LIVE FUTURES REPORT 17/07: Softer dollar fails to buoy LME base metals prices; Ni continues ascent

Gains in the three-month prices of base metals traded on the London Metal Exchange were broadly capped by thin trading volumes during the morning session on Wednesday July 17, with only nickel and tin in positive territory.

A suppressed US dollar index, trading down by 0.01% at 97.36, failed to incite buying and the market further ignored positive data despite some participants alluding to positive data releases and market fundamentals.

“Some of the recent industrial data has showed signs of improvement. Chinese production figures were a little bit better so you would also say that there’s a little bit of a relief rally and we have rate cuts coming which is genuinely helpful for demand,” Colin Hamilton of BMO Capital Markets said.

“From a fundamental perspective, actual stock drawdowns - we’ve seen from the LME and bonded [stocks] - were pretty decent in June. End demand is not terrible, it’s not great but not terrible,” he added.

Nickel continued its upward price trajectory, trading up by 0.4% at around $14,145 per tonne, having risen 2.9% by Tuesday’s close.

Having breached the $14,100-per-tonne resistance level this morning, market participants remain divided on the cause of nickel’s significant 17% price increase in July.

Over 4,000 lots of material were traded by 9.30am on Wednesday, more than any other metal in the complex by almost double, but some market participants expressed the view that this is purely speculative.

“Buying appears to be of a very speculative nature and triggered by Chinese investors. The rationale is that Indonesian supply will fall due to exports being blocked and increasing tariffs,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

“However, there are other producers in the world and this euphoria go down as fast as it has rallied. Physical demand tends to drift over the summer months and material seems readily available,” he added.

Tin’s three-month price also rose on Wednesday, up by a marginal 0.3% to $18,055 per tonne during the morning session on a significant 515-tonne fresh cancelation as of 9am the same day.

A further 50 tonnes of material were moved out of warehouses as of the same time, with total LME tin stocks now at 6,465 tonnes, up a significant 87.7% from 3,445 on June 13 this year.

But the LME three-month price has shown no correlation to rising stocks; it would have theoretically been expected to decline in line with higher stock availability, but instead has risen albeit marginally by 1.4% over the same period.

Other highlights

  • The Group of 7 (G7) summit commences on Wednesday, at which finance ministers and central bankers from Canada, France, Germany, Italy, Japan, the United Kingdom and United states will meet to discuss the framework of these countries’ ongoing global economic coordination. Given the base metals’ current macro sensitivity, the market will look forward to developments arising from the conference.
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