LIVE FUTURES REPORT 12/10: LME copper, nickel prices edge higher; wide zinc backwardation persists

The three-month copper price climbed up $37 per tonne while it continues to consolidate at higher levels. Nickel prices rallied $115 per tonne amid strong fundamental support and a pick-up in demand from steel markets as a result of rising steel prices.

“Purchases [of nickel] from steel markets will increase after the cautious, watchful attitude seen in the market before [China’s] Golden Week holiday since steel prices have risen as a result of supply constraints in China,” an analyst at Guotian Jun’an said.

Zinc prices edged higher this morning after falling 2.2% yesterday. Despite increasing stocks, zinc spreads are in high backwardation with cash/three-months at $76 per tonne. LME warrant holdings data also shows a significant dominant holder in the market.

“The massive re-warranting of LME stocks is a response to the wide backwardation. It won’t stop before the backwardation comes off,” a trader said.

Zinc inventories on the LME increased a net 68,800 tonnes in September and have continued to rise in October, with an increase of 7,875 tonnes, 2,200 tonnes and 6,550 tonnes between October 9 and October 11.

The three-month aluminium price also edged higher with over 6,000 tonnes of freshly cancelled stock in Rotterdam. Lead and tin prices were trading in negative territory this morning.

“Although the underlying trends in the base metals are upward, the metals in or near high ground are having to absorb selling, which is capping the upside and leading to some pullbacks,” Metal Bulletin senior analyst William Adams noted.

Copper moves higher

• The three-month copper price was up $37 to $6,837 per tonne.
• Stocks declined a net 1,025 tonnes to 285,900 tonnes, with a further 1,425 tonnes freshly cancelled. 
• The global refined copper market recorded a deficit of 70,000 tonnes in June, pushing the supply/demand balance to a deficit of 75,500 tonnes between January and June 2017, the International Copper Study Group estimated.
• Both copper and zinc production in Peru increased in August on an annual comparison, according to figures from the country’s energy and mines ministry, MEM. 
• “It has had its reaction to the August gains, built a base, and looks good for another test of the resistance [overhead],” a trader said.
• “Copper is really looking to have a go at the psychological $7,000 level now,” another trader said.

Base metals prices

• The three-month aluminium price was up $11 to $2,141 per tonne. Stocks declined 3,275 tonnes to 1,230,750 tonnes.
• Nickel’s three-month price was up $115 to $11,250 per tonne. Inventories increased by 2,682 tonnes to 385,830 tonnes.
• The three-month zinc price rose $13 to $3,232 per tonne. Stocks dipped 600 tonnes to 266,725 tonnes.
• Lead’s three-month price dipped $3.50 to $2,561.50 per tonne. Inventories declined 1,050 tonnes to 152,625 tonnes.
• The three-month tin price declined $115 to $20,755 per tonne. Stocks increased 50 tonnes to 2,045 tonnes.

Currency moves and data releases

• The dollar index was unchanged at 92.94.
• In other commodities, the Brent crude oil spot price was down 0.08% to $56.62 per barrel. 
• In data today, we have US weekly jobless claims and September’s producer price index , as well as EU industrial production figures for August.
• European Central Bank president Mario Draghi and US Federal Open Market Committee members Lael Brainard and Jerome Powell will be speaking later.