LIVE FUTURES REPORT 23/08: LME base metals drift lower on tariff implementation; nickel falls 2%

The prices of base metals on the London Metal Exchange were mostly lower during morning trading on Thursday August 23, with broad weakness coming amid the implementation of corresponding US-Sino trade tariffs, respectively totaling $16 billion.

Falling more than 2% over the morning, nickel prices have lost the most ground, but they remain well supported above $13,000 per tonne after falling to their lowest point since January at $12,770 per tonne. 

That said, since the metal reached a high of $15,845 per tonne in June, its price action has been largely subdued, with prices consolidating around $13,500 per tonne.

“Its existing technical configuration suggests that the rebound in the LME nickel price has stalled just below the psychological overhead resistance price level at $14,000 per tonne,” Metal Bulletin analyst Andy Farida said.

“As such, the metal is consolidating while waiting for further development on trade talks between the United States and China. A positive outcome on trade should boost buyers’ confidence to take out the overhead resistance level, we feel,” he added. 

Despite mid-level trade talks between the US and China taking place on Wednesday, punitive tariffs between the two countries have already taken effect, with duties on more than $100 billion worth of products in place since July. 

While the impositions continue to threaten global economic growth, commodity investment remains thin on the ground, with stock drawdowns, a strong US dollar and pockets of fresh cancelations adding upward pressure to prices. 

That said, base metals are largely ignoring fundamentals, remaining broadly macro-driven, while volatile Asian equity markets are also pressuring prices.

“The danger is that bad news could well trigger an explosive correction to the somewhat overbought global equity markets, with some analysts looking for a 10-15% correction that in the short term would take down everything else with it,” Kingdome Futures director and chief executive officer Malcolm Freeman said in a morning note. 

Elsewhere, volumes traded over the morning period have been high, with copper trading 7,300 lots as of 10:45am London time. 

Base metals drift lower

  • The three-month copper price recently traded at $5,924 per tonne, a $81 fall from Wednesday’s close. Stocks climbed a net 4,100 tonnes to 266,950 total tonnes, with 17,925 tonnes freshly canceled across Europe, North America and Asia.  
  • Aluminium’s three-month price fell $16 to $2,049 per tonne. Inventories fell by 2,475 tonnes to 1,099,975 tonnes, with 1,450 tonnes freshly canceled across Asia. 
  • Nickel’s three-month price recently traded $225 lower at $13,300 per tonne. Inventories were down 114 tonnes to 243,552 total tonnes, with 1,944 tonnes freshly canceled across Asia.     
  • The three-month zinc price dipped $29 to $2,438 per tonne. Stocks fell 800 tonnes to 248,575 tonnes, while 1,300 tonnes were freshly canceled in New Orleans. 
  • Lead’s three-month price recently traded at $2,014 per tonne, a $1 climb from Wednesday’s closing price. Inventories were down 75 tonnes at 126,550 tonnes. 
  • The three-month tin price fell $400 to $18,970 per tonne. Inventories held firm at 2,890 tonnes, with 10 tonnes freshly canceled in Port Klang. 

Currency moves and data releases

  • The dollar index was up 0.32% at 95.40.
  • In other commodities, Brent crude oil was down 0.54% at $74.32 per barrel. 
  • In US data on Wednesday, existing home sales decreased 0.7% to a seasonally adjusted annual rate of 5.34 million in July from 5.38 million in June. Crude oil inventories fell by 5.8 million barrels in the week ended August 17 – significantly more than the expected 1.6 million-barrel decline.
  • In data today, we have a host of manufacturing and services purchasing managers’ index (PMI) releases out across Europe and the US, the European Central Bank’s monetary policy meeting account, China’s Conference Board Leading Index as well as other US data that includes unemployment claims, house prices, new home sales and natural gas storage numbers.