Good morning,
US PMI and ISM’s later today followed by initial jobless claims tomorrow. But its Friday’s Non Farm Payrolls which is the big data release this week. Although one could argue that basis the risk reduction seen in the past fortnight across energies, industrial metals and the precious complex as the bullish macro waned, that we are unlikely to see an immediate redeployment of capital. Markets needing to breathe after such sharp corrections. Macro long liquidation on the likes of copper whose highs were also established on the back of a short squeeze, with the other metals now playing catch up to the downside. CTA sell progs becoming evident but not substantial from the volumes executed. But clearly there remains systematic and other spec length in some of our metals.
Improving arb windows attest to the buy interest seen scale down from the Chinese but this not executed in a manner to hold the price. Rather it is having been lighter and passive in nature.
So, we kick off the day on the back foot again. Don’t be surprised if the market goes quiet mid morning with June options expiry and as traders establish their positions on the post. Ditto it will be interesting to see if vol pressure emerges and specifically whether the focus of any selling is on the downsides.
Volumes on the major metals running down on average:
Price performance at cob 4th June 2024:
Ali
- Light volume this morning with a $33 intraday range traded.
- European and mid western aluminum premium seeing a minimal decline whilst onshore 99.7% ali premium improved to -90 from the low back on 30th May at -150.
- LME ali buy progs have stalled this week although yesterday saw its net combined reading remain in positive territory albeit with a minimal demand reading.
- Shanghai aggregate open interest down 10.3k lots or 1.7%. Long liquidation continues onshore. OI declined 80k lots over the 4 sessions. Down from peak of 686.8k lots on 30th May to 608.6k lots. Low of 596.7k lots on 15th May although the ytd trough was in mid Jan at 426.4k lots.
- Shanghai ali on warrant and COMEX stocks seeing a minimal build whilst LME on warrants declined further to 585kt today.
- Onshore alumina price bounced back slightly this week due to the tight balance. Onshore alumina supply in short term is still limited whilst Yunnan's resumption of production is making steady progress, and the news of the Inner Mongolia Huayun Phase III project being powered up has released positive signals for demand.
- Daily volume profile showing you the volume has been largely traded to the downside and the biggest bar traded into $ 2632 area.
- Price holding the 21 day ma at $2628 as well as a rising trend taken from the late March lows.
- More support into $2600 area and down to $2575. See if ali is able to establish a new higher range.
- Resistance into $2675/85.
Copper
- Indonesia's Finance Ministry has issued a new regulation announcing that it will impose a 7.5% export tax on copper concentrate exports, effective immediately. According to the new regulation, this export tax will apply also to the two mining companies currently exempted from the export ban - Freeport Indonesia and Amman Mineral International. The latest export permits for the 2 companies whom had been given relief til end of 2024 expired on 31st May – the delay so they could complete construction of copper smelters there. Up to 31st May they had been paying between 7.5-15% depending on the smelter progress.
- Bloomberg reported that BHP Group is heading into mediation with union leaders in Chile at its Spence mine (250-300kt pa mine) in a bid to avoid a strike as this year’s surge in copper prices inflates the bottom lines of producers and expectations of their employees. 5 days of talks which will be monitored closely ahead of wage talks at the bigger Escondida over the coming months.
- Below is the monthly flow for COPA starting in 2023 to show you the money outflows. See how the large part of that inflow which helped drive price gains is now out.
- Light turnover so far today – running down 34% compared to 20d average with a $107 intraday range traded which has not achieved any of ATRs yet.
- SMM commented that for copper’s fundamentals side, the supply side saw a continuous arrival of domestic and imported copper, with low-price imported copper also flowing in. On the consumption side, as copper prices dipped and the delivery month approached, the premium continued to rise, but overall demand showed no significant recovery.
- China copper wire and producer’s total capacity stood at 3.64 million ton in May, increased from June 2023’s 3.13 million ton.
- LME copper continues to liquidate and the net combined reading seeing the heaviest supply reading since 2nd May.
- Shanghai aggregate open interest up 2.3k lots or 0.4% after 4 consec decline.
- Both Yangshan premium and China 99.5% spot premium improved further especially China 99.5% spot premium.
- Both LME and SHFE on warrant stocks seeing small build whilst COMEX inventory declined for another session and down to 15.7kt.
- See a volume profile since the 20th May and the day the market made its all time peak of $11,104.50 and how the biggest bars have gone through below $10,200 and as that Chinese passive arb bid began to engage.
- Support into $9800/25 and those lows from 8/9th May.
- Bigger support between $9600/9700 and that 50% retrace up to the rising trend line.
- Resistance into 8 dayer at $10,182 then the $10,250 area.
Nickel
- Today’s underperformer, decent turnover – running up 23% compared to 20d average. A $420 intraday range traded which has not achieved any of its ATRs.
- But now running into some big technical levels.
- LME nickel position remains flat and its net combined reading flipped to the negative territory.
- Shanghai aggregate open interest down 0.2k lots or 0.1% , largely unchanged.
- Onshore stainless prices have been sold off recently which brought further downward pressures to nickel prices.
- China’s renewable energy equity index continues to bounce back but LME nickel prices have ignored this support.
- LME on warrant stocks build further and it has reached the highest level since October 2021. In contrast, SHFE on warrant stocks seeing small withdrawal.
- Daily volume profile seeing the largest bar traded into $18700 area today.
- Support into $18,500/30 basis the 61.8% retrace as well as the lows from 19th April and 2nd May.
- Then $18,000/100 area.
- Resis now into $19,000-19,150.
Zinc
- Decent turnover this morning – running up 17% compared to 20d average.
- LME zinc seeing a long liquidation prog since 29th May however yesterday its net combined reading flipped to positive territory with a minimal demand reading.
- Shanghai aggregate open interest up 1.6k lots or 0.7%, minimal changes.
- Onshore ferrous and steel prices continue to get sold off which brought downward pressure to zinc prices.
- Both LME and SHFE on warrant stocks seeing some small build.
- In a sign that zinc is still playing catch up to downside with say copper see how in contrast its volume profile since making the peak on 21st May actually shows the higher volume bars above $3050.
- No substantial exchange on the dip yet.
- Although onshore arb window continue to improve further and back to the level last seen in April. Still closed clearly from a physical perspective but a big improvement since we made the price peak driven by the western bid.
- Price doing work around $2888 and the 38.2% retrace. More support into the $2856 low from 8th May.
- Then the big area into 50% retrace and $2800.
- Resistance into $2935/50 then $3k.
Lead
- Decent volume today which is running up 27% compared to 20d average with a $33 intraday range.
- Long liquidation since 28TH May on LME and today seeing the heaviest supply reading since 30th May.
- Shanghai aggregate open interest up 6.5k lots or 4.8% for the 3rd consec session, fresh length.
- Shanghai on warrant stocks build further whilst LME on warrant stocks declined to 56.6kt from the peak back on 3rd April at 265kt.
- Daily volume profile seeing the largest bar traded into $2228 to the downside.
- Support into $2205/20 – low from 9th May and 38.2% retrace.
- Then $2177 and the 50% retrace.
- Resistance into 8 day ma at $2284.
Macro
- 12:00hrs MBA Mortgage Applications
- 13:15hra ADP Employment Change
- 14:45hrs S&P Global US PMIs
- 15:00hrs ISM Services Index
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
