Good morning,
Yesterday’s sell off less driven by any systematic selling – those types remain long our space. Rather it was apparently macro led. Dollar strength since its trough on the 16th May not helping but really it was the growing narrative around rates with the realisation, we might not see any cuts this year and the negative implications that has for global growth.
No meaningful relief overnight with prices taking another turn lower since 8am as CTAs are in selling. Look for heavier exchanges, any arb relief and gamma involvement to stem these losses. As we progress through the morning a lack of further systematic selling has seen prices hold and bounce into some technical support levels with momentum indicators getting oversold on short term charts.
Later today we have US initial jobless claims, new home sales and key PMI data.
Price performance at cob 22nd May 2024:
Ali
- Decent volume this morning – running up 16% compared to 20d average. Shanghai aggregate open interest seeing a decent decrease, down 44.9k lots or 6.9%. This has been the largest decrease since 12th December 2022 when it fell 9.39%.
- LME aluminum still seeing fresh length – its net combined reading has been in the positive territory since 15th May with a lighter demand reading.
- China aluminum spot inventory declined 0.52% compared to Monday to 771kt. However, this year’s destocking momentum has been much slower than last year and the current stock level is still about 20% higher than same period last year.
- Weekly volume profile attached to how the largest bar traded into $2635 and seeing a pick up volume from the downside.
- LME on warrant stocks seeing another 47.6kt stock build totalling at 654kt. In contrast, both COMEX and SHFE stocks have been flatlining.
- China aluminum profile medium producers operating rate declined slightly to 57% in May but overall it is still running higher than its 5-year average rate.
- Should find support into its 200 hour ma which comes in at $2596.
- Hourly RSI also into oversold territory.
- Between 24th April and 15th May market pretty much traded a $2500/2600 range capped by producer offer.
- So will be interesting to see if we can hold here to carve out a new range. And note June options oi shows $2600s x 5.6k lots and the $2700s x 5.6k lots. Plenty of June options oi and gamma therefore.
Copper
- Yday’s saw a $487 intraday range traded, the largest price decline since March 2022.
- There are a couple of copper stories on wires. Firstly, that Las Bambas mine in Peru could reach a production target of 400kt in 2025.
- Then According to customs data, in April 2024, copper tube imports were 1,892.8 mt, down 0.5% MoM, up 15.9% YoY; from January to April, cumulative imports were 7,255.9 mt, up 19.3% YoY. In March, copper tube exports were 30,618.3 mt, up 5.3% MoM, up 4.5% YoY. April copper tube import and export data continued to show a YoY growth trend, with export volumes again surpassing 30,000 mt according to SMM.
- Elsewhere nearly two-thirds of Chinese copper rod producers have cut or stopped production due to slowing sales, according to a survey by industry researcher Mysteel Global. The surveyed plants have a combined capacity of almost 9 million tons, or about 30% of the country’s total fabrication capacity.
- LME copper’s length continue to build for another session and now it has been the largest since 26th February 2021. However, its net combined reading flipped to the negative territory.
- Shanghai aggregate open interest down 11.9k lots or 1.9%, decline for the 4th consec session. Long liquidation.
- Both Shanghai bonded inventory and China social inventory build further as of today. Especially for China social inventory which has been a record high level.
- Shanghai on warrant stocks seeing a small build to 225kt. COMEX copper inventory continues to draw from the high on 22nd March at 30.8kt to 19.2kt today.
- COMEX copper aggregate open interest seeing a small decline, from the peak on 10th May at 312k lots to 306k lots. But till cob 17th May, COMEX copper still seeing fresh length.
- There was sell copper / buy ali in the mkt yday morning. Looking at that switch on a 3 x ali : 1 x copper basis that also showing supportive signs of the copper.
- Seeing trend line support taking low of $8776 from 27th March. Today creating 3rd point.
- Below $10,210 you have more support into 21 day ma at $10,151.
- $10,260 represents 61.8% retracement of May range - $9739-$11,104.50
- We have seen some scale down arb support since yday afternoon.
Nickel
- Decent volume this morning – running up 47% compared to 20d average.
- A minimal net long established on LME but slowly. The net combined reading flipped to the negative territory.
- Shanghai aggregate open interest down 13.8k lots or 5.9% for the 4th consec session. The biggest decrease since 8th February 2024 down 11.77%.
- LME on warrant stocks unchanged whilst SHFE warrant stocks decline slightly to 20.7kt.
- Onshore stainless prices get sold off after yday’s surge which brought downward pressure to nickel prices.
- All of the onshore renewable energy equity index get sold off which only adds to the initial pressure.
- Weekly volume profile attached to show the largest bar traded into $21,600 the topside, but the volume starting to pick up to the down side as well especially near $20,700 area.
- RSI also oversold on hourly basis.
- Price holding around 200 hour ma at $19,910 and ahead of the 61.8% retrace at $19,755 taking the months range - $18,520 to $21,750.
- $20ks also a big options strike : June x 1.2k lots and July x 1.8k lots.
- Needs to clear $20,150 on this bounce.
- IF we break below then major support basis the 21 day ma at $19,550 with rising trend line from March $16,540 low coming in at same level.
Zinc
- Turnover is running up minimally on it 20d average.
- Long adding has been the recent theme for LME zinc and now is going to test the recent peak on 3rd May.
- Shanghai aggregate open interest down 4.0k lots or 1.7% after 3 consec increase.
- See how LME/SHFE arb window get improved today but the current level remained wide.
- LME zinc price has been following today’s ferrous price movement – dipped overnight but managed to bounce back slightly.
- Shanghai on warrant stocks continue to build up to 85.2kt from the low on 30th January at 3.8kt.
- This week the largest volume still traded into $3135 area but see how the downside volume picked up especially around the $3080 area.
- Support provided by its 200 hour ma at $3007 below which you have rising trend line support into $2963.
- Resistance into its 21 hour ma now – last at $3056. Above which the $3100 area.
Lead
- Today’s underperformer. Decent turnover – running up 31% compared to 20d average. A $52 intraday range traded which almost achieved all its ATRs.
- Length continues to build on LME and now approach to the previous peak back on 21st November 2023. The net combined reading flipped to the negative territory.
- Both exchanges’s stock remained at a similar level.
- Shanghai June July spread traded into 15 contango, easing from the recent peak on 20th May at 30 backwardation.
- Support into the 21 day ma at $2247.
- You then have $2220 which is the 38.2% retrace taking the move from the $1995 low on 28th March to this week’s $2359 peak.
- Resistance into $2300 now. Then $2359.
Macro
- 13:30hrs Chicago Fed Nat Activity Index
- 13:30hrs Initial Jobless Claims
- 13:30hrs Continuing Claims
- 14:45hrs S&P Global US PMIs
- 15:00hrs New Home Sales
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
