LIVE FUTURES REPORT 10/07: LME base metals consolidate lower; zinc drops 3%

Falling more than 3% over the morning, zinc prices are trading at their lowest point since June 2017 as the metal continues to struggle against a tight fundamental backdrop.

Zinc’s nearby cash/three-month and July/August spreads are both backwardated at $11 per tonne and $17 per tonne respectively, with the metal’s rising stock levels equally supportive of lower prices.

“A short-covering rally emerged last Friday (July 6) and the timing of the technical rebound goes hand-in-hand with LME zinc’s improved micro dynamics. A previous dominant warrant holder with 40-49% of the available warrants has increased their holdings to 50-79%,” Metal Bulletin analyst Andy Farida said.

“With metal in such tight hands, the LME zinc price could be subject to a short-covering rally if short-sellers are unable to find enough metal to roll-over their positions,” he added.

Elsewhere, broad weakness in lead, nickel and copper prices has taken effect, with lead’s three-month price edging 1.7% lower during the morning session.

Continued uncertainty surrounding trade relations between the United States and China have added further bearish sentiment toward base metals, deterring investor sentiment amid worries of a slowdown in global economic growth.

Pledging retaliatory measures against the US this morning, China’s intentions to raise anti-dumping tariff rates on certain optical fiber products from the North American country could spur further discord between the world’s two largest economies.

That said, a sharp rebound in tin prices has been largely incongruous with the rest of complex’ losses, with the metal climbing 0.8% over the morning and making a firm approach back towards $20,000 per tonne.

A rising LME inventory count had supported tin’s gradual decline in prices over the June-July period, with total stocks at their highest since April 2017.

But this morning’s fresh cancelation of 175 tonnes across Port Klang and Rotterdam has added further weight to a potential rebound rally for tin.

Zinc, lead prices drag; tin recovers

• The three-month copper price recently traded at $6,354 per tonne, a $36 fall from Monday’s close. Stocks climbed a net 75 tonnes to 270,625 total tonnes, while 600 tonnes were freshly canceled in Rotterdam.
• Aluminium’s three-month price fell $16 to $2,105 per tonne. Inventories increased by a net 1,300 tonnes to 1,116,550 tonnes.
• Nickel’s three-month price recently traded $75 lower at $14,140 per tonne. Inventories were down 1,548 tonnes to 263,994 total tonnes, with 72 tonnes freshly canceled in Singapore.
• The three-month zinc price was down $79 at $2,626 per tonne. Stocks fell 1,950 tonnes to 250,000 tonnes.
• Lead’s three-month price recently traded at $2,300 per tonne, a $39 fall from Monday’s closing price. Inventories were down 825 tonnes at 129,775 total tonnes, with 25 tonnes freshly canceled in Moerdijk.
• The three-month tin price was up $165 at $19,810 per tonne, while inventories remained stable at 3,285 tonnes.

Currency moves and data releases

• The dollar index was up 0.02% at 94.11.
• In other commodities, Brent crude oil was up 0.61% at $78.76 per barrel.
• In data today, China’s consumer price index (CPI) rose 1.9% year on year in June, compared with 1.8% for May, data from the country’s National Bureau of Statistics showed. Meanwhile, China’s producer price index (PPI) rose 4.7% last month, beating an expected reading of 4.5% and a previous rise of 4.1% in May.
• Later, we have industrial production from Italy and France along with UK data that includes gross domestic product (GDP), manufacturing production, goods trade balance, construction output, index of services and industrial production.
• US data out later includes NFIB small business index and Jolts job openings.