Marex Metals Call Update : COMEX COPPER POSITIONING AND RISK PREMIA WITH GUY WOLF
Time: May 16, 2024 01:40 PM London
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Good morning,
The major news overnight is that China’s state council is considering plans to get local governments to buy unsold homes at discounted prices. These plans on a much more substantial scale than previous test progs and so which should take months to manifest – details and feasibility still to be established. Shanghai’s Property Index rallies into late January area of highs albeit settling mid range. Iron ore trades lower however. This likely the realisation that the property sector and particularly SOEs have now gotten state support. But no panacea in terms of future demand.
As for the base, its once again telling to see how prices have rallied overnight during the Asian session. CME copper’s bid across July Sep and the arb still bite. Volumes on copper, lead and tin well above average. Ali following yesterday’s theme. Light turnover. Nickel also below average with reports that New Caledonian production has been impacted following local demonstrations which commenced yesterday.
This afternoon’s US CPI data follows yesterday’s PPI release which saw dollar then sell off.
London open brings a systematic bid across the complex. Shorts also being squeezed. Spread volatility persists.
See these comments on the wires:
EU commissioner calls for stockpiling of critical minerals
The EU’s green chief has said the bloc should start jointly buying and stockpiling critical raw materials “sooner rather than later” as it tries to secure supplies for the green transition amid heated global competition.
Maroš Šefčovič, the European Green Deal commissioner said on Wednesday that the EU should start joint purchasing 30 minerals, such as lithium and cobalt, in the way that it had done for Covid vaccines and gas.
“We know that we would need to use better the political and economic weight of Europe to get better supplies . . . and we are also considering stockpiling of critical raw materials because we have seen that we could have tough times,” Šefčovič said.
Price performance at cob 14th May 2024:
Ali
- CTA bid came back to the market post stocks data. After a few sessions’ stock build, today we are seeing a 100.5kt stock draw. And price managed to trade higher after this morning stock draws.
- As it traded above $2600 it ran into some selling with producer selling having been evident on moves into this area previously.
- China aluminum spot inventory seeing further stock withdraw, declined 0.25% to 802kt from the high on 8th April at 908kt.
- LME ali seeing long liquidation prog since reaching the peak on 13th May. The net combined reading flipped to negative territory with the heaviest supply reading since 2nd May.
- Shanghai aggregate open interest have been largely unchanged.
- LME on warrant stocks seeing a 100.5kt stock draw whilst SHFE on warrant stocks build up further and reaching the highest level since April 2023. COMEX stocks remained low and seeing further stock draw to 18.5kt.
- Weekly volume profile attached to show the largest bar traded into $2545 area and also the volume for the topside is picking up.
- $2618 is the 50% retracement of move taking $2728 peak post Russian sanctions to this week’s $2508 low.
- Also into break down area and highs from 23/24th April.
- On recent moves above $2600 we have seen evidence of a producer offer.
- Port Klang material cancelled on this morning’s 100kt stock draw.
- At $81 session range the widest since the 23rd April.
- Turnover having picked up substantially since the London open.
- Support intra day into $2575.
Copper
- Today’s outperformer. More stress in the system apparently. Spread, vol and outright.
- See how COMEX/LME arb get bid again in the morning and touched a high of $1015.5 looking at the July cme contract vs 3s London.
- In terms of fundamentals, from the supply side, domestic refineries have entered maintenance, and domestic copper supply has declined on a month-on-month basis according to SMM. As delivery approaches, the amount of copper sent to warehouses has increased. In terms of consumption, downstream processing companies are still mainly replenishing stocks on demand against high copper prices.
- July Sep comex copper out to $29.25 and matching yesterday’s peak. Last at $19.25 still out from last night’s $15.65b settle.
- July comex copper at the money vol up 10% since Monday’s settle.
- LME copper seeing further long liquidation and the net combined reading flipped to negative territory with a supply reading.
- In contrast, SHFE aggregate open interest seeing minimal changes.
- Both Yangshan premium and China 99.5% spot premium increase, especially China 99.5% spot premium improved to 60 from the recent low on 26th April at 230 contango.
- See leveraged fund’s net position for dollar seeing a long liquidation after reaching the peak on 3rd May at 192k lots.
- Weekly volume profile attached to show the largest bar traded into $10190. Not exciting but point is no exchange into the highs or lows…Suggests no end in sight yet.
- LME on warrant stocks up very minimally whilst SHFE on warrant stocks increased further to 241kt.
- Shanghai June July spread offer to 290 contango this morning, eased 120 Yuan compared to 10th May.
- Daily price has stalled into that steep rising trend line we broke down through on 1st May.
- So resistance into $10,400 and then $10,500 area.
- Support now into 8 day ma at $10,045.
Nickel
- Decent turnover – running up 13% compared to 20d average. A $490 intraday range trade which has achieved its 4D&10D ATR already.
- LME nickel’s short continue to cover and nearly back to flat. The net combined reading seeing a very minimal demand reading. In contrast official exchange positioning data on both London and Shanghai now showing a long start to build.
- Shanghai aggregate open interest up 5.1k lots or 2.3% for another session.
- Onshore renewable energy equity index still largely under pressure which is not supported to LME nickel prices. But nickel prices hold well of late.
- Onshore stainless prices have been sold off this week which brought downward pressure.
- Both CME and LME seeing a minimal stock build.
- Weekly volume profile illustrating the biggest volume traded into $19200 area and the topside volume is picking up gradually.
- Price is holding this uptrend from the $16,540 low on 28th March.
- And has breached the down trend from the $19,775 peak on 22nd April.
- Resis above into $19,505 high from 7th May then the $19,775-20k area.
- Support into 21 day ma at $18,985.
Zinc
- Decent turnover – running up 52% compared to 20d average. CTA bid on zinc since London kicked off.
- LME zinc’s length build further but small. The net combined reading remained in the positive territory with a much lighter demand reading.
- Shanghai aggregate open interest up 12k lots or 5.1% after 2nd consec decline.
- Both LME and SHFE stocks seeing big stock build especially LME zinc seeing a 24.6kt inflow.
- LME zinc prices have been largely decoupling with ferrous price movement this week. See how ferrous get sold off initially overnight but manage to cover back. LME zinc prices however have been trading higher this morning.
- Next resistance into $3140/50 area and those highs from Feb/March 2023. Price into the 61.8% retrace at $3016 taking move from $3512 high to $2215 low last year.
- Support into 21 day ma at $2889.
Lead
- SHFE lead price up 3.3% this morning whilst LME is up 1.3% so far.
- SHFE aggr open interest up 21.1k lots or 16.8% for the 3rd consec session, total at 146.3k lots which is the largest oi total since 28th November 2023 at 149k lots. Length continues to rise. According to Marex est, SHFE lead net long continue to build and is going to approach the August 2023 peak.
- So SHFE price led this upward movement.
- On wires : Lead smelters in Hunan province shut down due to pollution.
- LME/SHFE arb improving to a level not seen since September 2022. Suggesting buy LME/sell SHFE.
- Stock build seeing on both LME and SHFE exchanges. But the stock building momentum on SHFE is much quicker than LME.
- Shanghai June July spread offer to 10 back, easing from 60 back on 9th May.
- Mkt into the $2300 resistance and the highs going back to May 2022.
- Resistance above into $2385 basis the fibo extension.
- Support $2250 now.
Macro
- 12:00hrs MBA Mortgage Applications
- 13:30hrs Empire Manufacturing
- 13:30hr CPIs
- 13:30hrs Retail Sales
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
