MORNING VIEW: Base metals prices consolidate after Tuesday’s general weakness

Base metals prices on the London Metal Exchange were mixed this morning, Wednesday March 24, while those on the Shanghai Futures Exchange were for the most part weaker, following Tuesday’s weakness on the LME.

  • Asian-Pacific equities were generally nervous this morning, and low US treasury yields suggest risk-off
  • Stronger US dollar may prove to be a headwind for metals

Base metals
LME three-month base metals prices were mixed this morning, with the complex up by an average of 0.2%, the outlier being the 1% gain in copper ($8,958 per tonne), while lead ($1,958.50 per tonne) was up by 0.4% and the rest were little changed.

Overall we view today’s performance on the LME as consolidation following weakness on Tuesday, when all the base metals, with the exception of tin, dropped by an average of 1.7%. Tin rose by 0.9%.

The most-active base metals contracts on the SHFE were for the most part weaker this morning; with the exception of May lead that was up by 0.4%, the rest were down by an average of 1.5%, led by a 2.5% fall in May tin, while May copper was down by 0.7% at 66,570 yuan ($10,217) per tonne.

Precious metals
Precious metals prices were firmer this morning with gains averaging 0.5%, with spot gold prices up by 0.2% at $1,731.18 per oz.

Wider markets

The yield on US 10-year treasuries was weaker at 1.61% this morning, down from 1.67% at a similar time on Tuesday, and off the recent high of 1.75%.

Asian-Pacific equities were mainly weaker on Wednesday: the CSI 300 (-1.58%), the Nikkei (-2.04%), the Kospi (-0.28%) and the Hang Seng (-2.03%), while the ASX 200 (+0.49%) bucked the trend.

The US Dollar Index has breached recent highs and was recently at 92.53, the previous high being 92.51 – this is a new high for the index this year.

The other major currencies were mainly weaker: the euro (1.1826), sterling (1.3682) and the Australian dollar (0.7588), while the yen (108.61) was firmer, again suggesting risk-off.

Key data
There is a barrage of economic data out today, mainly focused on manufacturing and services purchasing managers indices (PMIs), but other key data includes data on UK pricing and US durable goods orders.

In addition, there are numerous central bankers scheduled to speak, including US Federal Reserve Chairman Jerome Powel, European Central Bank President Christine Lagarde and Federal Open Market Committee members John Williams, Mary Daly and Charles Evans.

Today’s key themes and views
The base metals once again encountered selling on Tuesday which has caused them drop back into their consolidation zones. The stronger dollar may well act as a headwind now and could lead to further weakness.

While the underlying themes remain bullish, the metals have already performed surprisingly well over the past 12 months, so a lot of the recovery news may be in the price and stale long liquidation could set in. We do, however, think dips will be well supported while talk about infrastructure spending moves toward actual infrastructure spending.

Gold prices got some lift in recent weeks, but seem to be lacking follow-through buying – the stronger dollar no doubt not helping. With prices down more than $300 per oz from last year’s high, gold may well look like a cheaper haven should investors feel the need for one.

What to read next
Fastmarkets has corrected the pricing rationale for MB-AL-0302 aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), $/tonne, which was published incorrectly on Friday April 19. No prices were corrected.
The low-carbon aluminium differential in the US made its first move on Friday April 5 since Fastmarkets launched it five months ago.
Brazil's aluminium industry is further enhancing its sustainability by boosting renewable energy use and recycling, while mitigating risk from high-carbon imports
German copper producer Aurubis is among the least likely to consider reducing capacity despite record low treatment charges (TCs), according to its chief executive officer
European copper demand, particularly for wire rod, remains strong and seems to be outpacing broader macro-economic growth in the region, the chief executive officer of German producer Aurubis has said.
The process to place the smaller and less efficient of the two processing plants at Los Bronces on care and maintenance is expected to be completed by mid-2024 and comes as the company pushes value over volume, the chief executive officer of Anglo American Chile said