LIVE FUTURES REPORT 18/10: LME base metals consolidate; large zinc re-warranting in New Orleans

Base metals prices on the London Metal Exchange were mostly consolidating in morning trading on Wednesday October 18, after copper and zinc prices plummeted at yesterday’s 5pm close.

The three-month copper price edged $8.50 per tonne higher recently as it tried to recoup some of the 2.5% loss yesterday. Prices collapsed as the stronger dollar ignited profit-taking among investors, ANZ Research noted.

Zinc prices continued to dip today, falling a further $15 per tonne as 61,100 tonnes of zinc was re-warranted today. In New Orleans, on-warrant zinc stocks are now over double the amount of cancelled stocks. This follows a 16,250 tonnes of re-warranting in Antwerp yesterday. Zinc on-warrant stocks are back to levels not seen since March.

The significant backwardation on zinc spreads has also collapsed; the cash/three-month spread is now at $23 per tonne backwardation, down from its high of $91 per tonne on October 12.

“The softening of zinc and lead prices will also be likely to lead the copper price to fall,” Citic Futures Research said.

The three-month nickel price regained some ground, climbing back up to $11,790 per tonne as it continues to be backed by supply tightness and stable demand.

“On the supply side, tightness due to production limitations on environmental grounds continue to lend support to the nickel price; […] meanwhile, the market sees stable demand from stainless steel mills whose profit margins have widened,” Citic Futures Research noted.

Copper stabilises 

  • The three-month copper price was up $8.50 to $7,035.50 per tonne. 
  • Copper stocks increased 900 tonnes to 292,225 tonnes, with 2,075 re-warranted. 
  • On the supply side, Rio Tinto has slashed its mined copper production guidance for the second time this year due to a delayed ramp-up at the UK-listed miner’s Escondida operation as well as mine sequencing changes at Rio Tinto Kennecott. 
  • The new full-year 2017 guidance for mined copper is now 460,000-480,000 tonnes, compared with a previously revised guidance of 500,000-550,000 set in April this year.

Base metals prices mixed 

  • The three-month aluminium price dipped $22 to $2,118 per tonne. Stocks dipped 1,200 tonnes to 1,210,325 per tonne. 
  • Nickel’s three-month price increased $25 to $11,790 per tonne. Inventories declined 438 tonnes to 385,218 tonnes, with 1,314 re-warranted. 
  • The three-month zinc price declined $15 to $3,070 per tonne. Stocks dipped 600 tonnes to 271,250 tonnes – with 61,100 tonnes re-warranted. 
  • Lead’s three-month price was $12 lower at $2,480 per tonne. Inventories fell 225 tonnes 151,925 tonnes. 
  • The three-month tin price was up $45 to $20,395 per tonne. Stocks rose 70 tonnes to 2,110 tonnes.

Currency moves and data releases 

  • The US dollar index was recently 0.24% to 93.71. 
  • In other commodities, the Brent crude oil spot price rose 0.50% to $58.34 per barrel 
  • In equities, the Shanghai Composite Index moved up 0.19% to 3,378.4. 
  • Today’s calendar is pretty light, with US housing starts, building permits figures coming out later. 
  • China’s President Xi Jinping will give the opening speech at the 19th Communist Party Congress; ECB board members Mario Draghi, Peter Praet and Benoit Coeure are speaking in Frankfurt; the US Federal Reserve’s William Dudley and Robert Kaplan will also deliver speeches later today.