Good morning,
Our metals markets starting off Friday with a whimper. This week we have had what some would consider dovish US inflationary data around a FOMC meet which saw markets have to reassess and reduce rate cut expectations for 2024 to only one. This only creating macro uncertainty. But the key in our space is really the fact we have only just seen a big position tip out as longs liquidated. Furthermore, Chinese buy interest over the past 2-3 weeks has been particularly passive in nature. Aside from lead, todays Shanghai weekly deliverable stock draws across the balance of the complex attests to the fact some downstream consumers are restocking. But again, the tonnages involved on the draw are very light.
And earlier on we get China aggregate financing and new loans data. Then Monday the LME prices cash for 3rd Wednesday and with our now having passed through the official 5 day index roll window, natural business tends to drop off into the 2nd half of the month.
So mixed pricing this morning on the open. Although that amid light turnover with the jury out. This week those bounces on the likes of copper and ali stalling into their 8 day moving averages. We in consolidation mode.
Price performance at cob 13th June 2024:
Ali
- LME on warrant stocks saw another stock draw – now down to 486kt from the peak 926kt on 14th May. Cancellation in Asian port Klang again.
- CTA activities remained muted of late with a light turnover – which is running down 59% this morning so far.
- See how the far money continue to build up its short positions whilst the medium money’s long positions start to liquidate.
- Shanghai aggregate open interest down 8.3k lots or 1.5%. Long liquidation continues for another session.
- As we mentioned that LME ali on warrant stocks seen another withdraw but current level remained high. In contrast, Shanghai daily on warrant stocks increased 7.7% to 160kt. COMEX ali instead flatlining for another session.
- China aluminum ingot social inventory have been choppy of late and we seeing a minimal stock draw yday to 780.5kt.
- China Shanghai 99.7% premium improved further to 0 today from the previous low back on 30th May at -150.
- China aluminum profile large producers operating rate declined to 54% in June which is also running lower than its 5-year average level, signalling a weaker consumption.
- Shanghai July Aug spread remained in contango, settled at 40 contango
Copper
- As we mentioned that the current positioning profile is similar to Q1’21 and now fast money’s short positions started to show covering signs. If this turn in fast money direction continues, we may see some support in prices.
- Shanghai aggregate open interest down 5.7k lots or 1.0% after 2 consec increase.
- China social inventory seeing signs of stock draws, down to 292.9kt and the Shanghai bonded inventory instead seeing a slight build to 86.2kt.
- Only LME on warrant stocks seeing further build up whilst COMEX and SHFE seeing stock draws.
- See how China 99.5% spot premium surged to 110 from the low on 21st May at -340, which has been the highest level since 15th April. Yangshan premium declined further to -12.
- Currency index of late still under pressure for the 3rd consec session which weighing on our space, especially on copper.
- China liquidity index instead picked up further which should bring some support to copper prices.
Nickel
- There are a few news on wires this week for nickel. First Aussie’s Rudd commenting on the LME’s failure to back new standards of nickel could lead to up tp a 20% cut in global supplies (Aussie and New Caledonian prodn cost). This has to raise the potential for tariffs on Indonesian material.
- But in the here and now price under pressure and set to close below its 21 week ma at $18,069 for first time since week ending 29th March.
- Separately Nickel Industries whose shares took that hit earlier this week reports that the evaluation of RKEFs and the halt on issuance of new permits does not apply to those operations already in operation but to those under construction or in the feasibility stage where no progress has been made.
- Finally Tsingshan nickel plant sees another incident – 21 workers having been killed in a blast back in December. This time 2 workers injured.
- Then looking at nickel’s profile that those fast money continues to build up their short positions whilst medium money’s long gone to flat from long.
- Shanghai aggregate open interest down 5.2k lots or 2.5%. Long liquidation.
- Both feedstock prices seeing weakness today, nickel pig iron and nickel sulfate prices all dipped lower which brought downward pressure to nickel prices.
- LME and SHFE on warrant seeing continuous stock build of late while Shanghai weekly deliverable stocks seeing stocks withdraw.
- Onshore stainless prices traded higher overnight but dipped slightly. LME nickel prices have been following this movement and edged lower since London kicked off.
- Most of the onshore renewable energy equity index still under pressure which is not supportive to nickel prices.
- Shanghai July Aug spread bid to 440 contango today, tightening from 690 contango on 6th June.
Zinc
- China zinc concentrate port inventory continued to decline, down to 5kt which has been the lowest level on record. And China’s imports of zinc concentrate fell sharply over the first quarter this year due to the tightening raw materials.
- Reuters on wires reported that China imported 1.18 million metric tons of zinc concentrates in the first four months of this year, down 24% on last year's equivalent tally of 1.54 million tons. This is a pronounced change of trend after raw materials imports increased by 13% and 14% in 2022 and 2023 respectively.
- LME zinc continues to see a long liquidation prog but we start to see early signs of the short covering from the fast money.
- Shanghai aggregate open interest up 2.3k lots or 1.2% after 5 consec decline.
- China refined zinc operating rate increased to 87.14% in May from the low in February at 50.25%. Likewise that China refined zinc monthly production total at 536.2kt.
- Ferrous and steel prices opened strongly but failed to hold the gains which LME zinc prices ignored this movement and has been trading lower throughout the session.
- Both LME and SHFE on warrant largely unchanged whilst SHFE weekly deliverable stocks declined to 125kt from the recent high on 19th April at 132kt.
- Shanghai July Aug spread offer to 15 contango, eased from 25 backwardation on 13th June.
Lead
- Onshore aggregate open interest continues to expand, up 2.4k lots or 1.6% for the 4th consec session, increased to 154.4k lots.
- If we look at SHFE top 20 brokers position, we see the net long continue to build and it has been the strongest since December 2022.
- LME lead seeing those fast money build up their short positions and its net position now liquidated to flat.
- LME and SHFE stocks all seeing further stock build especially LME on warrant stocks, up 7.1kt as of today.
- Shanghai July Aug spread bid to 35 backwardation, tightening from 5 contango on 6th June.
- LME cash to 3s spread settled at $54.84 contango, easing slightly from $53.56 contango on 12th June.
Macro
- 13:30hrs Import Price Index
- 15:00hrs U. of Mich Sentiment
LME Stocks
Shanghai On Warrant Stocks
Shanghai Weekly Deliverable Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
