Good morning,
This afternoon we have existing home sales and FOMC minutes later. But it is Nvidia’s results on the post which has been key in seeing risk pause these past few sessions akin to that consolidation we saw around end of April and into first few days of May.
As to whether we are set to see deeper retracements the jury remains out although sticky UK core inflationary CPI data reminds us of the reasons why we have seen those substantial inflows into commodities since late February. But also the news wires remind us of the aging power infrastructure worldwide with storms in Houston exacerbating what is seen as one of the most stressed parts of the US grid. Likewise reports that South African troops have been tasked with protecting power plants there. More and more banks writing commentary about the substantive build out governments have to do to improve aging energy infrastructure.
Our markets remain vulnerable given their short vol nature. And certainly, when you look at the copper 3s pricing yday, widening bid offer spreads reminds us of the fickle nature of HFTs and presents an argument that moves will be sharper and execution tougher. Copper seeing an RV offer against the bid in ali. Meanwhile nickel generating some mean reversion sell signals basis it breaking back below its upper Bollinger band. Stock builds across nickel, copper and ali only likely to add to the soggy pricing this morning.
Price performance at cob 21st May 2024:
Ali
- Decent turnover this morning – running up 26% compared to 20d average.
- Yday a $158.50 intraday range traded which is the widest range since the Russian sanctions were announced and we saw a $193 low to high move that Monday. Then yesterday’s turnover total at 41.6k lots is the heaviest since 15th of April at 57.8k lots.
- Length continues to build on LME ali and its net combined reading seeing a stronger demand reading yday.
- Shanghai aggregate open interest increased 16.7k lots or 2.7% after 2 consec sessions decline. Fresh length.
- China 99.7% aluminum premium collapsed to -140 from the recent peak on 15th May at 10.
- LME on warrant stocks seeing a 51.9kt stock build today whilst SHFE and COMEX stocks flatlining.
- Shanghai June July spread traded at 80 contango, easing from 20 contango on 14th May.
- Hourly chart shows support ali found into $2675 area with $2686 representing a 50% retrace taking move from the $2607 low yesterday to the $2765.50 peak.
- Also price holding the rising Bollinger band. Next support $2650/65.
- See how price behaves into $2710/15 on bounce basis that being the 21 hour ma.
Copper
- A $224 intraday range traded with turnover running at average.
- According to SMM there are two smelters under maintenance in Shandong province, and a total of 20kt production will be affected. But due to the recent high copper prices, downstream consumption is limited and still living on a hand-to-mouth basis.
- According to data from the General Administration of Customs, China imported a total of 1.1906 million mt of refined copper from January to April 2024, up 20.44% YoY. In April, imports were 284,000 mt, down 3.91% MoM but up 17.42% YoY.
- LME copper continues to see long adding prog since early April.
- See how Shanghai June July spread eased to 510 contango which is the widest.
- LME on warrant stock seeing a pick up, increased from the low on 13th May at 89.6kt to 96.6kt today. Then SHFE and COMEX stocks seeing a further stock draw.
- Yangshan premium continued to collapse and now down to -$20. In contrast, China 99.5% spot premium
- If you compare the current price action to that seen between 29th April and 2nd May.
- Price dropped $469 or 4.6% between $10,208 high on 30th April to $9739 low on 2nd May.
- Basis $11,104 peak in percentage terms the same correction comes in at $10,593 or in $ terms then $10,635.
- Price has today dropped $270 high to low versus a 4 day atr of $291.
- Going to hourly chart and $10,575 represents the 50% retrace taking move from $10,046 low on 14th May to $11,104.50 peak.
- Hourly RSI approaching oversold conditions.
- Below there see the 8 day ma at $10,494 BUT support in here intra day
Nickel
- Decent turnover – running up 41% compared to 20d average with a $620 intraday range traded which achieved most of its ATRs.
- Nickel finally seeing minimal long built on both LME and SHFE, but SHFE’s long building momentum is slower than LME.
- See the minimal length built on LME and the net combined reading remained in the positive territory but with a lighter demand reading.
- Shanghai aggregate open interest down 5.0k lots or 2.1%. Short continues to cover.
- Onshore stainless steel prices surged into its close with recent property policy bringing some support and with its feedstock price trading higher that has helped push the stainless price to the topside. Nickel prices followed this initially upward movement overnight but failed to hold the gains since London kicked off
- Onshore nickel feedstock prices also stayed supportive of late, especially for nickel sulfate prices imrpvoed to 31500-32500 yuan/ton range this week.
- LME nickel on warrant stocks continues to build up and now increased to the record high level since November 2021.SHFE on warrant stocks seeing a very minimal decline and has been largely unchanged.
- Onshore renewable energy equity indexes started to trade higher again which will provide further support to nickel price.
- Nickel price finding support now having dropped $620 high to low albeit its 4 day atr is wider at $848.
- More support into $20,500/50 area of all the metals this market showing vol stress signs which can only exacerbate the chop.
Zinc
- LME zinc seeing fresh length with a light CTA buying interests. But the turnover is running down 11% compared to 20d average. Its net combined reading now back to flat.
- Shanghai aggregate open interest up 0.4k lots or 0.2%, minimal changes.
- Shanghai on warrant stocks seeing a 1.8kt stock build this morning whilst LME on warrant stocks largely unchanged.
- European power and gas prices have been trading higher of late which is in line with the recent rally in zinc prices.
- Overnight, zinc prices traded higher which correlated with zinc prices but it failed to hold the gains since London kicked off.
- Shanghai June July spread traded into 120 contango this morning which eased from the previous high on 8th May at 45 contango.
- Price holding yesterday’s $3083 low.
- More support into the 8 day ma at $3041.
- Resistance $3200/25 then really the $3400 area.
Lead
- Length on LME lead continues to build further and previous peak was on 21st November 2023. The net combined reading remained in the positive territory since 2nd May with a lighter demand reading.
- Shanghai aggregate open interest down 2.5k lots or 1.9%, declined for the 3rd consec session.Long liquidation.
- Shanghai on warrant stocks seeing a 2.06% draw whilst LME on warrant stocks flatlining.
- LME cash to 3s spread traded to $50.42 contango yday, easing from the high at $25.4 contango on 5th April.
- Resistance $2400 then the $2488 peak from 19th April 2022.
- Support 8 day ma at $2297 then the 21 dayer at $2244.
Macro
- 12:00hrs MBA Mortgage Applications
- 15:00hrs Existing Home Sales
- 19:00hrs FOMC Meeting Minutes
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
