Good morning,
Base rallies in London’s absence with China’s industrial profits and dollar weakness supportive. Onshore sentiment also supported ahead of July’s NPC meet via a relaxation of home buying curbs in the likes of Shanghai which made announcements yesterday. Although with ore and steel inventories growing at Chinese ports amid a slowdown in demand there, we note SGX iron ore dropped $4 into the DCE close whilst the Shanghai property index which looked to be breaking higher actually ended up posting a bearish outside day.
Gold and the rally seen across the rest of the precious space (refer especially to silver’s sharp recovery) and to a lesser extent crude is worthy of note given the macro has been determining moves. That especially noteworthy ahead of this week’s month end given the commodity inflow theme evident over the past 2 months.
Systematic flows across this desk since the London open also coming from the bid side and NOT on the offer as one might have expected on the likes of copper following Friday’s poor technical close.
So here we are in recovery mode following last week’s retracements. A period of consolidation is ensuing. China PMI on Friday and the key USA core PCE deflator and being inflationary its implications for the rates path key as to how we close out this week.
Price performance at cob 24th May 2024:
Ali
- Today’s turnover is running up 13% compared to 20d average. A $46 intraday range traded which has achieved its 1Y ATR. Volume has been muted since London kicked off.
- Options market seeing call buy interest – this morning its Sep $3250s. June and the large oi on the $2700s and $2800s x 6.7k and 6.2k lots and manner in which June is bid this morning suggestive of a market which is short these two strikes.
- China’s ali ingot social inventory continued to build up since 20th May to 780.7kt this week. And the current inventory level is running up 25% compared to the same period last year.
- SMM reported that Alumina spot prices maintained an upward trend during the week, and domestic aluminium production costs continued to rise, with the import window remaining closed, that may provide some support for aluminum prices.
- LME ali remains long altho that prog has stalled since 23rd May. Its net combined reading in negative territory with a minimal supply reading for the 2nd consec session.
- Shanghai aggregate open interest up 14.8k lots or 2.5% for the 2nd consec session. Fresh length.
- China Shanghai 99.7% premium declined slightly today, down to -120 from the recent high on 15th May at 10.
- Shanghai June July spread offered to 50 contango today, easing from 45 contango on 24th May.
- LME on warrant stocks down 1kt to 652kt as of today whilst SHFE on warrant stocks up tiny and total
- 8 week ma comes in $2567 although will be interesting to see if price can continue to hold above $2600.
- Resistance into $2750/75 then $2841 which is the 38.2% retrace taking move from $4073.50 all time peak to the 2022 trough of $2080.50.
Copper
- Light turnover this morning – running down 25% compared to 20d average.
- Onshore bonded inventory and social stocks continued to build up further especially for the social inventory now surged to 302.7kt from the low on 12th January at 52.2kt.
- Long liquidation slightly on LME from the peak on 22nd May. Its net combined reading remained in the positive territory for the 2nd consec session with a lighter demand reading.
- Shanghai aggregate open interests up 3.9k lots or 0.6%, increased after 6th consec increase.
- Yangshan premium improved slightly from the recent low on 22nd May at -$20 to -$12 as of today. In contrast, China 99.5% spot premium declined again to -285.
- Both LME and SHFE on warrant stocks seeing stock build whilst COMEX copper inventory remained at a low level around 18.9kt.
- Shanghai June July spread settled at 230 contango this morning, tightening up from the low back on 22nd May at 510 contango.
- Leveraged Fund’s net dollar position continues to see a long liquidation prog which is benefitting to our space.
- LME support into rising trend and last week’s $10,210 low below which the 21 day ma at $10,215.
- Resistance into 8 day ma $10,560 and price having paused into that overnight. Break above that opens up potential for retest of $10775-825 area.
Nickel
- Nickel has been the last metal to build its length and the current long is still very minimal. Its net combined reading remained in the positive territory but again minimal.
- Shanghai aggregate open interest has been largely unchanged.
- See how the nickel sulfate and nickel pig iron prices have been steady of late, nickel sulfate prices onshore improved further to 32000-33000 range this week.
- Onshore stainless prices have been strong since mid May which brought some upward strength to LME nickel prices.
- All the onshore renewable energy equity index under pressure of late which is not supportive to LME nickel prices.
- LME nickel on warrant stocks remained unchanged at 78.9kt today whilst SHFE on warrant stocks build up to 21.4kt now.
- Price seems to be in rising trend channel.
- Support into $20k area and then the rising tend line and 21 day ma around $19,600/50.
- Resistance into 8 day ma around $20,610 then the $21,300/350 area.
Zinc
- Light turnover this morning – running down 22% compared to 20d average. A slim range traded at $41 so far today which has not achieved any ATRs yet.
- LME long adding momentum has slowed u of late and its net combined reading remained in the positive territory for the 2nd consec session.
- Shanghai aggregate open interest down 3.8k lots or 2.5%. Long liquidation.
- Both LME and SHFE on warrant stocks seeing slight stock draws.
- Ferrous and steel prices have been sold off this morning which is not supportive to LME zinc prices.
- According to our systematic iron ore model, our signal flipped to -0.17 from0.62 last week. Today’s weakness is coming from the supply side as all four indicators signal bearish. We expect to see increased seabourne volumes and imports. Meanwhile, the domestic supply has been sufficient as well which brought downstream pressure to prices. Stockpiles at Chinese ports remain elevated compared with previous years without any signs of a notable drawdown. On top of which, the seaborne volume into China continue to pick up.
- Shanghai June July spread settled at 95 contango, tighten up slightly from the low on 21st May at 120 contango.
- LME/SHFE arb window have been improved since reached an extreme level on 30th April. This may suggest some LME buying against SHFE selling.
- Support into $3k then the 21 day ma at $2981.
- Resistance into $3100 then $3200.
Lead
- Decent turnover this morning – running up 13% compared to 20d average.
- LME lead’s net long continue to build but slowed down of late. Its net combined reading remained in the positive territory with a stronger demand reading.
- Shanghai aggregate open interest up 2.3k lots or 1.9%, increased after 6 consec sessions’ decline.
- China weekly inventory noted a small build up this week, which is running slightly higher than its 5-year average level.
- LME on warrant stocks see a small draw whilst SHFE on warrant stocks build up to 51.4kt.
- Shanghai June July spread offer to 15 contango, easing from level on 24th May.
- Support into 21 day ma at $2259. Then $2220 and the 38.2% retrace of the year’s range.
- Resistance into the $2350 area.
MACRO
- 14:00hr FHFA House Price Index
- 15:00hrs Conf. Board Consumer Confidence
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
