Market and product
Markets cautious on geopolitical risks; metal prices range
At one stage aluminium and zinc set fresh lows since mid-August, lead dropped to its softest price since mid-June, while tin declined to another 13-month low.
In geopolitical developments, the Russian-Ukraine situation looks to have stabilised, with Ukrainian President Petro Poroshenko saying that most Russian forces are now out of Ukraine. However, over on the US front, markets stay cautious as President Obama announced the country’s strategy in fighting terrorism, or the ISIL/Islamic State.
“We will degrade and ultimately destroy ISIL through a comprehensive and sustained counterterrorism strategy,” Obama said in his speech, outlining the strategy the US will use in combating terrorism.
The rise in risk ahead helped the euro claw back some gains against the recent unstoppable strength of the dollar- the euro was last around 1.2913 against the dollar, well above the 14-month low of 1.2858 hit earlier this week.
On the data side, the Chinese consumer price index came in at two percent this morning against the expected 2.2 percent, while the producer price index came in a -1.2 percent compared to a forecast of -1.1 percent.
Recent concerns on the strength of the Chinese economy have prompted Premier Li to address the issue at his opening speech at the Summer Davos opening ceremony. In his speech, he said that China can decrease the possibility of a ‘hard landing’ by stabilising growth, adjusting structural reforms and ensure job creations.
In the metals, copper’s trading volumes were low today, with less than a thousand lots done so far. Prices are slightly lower at $6,865 per tonne, some $5 lower than Wednesday’s close.
“Strong US dollar upon market acknowledgement to interest rate rises next year and unwinding of bond purchase program raises concern as to impact upon global growth prospects; this, coupled with slowing Chinese growth is a likely a factor in the basket sell off,” commented a broker.
Nickel touched one-week lows at one stage on Wednesday’s LME trading - it has relinquished all of its gains since the news that the Philippines may implement a ban on mineral ore exports. It was last at $18,774, up $34 in price. Inventory data yesterday showed a 162-tonne stock fall to 331,980 tonnes.
“The focus on this country seems a little short-sighted, with the industry facing much bigger issues around the Indonesian export ban. The fact remains that the market is moving into a significant deficit in the near-term and thus recent weakness is unlikely to last." ANZ Research said.
Zinc at $2,310 is up $2; LME stocks jumped 20,350 tonnes to 756,050 tonnes, the highest since May 13 on Wednesday. Warehouses in New Orleans saw a spike in zinc stocks as a recent spat of spread tightness provided the opportunity to warrant metal amid lacklustre domestic demand and soft regional physical premiums
The lead price at $2,125 rose by $10, tin is almost flat at $21,002 while aluminium is up $9 at $2,067 per tonne.
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