LIVE FUTURES REPORT 23/02: Copper continues upsurge, nickel falls below $19,500/t

For a fourth trading day in a row, copper’s three-month price on the London metal Exchange rose to a new year-to-date high on Tuesday February 23, while the rest of the base metals traded slightly lower than where they were on Monday, when they all reached fresh 2021 highs.

The red metal’s high of $9,305 per tonne this morning is the most since early August 2011, nevertheless copper retreated to $9,156 per tonne at 9am, a slight 0.6% gain on Monday’s closing price.

Nearly 13,000 lots had been traded by that time, more than a third of Monday’s total volumes (30,300 lots by the close), suggesting the momentum for copper is still present on the LME. On the Shanghai Futures Exchange, the April copper contract was up the most with a 3.4% gain to 68,320 yuan ($10,557) per tonne.

Together with a decline in LME stocks (down by 1,450 tonnes to 73,450 tonnes on Tuesday), macroeconomic bullishness continues to be another factor underpinning copper’s price rise. This optimism pushed the US Dollar Index down to 90.09 at 9am, which compares with a reading of 90.51 at a similar time on Monday.

“Optimism that [US] President Joe Biden will be able to pass his $1.9 trillion stimulus package at the end of the week, weighed on the greenback and spurred expectations of rising inflation. Firm demand from China also helped prices, with the economy expected to grow about 8% this year,” Marex Spectron’s LME Desk analyst Anna Stablum said.

Nevertheless, consolidation is expected for copper, while it is underway for metals such as nickel. After reaching $20,110 per tonne on Monday, nickel fell by 0.5% day on day at the close to $19,493 per tonne. It was lower again on Tuesday at 9am, at $19,455 per tonne.

Some market participants have pointed to the 8.55% drop in US automaker Tesla’s shares on the Nasdaq on Monday as one of the causes for the weakness in the three-month nickel price. The New York exchange’s composite index as a whole was also down 2.5%.

Furthermore, new figures from the International Nickel Study Group showed that the market was oversupplied by 14,600 tonnes in December, and the group expects the surplus for whole year of 2021 to be of 120,000 tonnes, up from the 30,000-tonne deficit in 2020.

“While we have been strongly bullish on copper so far this year, we recognize that its recent acceleration could become unhealthy and therefore, warrant for a sharp consolidation,” Fastmarkets analyst Boris Mikanikrezai said on Tuesday.

“With equities recently under pressure due to the rise in nominal yields and the Bitcoin consolidating (-15% from its high), the wave of risk-off mood could eventually spread to the base metals space,” he noted.

Other highlights

  • Aluminium’s three-month price reached a new year-to-date high of $2,180 per tonne during early trading, nevertheless it was down by $1.50 per tonne as at 9am compared with Monday’s 5pm closing price, reading $2,164 per tonne.
  • Later today, the chairman of the Federal Reserve Jerome Powell will testify on the US central bank’s semi-annual monetary policy report before the Senate Banking Committee.
  • Economic data out later today includes the European Union’s consumer price index (CPI), UK realized sales, and from the United States, house prices, consumer confidence and the Richmond manufacturing index.
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