Good morning,
No doubt it was Saturday’s data release which saw credit contract which drove the moves lower on the Asian open. That and the likelihood that the Biden admin is going to confirm punitive tariffs on Chinese goods such as EVs (quadrupling) this week. Wider risk including stock markets and currencies all under initial pressure. But then you get Country Gardens debt repayment (having said last week it would fail to meet it) and news that authorities there are set to sell the first batch of the 1 trillion special bond issuance (designed to alleviate local government debt pressure on Friday. Beijing also announcing a relaxation of home buying curbs. This sees a reversal and metals go bid into the lunch time period and continue during the second half of the Asian session.
Turnover on all down on their 20 day averages. LME pricing cash for 3rd Wednesday this morning. The recent them has been to see trade shorts get caught. Supply and delays on the likes of copper remain the issue and the driver of Friday’s arb and spread moves. Ali recovering albeit underperforming having now filled the $2512/17 gap from that weekend when Russian sanctions were announced.
Price performance at cob 10th May 2024:
Ali
- Today’s underperformer initially – turnover is running down 11% compared to 20d average with a $30 intraday range traded.
- CTA selling following Friday’s official stock build – not manifesting itself in major flow. Some but not significant.
- Gap between $2512/17 filled from weekend of Russian sanctions.
- China downstream consumption held strong – see the downstream producer’s operating rate picked up for another month in April suggesting an improved demand.
- China aluminum ingot inventory has been largely unchanged and total at 778.2kt this morning.
- Its ratio against copper back into the highs from mid March on the weekly chart.
- This also an area where market broke down from in June 2021.
- Price did clearly encounter a producer offer on recent moves above $2600. So will be interesting to see where the consumer re-engages.
- But the main argument as we are monotonous about currently is the money flow…..if money is coming into commods => ali should benefit.
- And Friday’s stock drop is a rent share deal and was metal being moved from a non LME listed warehouse into an official one – that’s all.
- CTA sell flows not materializing in a big way today.
- LME aluminum position remained long and largely unchanged. But its net combined reading flipped to negative territory with a minimal supply reading
- Shanghai aggregate open interest down 25.2k lots or 4.0%, the biggest decline since 16th April where down 6.1%. Now total at 598.7k lots, declined from the recent peak on 12th April at 723.5k lots.
- China 99.7% aluminum premium improved further, up to -50 from the recent low on 7th May at -80.
- Stock wise, LME aluminum stocks seeing a 1.5kt stock draw. SHFE and COMEX stocks have been largely unchanged.
- Shanghai May June spread tightens marginally settling at 15c in from 30c on Friday.
- Support into $2490/2500 now.
- 50% retrace taking Dec low to April peak comes in at $2418.
- Resistance into $2555/65 then $2600.
Copper
- Outperformer so far this morning with a $183 intraday range traded which has achieved most of its ATRs. Turnover is light, running down 20% compared to 20d average.
- Friday’s arb stop outs evidence of the tight supply issues the market is facing and the increased costs of holding metal (higher price amid higher interest rate cycle).
- Shanghai session opens offered but then an onshore bid emerges.
- The one concern perhaps today is that gold is retracing.
- Yangshan premium declined to $0.50 from the recent peak on 8th May at $9. In contrast, China 99.5% spot premium increased to -50 from -230.
- China April copper cathode output total at 985kt which declined slightly from the peak in March at 1 million ton.
- LME on warrant stock declined to 89.6kt this morning from the recent peak on 11th April at 113kt. However, SHFE and COMEX stocks have been largely unchaged.
- Shanghai bonded inventory remained at 76kt this morning decline from the high at 77.8kt. In contrast, China social inventory seeing a minimal increase to 276.9kt, the current level still running at a high level.
- Similar to ali’s LME position, LME copper remained long and largely unchanged. Its net combined reading stayed in positive territory with a stronger demand reading.
- Shanghai aggregate open interest up 9.0k lots or 1.5%, up for the 2nd consec session.
- Copper plate/sheet producers refined copper demand dropped to 102.6kt in April from the peak in Jan’s 129.3kt.
- SHFE May June spread eases to 210c from 140c on Friday. Still in from 370c at cob 7th May and its widest settle.
- Resistance into $10,195/205.
- Support 8 day ma at $9943.
Nickel
- Very light turnover today – only seeing 765 lots traded on select which is running down 63% compared to 20d average. A $280 intraday range traded which has not achieved any of the ATRs yet.
- Nickel remains the only metal still short albeit it has now largely covered and nearly back to flat. Its net combined reading remaining in positive territory with a lighter demand reading.
- Shanghai aggregate open interest down 3.8k lots or 1.7%. Declined for the 3rd consec session.
- Nickel pig iron prices seeing further improvement, up to 985 yuan/ton.
- The nickel sulfate prices still hold at 29000-30000 yuan range. SMM commented that this affected by tight raw material supply and smelters’ losses, the output in April was 34,000 mt in metal content, up 0.66% MoM and 13.54% YoY. SMM estimates that the nickel sulphate output will be 33,200 mt in metal content in May, down 3.07% MoM but up 1.4% YoY, highlighting a supply crunch.
- Less positive with all the onshore renewable energy equity index getting sold off.
- Onshore stainless prices have been range bound this morning.
- LME nickel on warrant stocks seeing very small draw whilst SHFE nickel unchaged at 19.8kt.
- China nickel cathode inventory declined to 4360 ton from the recent peak on 3rd April at 4760 ton. Whilst China nickel briquette inventory remained at 100ton.
- Since testing the $18,500 area last week ranges have been contracting.
- Resistance into $19,150 then $19,500.
- Support $18650,500 area.
Zinc
- See how China zinc concentrate inventory at port dropped further to 39kt which has been the record low level. The concentrate tightness situation remains…
- LME zinc seeing long liquidation since 3rd May reaching the peak. Its net combined reading seeing a stronger demand reading.
- Shanghai aggregate open interest down 2.4k lots or 1.0%.
- See how today’s upward ferrous price supported LME zinc prices.
- Our systematic iron ore model flipped to long at 0.13. Today’s bullishness comes mainly from the supply and demand side whilst macro drivers remain bearish. Supply wise, we see the seabourne volumes declining slightly compared to the previous week, on top of that domestic supply is seeing a drop as well. Then on the demand side, we notice some improvement in the operation rate at steel mills and the inventory of consumption days also dipped slightly, all suggesting better consumption.
- Both LME and SHFE on warrant stocks remain largely unchanged.
- Shanghai May June spread tightens to 55c from 80c on Friday.
- Resis into $2975./300 then $3200.
- Support into $2900.
Lead
- Light turnover – running down 29% compared to average with a $24 intraday re which has not achieved any ATRs yet.
- LME lead length continues to build but slow. The net combined reading remain in the positive territory but flat really.
- Shanghai aggregate open interest up 5.9k lots or 5.0%. Total at 123.3k lots which the highest level since 4th December 2023 at 125.5k lots.
- LME lead on warrants only seeing a 50 ton inflow very minimal.
- LME cash to 3s spread traded into $48.4 contango last Friday, easing from the recent peak on 5th April at $25.4 contango.
- Shanghai May June spread eases to 15c from 300b at cob 9th May.
- Support $2200. Then $2175 area.
- Resistance $2250 then $2300.
LME Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
