MORNING VIEW: Base metals prices supported by strong data out of China

The base metals on the London Metal Exchange were mainly stronger this morning, Monday January 18, aided by some strong economic data in China, including gross domestic product (GDP) that showed growth of 6.5% year on year in the fourth quarter, which was stronger than the 6.2% expected and up from 4.9% in the third quarter.

  • Metals prices firmer despite stronger US dollar

Base metals
Three-month base metals prices on the LME were mainly firmer this morning, the exception was tin that was down $10 per tonne at $21,115 per tonne, while the rest of the complex was up by an average of 0.9%, led by a 1.1% rise in copper to $8,021 per tonne.

The most-traded base metals contracts on the Shanghai Futures Exchange were mainly firmer, the exception was March zinc that was down by 0.6%, while the rest of the metals were up by an average of 0.6%, with March copper up by just 0.1% at 59,280 yuan ($9,146) per tonne.

Precious metals
Spot gold was up by 0.4% at $1,834.40 per oz this morning, silver ($25 per oz) and platinum ($1,080.50 per oz) were both up by 1%, while palladium was down by 0.3% at $2,378.50 per oz.

Wider markets
The yield on US 10-year treasuries continues to slip and was recently quoted at 1.08%, compared with 1.10% at a similar time on Friday.

Asian-Pacific equities were mixed this morning: the Kospi (-2.33%), the Nikkei (-0.97%), the ASX 200 (-0.78%), the CSI (+1.11%) and the Hang Seng (+0.92%).

Currencies
The US Dollar Index was extending its bounce and was recently quoted at 90.86, this after 90.32 at a similar time on Friday and up from the recent low at 89.21 on January 6.

The other major currencies were weaker this morning: the euro (1.2071), the Australian dollar (0.7675), sterling (1.33546) and the yen (103.78).

Key data
In addition to China’s GDP data, other data already from the country showed fixed asset investment climbed by 2.9% year-to-date in December, compared with 2.6% in November; industrial production climbed 7.3% in December, after a 7% gain previously; retail sales were up by 4.6% year on year in December, down from 5% in November; and the unemployment rate was 5.2% last month, unchanged from November. Japan’s revised industrial production dropped by 0.5% month on month in November, previously it had been reported flat.

In addition, there is a Eurogroup meeting, a German Bundesbank monthly report and Bank of England Governor Andrew Bailey is scheduled to speak.

Today’s key themes and views
Despite most of the metals being firmer this morning, on the charts they are for the most part looking tired which increases the risk of prices slipping. For now tin is holding up very close to its recent highs, nickel prices are off Friday’s high, lead, copper and aluminium are consolidating, while zinc is leading on the downside having broken below support at $2,720 per tonne. Will the others follow zinc?

Overall, we think we are in a long-term bull market but we should expect countertrend moves along the way.

Gold prices remain in the middle of their sideways-to-lower trading range, but the stronger dollar is likely to remain a headwind.


What to read next
Chinese mining giant CMOC reported a 178% year-on-year increase in cobalt metal production for the first six months of 2024, according to an announcement by the company on Friday July 12
Steel industry participants in the United States are unclear whether Brazilian slab imports will be exempt from the 25% tariffs under Section 232 that will be levied on Mexican imports for steel that is not melted and poured in Mexico, the US or Canada, sources told Fastmarkets on Wednesday July 17
Fastmarkets has amended the name of MB-AL-0231 Aluminium P1020A all-in price, delivered Midwest US, US cents/lb as of Wednesday July 17.
Aluminum scrap generation in Europe is expected to decrease in the current quarter due to lower demand from downstream metal producers amid the domestic seasonal summer slowdown, according to the latest market overview from the Bureau of International Recycling (BIR)
China’s nickel-cobalt-manganese (NCM) battery output in June registered fell to 20.5 gigawatts hours (GWh), down by 1.5 GWh, or 6.8%, from the 22 GWh in May, and down by 3.7 GWh, or 15.3%, from the 24.2 GWh in March, according to the data from China Automotive Battery Innovation Alliance (CABIA)
The US government will impose tariffs on steel and aluminium shipped from Mexico that were made elsewhere, in a bid to curb trans-shipment and excess production, the White House said in a statement on Wednesday July 10, a move widely applauded by the pair of metals industries