Market and product

Base metals were in consolidation mode on Thursday morning on the LME – yesterday’s short-lived rally saw nickel, zinc and tin climbing to fresh 2016 highs.

“The fact base metals prices can spike higher shows there is buying interest around, but the fact the higher levels are not held, also shows there are overhead sell-orders,” William Adams, FastMarkets head of research, said.

“This shows there is two-way business, but the thin trading conditions are leading to more volatility, as buy and sell orders are mis-matched,” he added.

The US will release its weekly unemployment claims later today, forecast at 272,000, up from 269,000 the previous week, but below the 300,000 psychological level.

“A positive initial jobless claims number tonight could see commodities come under pressure again,” ANZ said. “Monetary policy continues to have an outsized impact on commodities.”

Investors are gauging the odds of a near-term US interest rate hike from the latest US economic data, which had sent the US dollar and commodity prices fluctuating.

The US dollar index had fallen to a week’s low of 95.45 on Wednesday, after Tuesday data from the US showed productivity declining for a third consecutive quarter in the second quarter – the index gave up part of the gains made last Friday from strong US July jobs data.

The index was last slightly higher at 95.82.

Investors are also cautious ahead of key Chinese data releases on Friday – industrial production, retail sales and fixed asset investment. Concerns are growing over Chinese economic growth after recent Chinese import data showed the previous uptick at the beginning of the year was fading.

“There should be a pause today as the markets take stock of events and await the US employment data this afternoon,” Kingdom Futures Malcolm Freeman said.

“However the sharp falls after yesterday’s rallies suggest the timing is not right for a sustainable rally, but it was a warning of how markets can fly away when speculative money comes in with a rush,” he added.

In the metals, copper recently traded at $4,825, $4 higher. Volumes are thin – only around 2,000 lots have changed hands on Select so far.

Tightness is showing in the nearby copper spreads. Tom/next was last at a backwardation of $1.25, cash/August was level, cash/September at $2.50 and August/September at $2.25.

In today’s warehouse data, copper stocks were down a net 900 tonnes to 203,925 tonnes and cancelled warrants increased 650 tonnes to 54,950 tonnes.

Aluminium at $1,650 edged $3 higher. Both stocks and cancelled warrants were down 8,075 tonnes to 2,240,425 tonnes and 960,325 tonnes respectively.

Nickel at $10,760 was $100 lower. The metal surged to a one-year high in the previous session, above $11,000. Stocks were down 900 tonnes to 369,492 tonnes and cancelled warrants fell 2,244 tonnes to 111,222 tonnes.

Zinc was last at $2,279, down $7 after climbing to its highest since May 2015 yesterday, despite a 30,000 tonnes rise in LME stocks – a move that was centred on New Orleans, where around 80 percent of the world’s available LME zinc stocks are in storage.

Today, stocks were down 625 tonnes to 458,450 tonnes and cancelled warrants edged 25 tonnes lower to 21,325 tonnes.

“Although the sharp rise in the price of zinc is justified, given the emerging high supply deficit, its scale now seems excessive in our view, especially since the upswing is driven partly by speculation. We therefore believe there is correction potential in the short term,” Commerzbank noted.

Meanwhile, zinc’s tom/next spread is tightening – it was last at $1.50. In the nearby spreads, cash/August was last at a backwardation of $2 and cash/September at $2.20.

Lead at $1,822 edged $3 higher. Both stocks and cancelled warrants were down 425 tonnes to 187,675 tonnes and 69,175 tonnes respectively.

Tin at $18,440 was down $110 – yesterday the metal rose to its highest since February 2015 amid uncertainty over the potential impact from the suspension of some private tin smelters caused by environmental checks in China. Stocks edged up 10 tonnes to 5,070 tonnes.

Steel billet, cobalt and molybdenum were neglected. Molybdenum stocks and cancelled warrants both fell 18 tonnes to 48 tonnes and 36 tonnes respectively. The fall in molybdenum stocks is a record low. The 54 tonnes of April 2010 represented the first deliveries against the contract launched in February 2010. The all-time high for inventories was 348 tonnes reached in December 2013.