Market and product

Base metals apart from nickel and zinc were in negative territory on Monday morning on the LME on increased risk aversion among market participants.

A meeting of oil producers in Doha failed to reach an agreement on limiting supplies, pushing oil prices down almost five precent from Friday’s closing level - spot Brent crude was last lower at $41.12 per barrel.

This impasse will continue to create deflationary pressures and weigh on broader industrial commodity sentiment, FastMarkets’ James Moore said.

“The main focus on Monday will be the impact the oil markets will have on the rest of the markets and from the initial indications based on the oil news out this weekend, things will turn rather ugly,” INTL FCStone analyst Edward Meir said.

The economic agenda is light today - the Bundesbank’s monthly report and US NAHB housing market index are the only releases of note. FOMC member William Dudley is also due to speak.

The pace picks up from tomorrow and culminates in a busy Friday that includes the release of flash manufacturing and service PMI readings from Japan, Europe and the US.

In the metals, copper recently traded at $4,784.50 per tonne, down $23 on Friday’s close. More than 8,000 lots have changed on Select so far. In the spreads, the benchmark cash/threes was last at a backwardation of $22.75.

The copper market has largely ignored news that heavy rains in central Chile over the weekend resulted in Codelco suspending operations at its El Teniente mine, with Anglo American also reportedly halting its Los Broncos mine.

“The second quarter should see a moderation of prices as demand concerns and inventory builds weigh on investor sentiment,” Citi’s David Wilson noted. “However, robust Chinese trade data could justify the notion that the middle kingdom may be finding its feet.”

In today’s warehouse data, copper stocks fell a net 700 tonnes to 147,275 tonnes and cancelled warrants fell 5,975 tonnes to 26,875 tonnes.

Aluminium at $1,550.50 was down $5. Stocks fell 7,300 tonnes to 2,705,550 tonnes and cancelled warrants were down 2,775 tonnes to 1,254,650 tonnes.

Nickel climbed to a high of $9,000 this morning amid speculation that China’s SRB has been active in the market recently, market participants noted. It recently traded at $8,960, up $45.

“A bigger test awaits above $9,000 where producer related selling is again expected to emerge. A break of $9,500 would really change the technical picture,” broker Triland noted.

Nickel stocks fell 522 tonnes to 423,690 tonnes and cancelled warrants were down 2,448 tonnes to 118,824 tonnes.

Zinc at $1,890.50 was up $18.50. Stocks and cancelled warrants both fell 1,850 tonnes to 413,250 tonnes and 51,400 tonnes respectively.

“The zinc price is facing resistance around $1,900. Sceptical consumers are still holding back but the technical [picture] would suggest that they may soon have to bite the bullet and accept these higher prices,” Triland noted.

Lead at $1,709 was $5 lower, having slipped below $1,700 earlier in the session. Stocks fell 50 tonnes to 162,575 tonnes.

Tin recently traded at $17,100, down $50. Stocks edged 20 tonnes lower to 4,640 tonnes.

Steel billet, cobalt and molybdenum were neglected. Steel stocks dropped 65 tonnes and now stand at zero.