LIVE FUTURES REPORT 18/06: LME base metals prices buoyed ahead of FOMC meeting; Cu up 0.7%

Base metals traded on the London Metal Exchange were broadly up during morning trading on Tuesday June 18, taking their cue from the Dow Jones Index which edged higher overnight in anticipation of the US Federal Open Market Committee (FOMC) meeting which gets underway today.

Recent comments from Fed officials have given rise to the expectation that interest rates will be cut in the near term, precipitating marginal gains across the base metals complex.

Despite lackluster gains, copper led the pack with a 0.7% increase in its three-month price to trade at around $5,891 per tonne this morning, up from the previous $5,845-per-tonne kerb.

Market participants have suggested that the red metal’s three-month price is being propped up by a continuing strike at Codelco’s Chuquicamata copper-mining operation in Chile.

Reports indicate that the mine, which produced 320,744 tonnes of copper in 2018, is operating at 50% capacity after more than 3,000 union workers downed tools last week after failing to reach a labor deal with Codelco.

Despite this, copper traded in thin volumes this morning with just 3,404 lots having changed hands at 10am.

Stock flows across LME warehouses were also negligible; a 1,100-tonne outflow of the red metal from warehouses in Chicago, New Orleans and Singapore was offset by a 500-tonne inflow of material into Rotterdam. A further 350 tonnes of copper were freshly canceled indicating that there is some buying interest on the back of recent events.

But any market optimism is likely to be short-lived with prices expected to dip once the market digests the news of the strike and once Fed rates are announced.

“Volumes so far today are very thin and as the Dow Futures slip into negative territory it looks like the metals will drift lower in the very short term and look to the LME stocks for the next move,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

Nickel also saw fresh cancelations this morning with 3,732 tonnes of material put on warrant in Rotterdam warehouses.

Market chatter indicates that volumes of plate and briquette material are being prepared for shipment from Rotterdam to China in a bid to profit from an arbitrage opportunity with the Shanghai Futures Exchange after the import window opened abruptly, rather than indicating significant demand.

The inventory moves have nonetheless been supportive to nickel’s three-month price, which was up marginally at around $11,800 per tonne in the morning session, from the $11,769-per-tonne kerb on Monday.

Other highlights

  • The US dollar index was up by 0.19% at 97.72.
  • The Dow Jones Index closed up by 22.92 points, or 0.88%, at 26,112.53 on Monday.
  • In terms of data on Wednesday, market participants will be focusing on the release of the FOMC’s economic projections and statement and the committee’s press conference for further clues about a possible interest rate cut in the United States.
  • European data of note on Wednesday includes the United Kingdom’s consumer price index, forecast to show headline inflation slowed to 2% in May from 2.1% previously.