LIVE FUTURES REPORT 19/10: LME nickel price recovers; Al supported by winter capacity cut news

Nickel prices on the London Metal Exchange recovered over $100 on Thursday October 19, while aluminium traded slightly higher on strong sentiment for the light metal.

The three-month nickel price has been flirting with the $12,000 per tonne level this week as it finds support from continuing curbs in Chinese output, while demand from steel producers remains strong.

“The recent rally suggests sentiment is bullish as supply-side development have led to a gradual tightening in the underlying fundamentals. But markets have taken a more cautious approach today at the start of China’s 19th Communist Party Congress, developments from which are likely to drive short-term sentiment,” Metal Bulletin analyst James Moore said.

Aluminium prices also edged higher this morning, supported by news of aluminium capacity cuts in China ahead of the country’s winter season. However, the actual amount of suspended capacity has failed to live up to market expectations, putting a lid on any substantial price gains.

“Despite the slight retreat in [aluminium prices] in recent days, the positive fundamentals of supply and demand are still providing support to prices,” China’s Guotai Junan Futures said.

“Despite the high inventory and lower-than-expected winter capacity cuts, the sharp rise of raw material costs has lent strong support to aluminium prices,” Citic Futures Research said.

Additionally, recent surges in prices for alumina, the raw material used to produce aluminium, have also lent support to light metal prices.

The three-month copper price retreated back further below the $7,000 per tonne mark. Its rally earlier in the week seems to have been short-lived. Meanwhile, zinc prices also continued to drop following a huge 61,100 tonnes re-warranted in New Orleans yesterday.

“We are on the lookout for signs about how strong underlying bullish sentiment is, recent turbulence with the price pullbacks, stock inflows and re-warranting of cancelled warrants, all surrounding the passing of the October date, have muddied the waters, so we wait to see how the market trades now the October date has passed,” Metal Bulletin senior analyst William Adams said.

“Our view of late has been to remain quietly bullish, but expect trading to become choppier when prices run into more bouts of scale-up selling – as indeed we seem to be experiencing,” he added.

Copper prices retreating

  • The three-month copper price fell $6.50 to $6,983.50 per tonne.
  • Copper stocks declined a net 975 tonnes to 291,250 tonnes.
  • “More longs exit to take profits, and copper prices are subdued,” Guotai Junan Futures said.
  • “In addition, copper inventories rose and the spot copper premium retreated, which indicated the spot copper supply tightness has eased,” it added.
  • “We remain bullish for copper’s fundamentals but prices once again appear to have run ahead of the fundamentals, so the market/price is now likely to have to absorb profit-taking and near-term pricing,” Adams added. “We should get a good feel for how bullish underlying sentiment is by seeing where support comes in.”

Base metals prices

  • The three-month aluminium price was up $4 to $2,125 per tonne. Stocks declined 2,525 tonnes to 1,207,800 tonnes.
  • Nickel’s three-month price grew $105 to $11,755 per tonne. Inventories increased 1,200 tonnes to 386,418 tonnes.
  • The three-month zinc price was down $18 to $3,103 per tonne. Stocks declined 1,525 tonnes to 269,725 tonnes.
  • Lead’s three-month price dipped $25.50 to $2,496.50 per tonne. Inventories declined 75 tonnes to 151,850 tonnes.
  • The three-month tin price increased $35 to $20,115 per tonne. Stocks were unchanged at 2,110 tonnes.

Currency move and data releases

  • The dollar index was down 0.06% to 93.48.
  • In other commodities, the Brent crude oil spot price declined 1.30% to $57.44 per barrel.
  • In data today, China reported third-quarter gross domestic product (GDP) growth of 6.8% year on year, on par with the forecast reading but below the previous print of 6.9%. There had been expectations in the market that the world’s largest base metals consumer would see growth of around 7% from a year earlier.
  • Chinese industrial production surprised to the upside with an increase of 6.6% against an expected reading of 6.4% and a previous reading of 6.0%.
  • China’s fixed asset investment missed with a reading of 7.5%. 7.7% had been expected. This was also lower than the previous print of 7.8%.
  • Staying with China, Chinese President Xi Jinping gave his opening speech at the 19th Communist Party Congress on October 18, saying China was working toward “socialist modernisation” and that “It is time for [China] to take centre stage in the world and to make a greater contribution to humankind.”
  • Data out later today includes UK retail sales, US unemployment claims, Philly Fed manufacturing index, CB leading index and natural gas storage.

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