LIVE FUTURES REPORT 08/04: LME base metals prices capped as rally wanes; 44kt of Cu flows in

“LME base metal prices are consolidating after recent gains but the ‘sell the rally’ mentality continues to overhang and that is likely to cap upside price potential in the short term,” Fastmarkets research analyst Andy Farida said.

“We attribute the rallies in the past two days to mere short-covering. Although there is still that upside potential, it will require a rapid improvement in the macroeconomic environment, which so far remains elusive,” Farida added.

Significant inflows of copper, aluminium and zinc into LME warehouses this morning have had a further dampening effect on those metals’ three-month prices.

A total of 44,400 tonnes of copper arrived across global LME sheds as of 9am this morning, 32,575 tonnes of which was split between sheds in Busan and Kaohsiung, while the remainder arrived in Europe. Just 1,050 tonnes of the red metal was removed from the LME at the same time.

This puts total LME copper stocks at 259,850 tonnes – the highest since October 30, 2019, when stocks were 263,400 tonnes – and approximately double the year-to-date low on January 17 of 124,255 tonnes.

While inflows may be capping upside price momentum, the LME three-month copper price is trading down a marginal $57 per tonne this morning at around $4,983 per tonne from the previous day’s $5,040-per-tonne kerb close.

This suggests that the market is largely ignoring the inflow, with some analysts intimating that they are surprised that deliveries were not forthcoming sooner amid dampened appetites on the Covid-19 pandemic.

Likewise, the LME three-month zinc price was trading down by $30 per tonne this morning from the previous day’s $1,924-per-tonne close amid a 14,825-tonne inflow this morning. LME zinc stocks now total 89,475 tonnes.

The LME three-month aluminium price was trading down a lesser $13.50 per tonne at around $1,464 per tonne following a 16,375-per-tonne inflow across LME sheds in Johor, Singapore and Port Klang, Malaysia this morning. LME aluminium stocks now total 1,227,450 tonnes.

“The market is essentially ignoring the inflows, which could be bullish in the short term,” Farida added.

“It is worth noting that many technical analysts’ reports are starting to show short-term trends with mixed signals but the longer term views are shifting from bearish to neutral, another sign of the overall trend turning,” Kingdom Futures chief executive officer Malcolm Freeman said in a morning note.

Other highlights

• The dollar index is trading up 0.28% around $100.27 this morning, potentially adding pressure to already-dampened LME base metals three-month prices.
• In data from the United States, weekly crude oil inventories will be announced later on Wednesday, expected to increase by 9.8 million barrels after last week’s 13.8-million-barrel increase.
• Brent crude oil futures are trading down 0.30% at around $32.08 per barrel this morning despite an expected drop in inventory.
• Also from the US, the minutes from the Federal Open Market Committee’s March meeting will be released later, and is expected to shed light on the committee’s decision regarding interest rates.