, while continued stock outflows and fresh cancelations have led to the build-up of queues at key locations.

According to LME data, queues for the removal of primary aluminium at warehouse operator Istim’s locations in Port Klang, Malaysia, may now take up to 68 days, while there remains more than a million tonnes of material held off-warrant in the Asia region.

Market participants now await the next release of the LME’s stock data this Thursday.

Meanwhile, LME aluminium’s forward curve remains wide, with the light metal’s benchmark cash/three-month spread recently trading at $37 per tonne contango.

Other highlights

  • In other commodities, Brent crude oil futures were down by 0.79%, recently trading at $42.04 per barrel.
  • The West Texas Intermediate (WTI) oil price was recently at $39.10 per barrel, a decline of 0.77%.
  • Meanwhile, the US dollar index was recently trading at 92.95.
  • In data from the European Union released this morning, the country’s industrial production on a month on month basis for the August period increased by just 1.2%, missing the expected rise of 4.5% and down from last month’s rise of 9.3%.
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