Good morning,
China’s return brings a bid to the base metals with onshore open interest declines across copper and ali as well as arbitrage moves symptomatic of the fact the buying was coming onshore with LME playing catch up on today’s rallys. Arb players in buying LME / selling Shanghai. Turnover running above average on copper, lead and nickel. Although down on zinc and ali.
Some spec profit taking capping the rallys with evidence of a producer offer also apparent on the ali.
Today sees the start of the 5 day index roll window. Spreads liquidity having been further negatively impacted by recent Russian sanction news, so much of those flows now taken right into moc to process rather than be transacted throughout the session.
We saw dips last week with decent length established across certain metals. But the price retracements shallower than many had anticipated with Friday’s recovery ahead of NFP much to do with just mean reversion ahead of the Shanghai reopen.
So some choppy consolidation but we remain overall friendly.
Price performance at cob 3rd May 2024:
Ali
- Light volume – running down 28% compared to 20d average with a $30 intraday range traded.
- China aluminum ingot social inventory seeing a small pickup, increased to 794.5kt from the low 791 on 29th April.
- Fundamentally, SMM commented that the bauxite supply was tight onshore and alumina prices rose rapidly which pushing up aluminum cost.
- Chian electrolytic aluminum operating rate increased further in April, up to 94.69% from the low in February at 93.41%.
- LME/SHFE arb has improved a lot today which suggests some LME buying interest against selling SHFE
- Long adding remained the main theme on LME but momentum has slow down. The combined reading remained in the negative territory with a lighter supply reading.
- Shanghai aggregate open interests down 3.8k lots or 0.6%, long liquidation.
- China Shanghai 99.7% premium seeing further decline, down to -80 from the recent peak on 22nd April at -50.
- All three exchanges inventory remained at the same level.
- Resistance into 2600/25 and the area where producer interest has previously engaged.
- See how price stalling around its 200 hour ma at $2588.
- Support into 21 hour ma at $2565 then the $2540 area.
Copper
- On wires First Quantum to seek talks with Panama’s incoming president in an effort to resolve the dispute that shuttered the Cobre Panama copper mine.
- China has been the buyer overnight. Volume picked up – running up 30% compared to 20d average.
- A $143 intraday traded which just achieved its 1Y ATR at $137.
- LME/SHFE arb seeing decent improvement, attracting ppl to buy LME against selling SHFE.
- See how premium improved further especially Yangshan premium increased to $6.5 from the low at 0 on 23rd April. China 99.5% spot premium also seeing an increase to -120.
- Long liquidation seeing on LME since reaching the peak on 30th April. The net combined reading flipped to positive territory with a minimal positive demand reading.
- Shanghai aggregate open interest down 3.1k lots or 0.5%, signs of long liquidation. Declined 28k lots within 4 days. LME/SHFE arb has improved a lot suggesting buy LME and sell SHFE.
- COMEX copper aggregate open interest declined to 300k lots and also seeing a long liquidation prog cob 30th April.
- SHFE on warrant stocks seeing another 4.5% stock build whilst LME on warrant stocks down tiny, declined to 90.2kt from the high on 1st May at 94.7kt.
- Both Shanghai bonded inventory and China social inventory build up for another week, especially for the bonded inventory seeing no signs of destocking kick-off yet.
- China copper wire producer’s refined demand in April total at 222.9kt increase 2.1% from previous month and reached a high level compared to previous years.
- Daily volume profile attached to illustrate the biggest bar traded into $10100 area.
- Rally has stalled around the lower end of that steep rising trend channel we breached to downside last week. Resistance into $10,100 then the $10,185-10,208 area.
- Support now into 8 day ma at $9938.50 then last week’s lows of $9739-9771 below which you have the 21 day ma at $9717.
Nickel
- Decent turnover this morning – running up 30% compared to 20d average. Price making the high on the open and then coming back under pressure with onshore stainless price coupled with renewable energy indices also retracing.
- LME nickel seeing a short covering prog and nearly back to flat. The net combined reading has been small and choppy of late, flipped to positive territory.
- Shanghai aggregate open interest up 16.3k lots or 7.5%. The biggest increase since 4th January seeing a 20k lots increase.
- Onshore nickel pig iron prices holding at 975 Yuan/ton which remained at a considerably high level.
- Not only nickel pig iron price, but also nickel sulfate prices remained at a strong range.
- Onshore nickel renewable energy index seeing its recent upward momentum pause this morning which is not that supportive to nickel prices.
- Onshore stainless prices edged lower this morning which put further pressure on nickel price.
- LME nickel warrant stocks have been largely unchanged whilst SHFE nickel stocks increased tiny to 19.8kt.
- Daily volume profile attached below to show the largest bar traded into $19350 area and also the volume picked up near $19250 area.
- Some support into the 8 day ma at $19,065 and the down trend of the pennant formation which we breached to the topside on Friday.
- More support below int o the 21 day at $18,665 which ties in with the rising trend from the $16,540 low on the 28th March.
- Resistance into $19,500 area then the $19,775/875 taking high from 22nd April and the upper Bollinger band on the daily.
Zinc
- Muted turnover – running down 26% compared to 20d average with a slim intraday range at $33.
- LME seeing the length continue to rise and the net combined reading seeing a strong positive demand reading.
- Shanghai aggregate open interest up 5.9k lots or 2.6%.
- LME zinc prices ignored ferrous and steel prices’ initial overnight sell off and has been largely rangebound. Then traded higher since London kicked off. Although tight range and light turnover.
- China zinc ingot inventory at port remained at 48kt still running fairly low compared to previous years.
- LME on warrant stocks remained flatlining whilst SHFE on warrant stocks seeing a small withdraw.
- LME cash to 3s spread settled into $30.37 contango, easing from the recent peak back on 29th April at $9.83 contango.
- Support into $2875 and then last week’s $2830/40 area of lows.
- Resistance into $2975/3k.
- Remember the 200 week ma at $2932. Market breached it briefly last week but has otherwise been trading below it since April 2023.
Lead
- This morning’s outperformer. Decent turnover – running up 24% compared to 20d average with a $18 intraday range.
- LME lead position remained long but stagnant really. Its net combined reading flipped to the positive territory with a small demand reading.
- Shanghai aggregate open interest up 1.3k lots or 1.2% for the 2nd consec session.
- Shanghai May June spread traded into 15 contango, easing from the recent peak back on 26th April at 50 backwardation.
- LME on warrant stocks continue to see stock draws since 1st May. In contrast, SHFE stocks build further but very minimally.
- Resistance into the $2246.50 high from 26th April and then the $2300/10 area and highs back to Jan 2023.
- Support now into 21 day ma at $2186.
Macro
- 20:00hrs Consumer Credit
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
