METALS MORNING VIEW 21/03: Metals prices open on a back footing again

Base metals trading on the London Metal Exchange are weaker this morning, Tuesday March 21, with prices down an average of 0.4%, this comes after an average decline of 0.7% on Monday.

Three-month copper prices lead the decline with a 1% drop to $5,804 per tonne, while tin prices are little changed at $20,250 per tonne. Volume has been above average with 7,455 lots traded as of 06:14 GMT.

Precious metals are also down across the board with average losses of 0.5%, led by a 1% drop in platinum prices to $959.50 per oz, silver prices are off 0.5%, gold prices are off 0.4% at $1,229.42 per oz and palladium is little changed. This morning’s losses come after gains of between 0.3% and 0.9% on Monday.

In Shanghai this morning, the base metals on the Shanghai Futures Exchange are down an average of 1%, aluminium prices are off 0.3%, the rest are down between 1.8% for copper prices at 47,180 yuan per tonne and 0.9% for lead and tin prices. Spot copper prices in Changjiang are down 1.5% at 46,930-47,130 per tonne, which shows that prices opened up even lower, but the futures have since started to rebound. The LME/Shanghai copper arb ratio is steady at 8.13, meaning the arb window remains closed.

In other metals in China, the weakness has been more pronounced with May iron ore prices off 4% on the Dalian Commodity Exchange, while on the Shanghai Futures Exchange, steel rebar prices are off 3.9%, gold prices are down 0.3% and silver prices are off 0.4%. In international markets, spot Brent crude oil prices are up 0.2% at $51.80 per barrel and the yield on US 10-year treasuries are around 2.48%.

Equities were slightly weaker on Monday with the Euro Stoxx 50 off 0.3% and the Dow closed down around 9 points. Equities in Asia this morning are mixed, the Nikkei is off 0.3%, the Hang Seng is up 0.4%, the CSI 300 is up 0.2%, the ASX 200 is down 0.7% and the Kospi is up 1%.

In FX, the dollar index’s recent weakness has halted and the index is consolidating, it was recently quoted at 100.21. The euro is firmer at 1.0769, the sterling is consolidating at 1.2357, and the yen is weaker at 112.74 as is the Australian dollar at 0.7710. The yuan is consolidating around 6.8860, while the other emerging market currencies we follow are for the most part looking stronger, especially the rupee and rand, which suggests confidence in emerging market economies is strong, which should bode well for metal demand.

On the economic agenda there is a host of UK data on prices, including CPI and PPI, plus the latest on the public sector borrowing requirement and CBI industrial order expectations. There is a European Ecofin meeting, Bank of England governor Mark Carney and US Federal Open Market Committee member William Dudley are speaking, plus there is data on US current account and China’s leading indicators – see table below for more details.

The heavy drop in iron ore and steel prices needs to be monitored to see whether it is forewarning of a change in sentiment towards the broader metals complex. As we saw on Monday morning, early weakness in Asian hours gave way to some bargain hunting and that appears to be unfolding again this morning. Generally the metals on the LME have rebounded strongly in recent weeks but they seem to lack the buying power to absorb the overhead selling, which suggests range-bound trading. With the second quarter approaching, which is a seasonally stronger time for economic activity, we would expect prices to remain at least well supported.

Gold’s latest rebound after the US interest rate rise was expected, but with geopolitical concerns in Europe in wait-and-see mode ahead of the French election and the UK’s triggering of Article 50, it may be that gold prices struggle on the upside for a while - as such we expect more range trading until the European politics road map unfolds further.

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

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