Good morning,
Metals find themselves in a twilight zone having seen long liquidation at various points over the past fortnight. The rot has stopped aided yday by the worst than expected US PMI data and the resultant dollar selloff. Our prices now going into a consolidation phase before next move.
Oils sell off won’t help us bounce with weekend reports that Opec+ were preparing to return barrels to market sooner than expected and note how the imminent seasonally bullish US driving season not enough to stop the rot in the past 24 hours. Ditto the weakness in the ferrous and steel space with iron ore back to mid April levels is not going to help although we note the Shanghai property index bounces. The value of China’s new home sales in May across the 100 largest real estate businesses was down 34% y/y. Less than April’s decline in April. And then tomorrow we have LME June options expiry ahead of which the markets often pause.
So we have had a position tip out. Some Chinese and paper arb support with those windows not open for physical but having improved. Now we likely await Friday’s Non Farm Payrolls as for wider macro clues. And worth our noting that Friday is also the first day of the official 5 day roll window.
London open has seen some nickel and ali buying from systematic types although we note copper and ali turnover running at down 58% and 32% against their 20 day averages.
Price performance at cob 3rd June 2024:
Ali
- Light turnover – running down 32% compared to 20d average with a slim intraday range at $25.
- LME ali seeing long adding prog but slowed down and its net combined reading flipped to positive territory with a minimal demand reading.
- Shanghai aggregate open interest down 0.2k lots which largely unchanged. Long liquidation stalled.
- On the fundamentals, domestic aluminum operating capacity continues to rise, with Yunnan's resumption progressing well and expected to be completed in June, which may gradually highlight supply-side pressure.
- China aluminum profile small producer’s operating rate seeing a drop in May, down to 44% from the high in April at 50%.
- Shanghai June July spread settled at 40 contango, tighten up from the previous low on 3rd August at 85 contango.
- China Shanghai 99.7% premium improved to 110 contango from the low on 30th May at 150 contango.
- LME on warrant stocks have been largely unchanged whilst SHFE on warrant inventory seeing a tiny 0.3% decline.
- Support into 21 day ma at $2623. Then the $2600 area.
- Resistance $2685/2700.
Copper
- Yday Bloomberg on wires reported that Taseko mines suspends operations at Gibraltar mine in Canada. This mine produced around 55.5kt refined copper per year, so not that huge but still has an impact on s&d balances. It having been the forecasted tighter supply which led the major price gains this year (not demand)
- Afternoon since the missed ISM manufacturing data, dollar has been sold off which helped copper prices traded higher. However today we are failed to hold the gains and edged lower.
- Muted volume today which is running 43% compared to its 20d average with a $200 intraday range which has only achieved its 1Y ATR.
- Long liquidation continues on LME since 22nd May and its net combined reading flipped to positive terror.
- Shanghai aggregate open interests down 6.2k lots or 1.1% for the 4th consec sessions. Long liquidation continues…
- Since mid May at 41,550t Asian warehouse locations has built to 67.9kt
- Both LME and SHFE on warrant stocks increased further whilst COMEX copper stocks declined for another session to 16.3kt.
- Chia social inventory continue to build up but minimally. In contrast, Shanghai bonded inventory declined to 87.5kt from the previous high on 27th May at 92.8kt.
- Shanghai June July spread settled at 230 contango from the low on 22nd May at 510 contango.
- Note how price has stalled on the overnight rally into the 8 and 21 day mas which come in at 10,270.
- Indeed one could comment that their setting to cross in a bearish fashion has to be a concern. Last time these crossed was in a bullish fashion on 22nd February when price was sub $8500 and prior to the big price gains.
- Key to the downside is the big psychological level at $10k with Junes showing 6.9k lots of oi.
- Although tech I guess there is case to make for a deeper correction to $9615/70 area and the 50% retrace up to that rising trend line.
- BUT key remains China’s engagement on the dip and where the downstream re-engages.
- Weekly volume profile seeing the largest bar traded into $10145 but also seeing the volume picked up from the downside.
- Price eyeing up $9967 and the 38.2% retrace.
- Major support into $9625/75 area.
- Resistance now $10,250
Nickel
- Light turnover today – still running down 15% compared to its average.
- LME nickel back to flat position from a minimal long established back on mid-May. Its net combined reading flipped to the positive territory with the strongest demand reading since 20th May.
- Shanghai aggregate open interest down 5.7k lots or 2.6% for the 3rd consec session.
- Onshore stainless price continue to traded lower initially which LME nickel prices followed this movement but edged lower since London kicked off.
- All the renewable energy equity index traded higher today which should bring upward momentum to LME nickel prices but it has been ignored this support.
- LME nickel stocks continues to build up even tho minimally and now totaled at 79.1kt. In contrast, SHFE nickel on warrant stocks seeing a 1.37% decline.
- Shanghai June July spread settled at 240 contango today, bid from the low on 3rd June at 940 contango.
- Support into $19,140 and the 50% retrace. Then $18.950.
- Resistance into $19,750 then $20k.
Zinc
- Turnover is running 9% up than its 20d average with a $69 intraday range traded.
- LME zinc seeing long liquidation prog since 29th May and see its net combined reading remained in the negative territory for another session with a heavier supply reading.
- Shanghai aggregate open interest down 3.4k lots or 1.6%, oi declined 27k lots within 4 sessions.
- Ferrous and steel prices continue to get sold off this morning which LME zinc prices followed this movement.
- Both LME and SHFE on warrant stocks declined minimally and they are still at a high level.
- Shanghai June July spread traded into 15 contango today, tight up from the previous low on 21st May at 120 contango.
- Weekly volume profile seeing the largest bar traded into $2950 area.
- Onshore arb continues to improve further of late and now improved to the level we last seen since 8th April, which may brought some buying interest on LME against selling on SHFE.
- Support into $2900 and lows from 10/13th May.
- Then $2888 is 38.2% retrace although $2800 the big area now.
Lead
- Shanghai aggregate open interest continues to expand of late, this morning it increased 5k lots or 3.8%. Fresh length.
- LME lead seeing a long liquidation prog since 28th May but its net combined reading flipped back to positive territory again.
- LME lead stocks declined minimally whilst SHFE on warrant stocks increased 5.0% today.
- Shanghai June July spread settled at 25 contango, easing from 5 contango on 3rd June.
- LME cash to 3s spread settled at $65.03 contango, easing from the high on 23rd May at $45.72 contango.
- Support $2250 then $2220.
- Resistance $2300.
Macro
- 15:00hrs JOLTS Job Openings
- 15:00hrs Factory Orders
- 15:00hrs Durable Goods Orders
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
