MORNING VIEW: Cu, Al, Sn prices steam ahead, others consolidate

Apart from nickel on the London Metal Exchange, the rest of the base metals on both the LME and Shanghai Futures Exchange were once again stronger this morning, Thursday February 25.

  • US Federal Reserve Chairman Jerome Powell told Congress that it might take three years to reach the central bank’s inflation targets
  • Asian-Pacific equities were up strongly on Powell’s comments

Base metals
The LME three-month nickel price was down by 1.3% at $19,615 per tonne this morning, while the rest of the complex was up by an average of 0.7%, with copper up by 0.3% at $9,530.50 per tonne. Copper, aluminium and tin have all set fresh multi-year/month gains this morning, while lead, zinc and nickel were consolidating below recent highs.

LME volume as of 6.43am London time was high at 20,550 lots, mainly due to the volume of copper and aluminium trading – volumes have been high since China returned from the Lunar New Year holidays (February 11-17).

The most-traded base metals contracts on the SHFE were significantly higher across the board with gains averaging 3.1%, ranged between a 1.1% rise in April lead and a 5.2% gain for April aluminium. April copper was up by 3.9% at 70,310 yuan ($10,885) per tonne.

Precious metals
Spot gold was down by 0.5% at $1,793.42 per oz, spot silver ($27.88 per oz) and platinum ($1,262 per oz) were little changed and spot palladium was down by 1% at $2,418.50 per oz.

Wider markets
The yield on US 10-year treasuries widened again on Thursday and was recently quoted at 1.41%, up from 1.34% at a similar time on Wednesday.

Asian-Pacific equities were stronger across the board this morning: the Hang Seng (+1.53%), the ASX 200 (+0.83%), the CSI 300 (+0.59%), the Kospi (+3.5%) and the Nikkei (+1.67%).

The US Dollar Index remains on a back foot and was recently quoted at 90.04, it has been fairly flat for the past three days.

The other major currencies were mixed: the euro (1.2171) was flat but buoyant, sterling (1.4136) was consolidating after yesterday’s show of strength, the Australian dollar (0.7974) was strong and the yen (106.02) was weaker.

Key data
Data already out on Thursday showed Germany’s GfK consumer climate index was -12.9 in in February, after a -15.5 reading in January.

Later there is data from the European Union on M3 money supply and private loans. US data includes preliminary gross domestic product, gross domestic product (GDP) prices, durable goods orders, initial jobless claims and natural gas storage.

In addition, US Federal Open Market Committee members Randal Quarles and Raphael Bostic are scheduled to speak.

Today’s key themes and views
The underlying bullish arguments remain in force, while tin is being driven higher by real shortages, the situation in copper seems to be driven by a combination of a tightening physical market, while stocks fall, as well as tightness on the LME.

While we remain bullish on the big picture, prices for most of the metals do seem to be running ahead of the fundamentals, so we are expecting corrections, but so far any pause has been limited both in how far prices have pulled back and the time prices have held back – both suggesting sentiment remains very strong.

Gold prices remain in the overall downward trend. They may well continue to struggle while bond yields climb, but if a broader correction gets underway, then we would expect gold to pick-up haven demand again.

What to read next
US President Joe Biden will increase tariffs on Chinese imports including steel and aluminium, electric vehicles, semiconductors and advanced batteries, to counteract China’s “unfair” trading practices, he announced on Tuesday May 14
Fastmarkets launched a new price assessment for MB-GER-0006 germanium dioxide, in-whs China, on Friday May 10.
Anglo American's rejection of takeover bids by BHP has put copper firmly under the spotlight, but what challenges lie ahead for the red metal as the corporate tussle continues?
Copper fabricators in China and the wider Southeast Asian region continue to feel the pain of high copper prices on futures exchanges and a lack of new orderbooks, with some having already asked for a postponing of shipments of long-term copper cathodes, sources told Fastmarkets in the week to Wednesday May 15
Recent weeks have seen a significant number of miners agreeing sales of copper concentrate to traders for one to four years of supply, Fastmarkets has learned
The copper market is facing a historical moment with Chinese smelters now paying premiums for raw material copper concentrate while selling their finished product at a discount, but participants point to easing concentrate demand in the second quarter as supportive for the market