METALS MORNING VIEW 13/12: Mixed start across the metals, expect more consolidation

Base metals prices on the London Metal Exchange are for the most part firmer this morning, Wednesday December 13, with gains in copper (0.2% at $6,690 per tonne), aluminium (0.1%), nickel (0.5%) and zinc (0.1%), while lead prices are off by 0.1% and tin prices are down by 0.4%.

Volume has been below average with 4,777 lots traded as of 06.56am London time.

Gold and silver prices are little changed, while the platinum group metals are firmer by between 0.2% and 0.3%.

On the Shanghai Futures Exchange today, the base metals prices are mixed with aluminium and tin off by 0.3% and 1.9% respectively, while the rest are firmer. Lead (1.7%) is out in front, followed by zinc (0.8%), nickel (0.6%) and copper which is up by 0.6% at 52,220 yuan ($7,886) per tonne.

Spot copper prices in Changjiang are up by 0.2% at 51,950-52,050 yuan per tonne and the LME vs Shanghai copper arbitrage ratio is weaker at 7.79.

In other metals in China, iron ore prices are up by 0.5% at 505 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are down by 2.5%, while gold and silver prices are off by 0.1% and 0.2% respectively.

In international markets, spot Brent crude oil prices are up by 0.17% at $63.89 per barrel, the yield on US 10-year treasuries is firmer at 2.40%, as is the German 10-year bund yield at 0.31%.

Equities in Asia this morning are for the most part firmer with gains seen in the CSI 300 (0.85%), the Hang Seng (1.39%), the Kospi (0.79%) and the ASX 200 (0.14%), while the Nikkei is weaker (-0.47%). This follows strength in western markets on Tuesday where in the United States the Dow Jones closed up by 0.49% at 24,504.80 and in Europe where the Euro Stoxx 50 closed up by 0.51% at 3,600.35.

The dollar index at 94.02 is trending higher again and with the Federal Open Market Committee (FOMC) meeting this evening and the expectation of an increase in US interest rates, we expect the dollar to remain firm. The euro at 1.1744 is drifting lower/consolidating, as are sterling (1.3327), the yen (113.44) and the Australian dollar (0.7566).

The yuan remains flat at 6.6182, the peso, ringgit, rand and rupee are consolidating, while the rupiah and real are looking weaker.

The economic calendar is busy today, data already out shows Germany’s consumer price index (CPI) remains at 0.3%, while the wholesale price index (WPI) rose 0.5%, having been flat in November. Data out later includes Italian industrial production, UK employment data, EU employment change and industrial production, while US data includes CPI and crude oil inventories. The FOMC will also decide on interest rates, show their economic projections and provide a statement. In addition, US President Donald Trump and FOMC member Lael Brainard are speaking.

Copper, lead and zinc prices are rebounding, while aluminium and nickel prices are consolidating and tin prices are weaker having sold off on Tuesday. It is interesting that lead and zinc prices are as firm as they are considering Glencore announced the restart of some idle production – the market no doubt seeing the gradual restart as not being too bearish, while a strike at Enami’s Paipote copper smelter is helping to support copper prices. We have viewed the recent price weakness in the metals as being partially driven by stale long liquidation and profit-taking – yesterday’s LME commitment of trade report (COTR) report supported that view. We generally expect sideways trading across the metals complex.

Gold, silver and platinum prices have sold off significantly, while strong fundamentals in palladium are keeping prices buoyant. We think traders have been anticipating a likely interest rate rise at today’s FOMC meeting and that has been one of the reasons for the weakness in most of the precious metals.
We wait to see if gold prices get some lift after the FOMC decision.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

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