As a whole, the base metals complex looks to be well supported by an uptick in investor sentiment amid easing trade concerns and a better outlook for Chinese demand, ANZ Research noted on Monday.
This morning’s strength across most of the base metals seems to a continuation of the gains on the London Metal Exchange last Friday, when the complex benefitted from a marginally weaker dollar and broad inventory drawdowns.
The dollar index dipped slightly last Friday after the United States’ second-quarter gross domestic product (GDP) reading missed expectations. US real GDP increased at an annual rate of 4.1% in the second quarter of 2018, down slightly from an expected increase of 4.2%. The 4.1% increase, however, was still the fastest gain since 2014.
The dollar index stood at 94.72 as at 11.58am Shanghai time on Monday – this after a high of 94.91 last Friday.
In aluminium, prices found additional support from lingering supply concerns in the market due to the unresolved situation surrounding the sanctions placed on Russian producer UC Rusal by the US.
The most-traded September aluminium contract on the SHFE was at 14,445 yuan ($2,120) per tonne as at 11.58am Shanghai time, rising 45 yuan per tonne or 0.3% from Friday’s close.
“Cancelled warrants of aluminium [on the LME] had spiked on Friday. In fact, they were up the most in more than a year as traders prepare for scenario that UC Rusal is unable to strike a deal for sanctions to be lifted on the Russian producer,” ANZ Research said.
Meanwhile, copper prices largely shrugged off news of a looming strike at the world’s largest copper mine, Escondida, with prices down by 0.3% from Friday’s close.
Market participants could instead be eyeing an impending rise in supply due to Aluminium Corporation of China’s massive 400,000-tonne-per-year Ningde copper smelter commencing output as early as mid-August.
Moreover, ample supply in Chinese warehouses continued to weigh on copper prices as SHFE stock are still up by about 47,000 tonnes or 31% in the year to date after dropping by nearly 4,000 tonnes, or 3%, in 2017, according to Metal Bulletin analyst Andy Farida.
Base metals prices
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