LIVE FUTURES REPORT 15/04: Base metals prices consolidate in low-volume LME trading; Zinc-lead switch nears $1,000/t

Base metals prices on the London Metal Exchange consolidated during morning trading on Monday April 15, with prices broadly rangebound amid low volumes while a price difference of nearly $1,000 per tonne continues to separate zinc and lead futures.

Three-month copper continues to trade just below $6,500 per tonne after climbing by just under 2% last week. The red metal’s on-warrant stock levels remain just below 180,000 tonnes, while a contango of $18.50 per tonne in the nearby cash/three-month spread continues to support metal financing.

Meanwhile, a dip in the US dollar index below the psychologically significant level of 97 has prompted marginal buying across the complex, despite broadly thin volumes traded over the morning.

“The point has been made many times that this recent rally in metals prices is not driven by demand and in the case of aluminium for example, we are seeing endless reductions in LME stocks and the price is actually still net falling,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

“Copper, nickel and zinc prices seem to be the favourites of the speculative and algorithmic sector which to a greater extent look at technical signals rather than the underlying fundamentals of the market and this is a gap that seems to keep widening,” he added.

Topping the complex over the morning, around 3,650 lots of zinc have traded, indicating strong buying momentum in the metal despite zinc’s cash price continuing to trade near $3,000 per tonne.

Elsewhere, zinc’s three-month price continues to trade just above $2,900 per tonne, while the metal’s cash/three-month spread was recently seen in a backwardation of $92.50 per tonne.

Nearby zinc spreads have traded in a backwardation for most of 2019, and despite this, tight spreads have prompted little metal back on to the exchange.

That said, this morning’s inflow of 4,150 tonnes – delivered into LME-registered warehouses in Vlissingen – marks the first inflow of material into LME warehouses outside of New Orleans since March 15. More than 90% of LME zinc stocks are held in New Orleans.

In macro news, continued optimism around US-China trade talks have prompted an uptick in commodity buying sentiment while both countries make continued efforts to support slowdowns in their economies.

This week however, investors will be keeping close watch on recession-indicators in the first quarter earnings reports of Goldman Sachs and Citigroup.

Other highlights

  • Despite another fresh cancelation of just under 10,000 tonnes this morning, aluminium’s three-month price is continuing to trade in a downtrend, recently seen at $1,866 per tonne.
  • In other commodity news, Brent crude oil futures were trading at $71.47 per barrel over the morning, down by 0.03%. That said, the oil industry is receiving support from supply cuts by the Organization of Petroleum Exporting Countries, while continued pressure on Venezuela’s oil industry remains a contributing factor.
  • In data on Friday, China’s consumer price index (CPI) recorded a year-on-year rise of 2.3% in March, in line with expectations but up significantly from the 1.5% year-on-year gain recorded in the prior month.
  • In US data due on Monday, the Empire State Manufacturing Index is of note, while a speech from Federal Open Market Committee member Charles Evans will also garner the attention of those looking for further clues about the central bank’s plans for future monetary policy.