Good morning,
As the market reduces risk and the pool of participants shrinks we would make this point: the impact felt from HFT type flows has increased significantly making execution more tricky amid markets that trade then show bid offer spreads away from the previous print (see copper late yday). Stock markets primarily seeing the risk whilst oil noticeably has seen an uptick in activity. But our markets in a funk with natural business usually ebbing during the 2nd half of the month as cash pricing for 3rd Wednesday and the official 5 day roll window is in the rear view. Moreover see how that 3rd Wednesday pricing has attracted further stock builds across the majority of the complex and particularly copper, lead and nickel today.
That the market has tipped out of positions means traders are unlikely to jump straight back into the saddle especially given summer is upon us and amid a Chinese market yet to see meaningful stock draws. Their NPC meet and the 3rd plenum on July 3rd now crucial. From the USA we have retail sales and IP today although Thursday’s initial jobless claims then Friday’s PMI more likely the data release which will give markets greater clues as to the Fed’s path in 2024. Furthermore, dollar also having been supported of late as swathes of Europe prepare for key political elections.
After a quiet overnight session, metals coming under pressure on the London open with some systematic selling in evidence. Volume on ali, in particular picking up. Indeed, we note how ali and copper whilst holding their 50% retracements of the YTD ranges yesterday are yet to clear their daily short term moving averages on bounces. Zinc also probably the best example of the choppy price action we are likely set to endure over the next few weeks.
Price performance at cob 17th June 2024:
Ali
- CTA selling evident in the market since London kicked off. Overall turnover is running 16% lower than 20d average.
- According to China’s Custom data, China imported 13.55 million tons of aluminum ore and concentrate in May, which was 4.83% lower than the previous month but 4.7% higher than the same period of last year. The total import volume from January to May reached 64.04 million tons, up 5.8% year on year.
- China aluminum spot inventory seeing a small draw yday, down 1.55% to 761kt.
- The long liquidation prog on LME ali stalled into Friday’s close, see how the fast money start to cover its short positions.
- Shanghai aggregate open interest down 24.4k lots or 4.5% since 30th May. Long liquidation continues for another session.
- China Shanghai 99.7% premium declined to -30 today, which has been its lowest level compared to same period previous years.
- LME on warrant stocks continues to see a small draw as do the SHFE daily on warrant stocks. COMEX still flatlines at 39.4kt as of today.
- Offers across ali forwards this week suggestive of the market either already encountering or setting itself up for some consumer buy interest.
- Dec 24/25 last 103/105c from $85c at last Thursday’s settle.
- See the exchange today picking up on move below $2480.
- Price doing some work into $2475 which is the 50% retrace of YTD range. Although looking at weekly and taking the low of $2109 on 15th Dec to the $2799 peak and the 50% retrace of that move comes in at $2454.
- Then below there both the 21 and 200 week mas come in at $2429/30.
- Resistance into $2500/25.
Copper
- Price continues to stall into 8 day ma on the rallies. Stocks have started to draw onshore but only minimally with those builds in London far greater.
- This morning LME on warrant stocks jumped by 14% to 153kt, the most since September 2023. These inflows driven by the deliveries into South Korea and Taiwan. LME Asian warehouse locations have increased 62.6kt since 10th May. The original rumours were for 60kt to be delivered. Today’s large build makes sense around 3rd Wednesday. As to whether we are set to see further deliveries is a moot point. Some suggest there is a potential for more to come. But this unsubstantiated.
- Long liquidation momentum did slow down into Friday’s close and see how that fast money short position has further reduced.
- Shanghai aggregate open interest down 19.5k lots or 3.5% for the 3rd consec session. Long liq continues.
- LME on warrant stocks see a big stock build, increased to 153kt from the previous low on 10th May at 89.5kt. In contrast, SHFE and COMEX stocks seiing further stock withdraw especially COMEX now down to 9.5kt.
- Both Yangshan premium and China 99.5% spot premium declined further, especially the onshore spot premium.
- China copper tube producer’s operating rate in May total at 83.32%, declining slightly from the peak in April at 86.53%.
- See how the spot month arb window opened minimally yesterday which suggests LME buying against SHFE selling.
- LME stock deliveries sees the forwards crease with Dec 24/25 trading out to $105c from $74.25c val. Ditto Dec 25/26 trades $15c from $20b settle. That has eased from $56 back on the 12th June and $290b on the 20th May.
- Weekly price and taking the move from the $6955 low in July 2022 to the $11,104.5 peak and the 38.2% retrace comesd in at $9519 with the 50% retrace well below at $9030.
- Although we have the $9550.5 high from Jan 2023 and then the $9590.5 high from 12th April. These highs an area we accelerated up through week ending 19th April and which now provide some support.
- Resis into $9775/9800.
Nickel
- Nickel prices still under pressure with a $325 intraday range which has not achieved any of its ATRs yet.
- LME nickel continues to see short adding prog, and it is mainly from fast money.
- Shanghai aggregate open interest down 2.6k lots or 1.3%. Relatively minimal.
- Onshore stainless prices initially traded higher overnight but failed to hold those gains.
- Most of the onshore renewable energy equity index were also under pressure which brought downward pressure to nickel prices.
- LME on warrant stocks continues to build up, increasing to 85.1kt from the recent low on 4th April at 68.3kt. SHFE on warrant stocks instead seeing another stock draw, down to 21.1kt.
- China nickel ore inventory at ports build up since 22nd March and the current stock level is running higher than its 5-year average.
- Testing support into $17,225/50 – the 76.4% last chance saloon and the area we broke up from on the 3rd April. Not to mention that shallow rising trend line.
- More support into $16,850/17k.
- Resistance into its 8 day ma at $17,717.
Zinc
- Light turnover – still running 19% lower than its 20d average. With a $60 intraday range traded which has not achieved any of its ATRs yet.
- Tight zinc concentrate supply onshore remains the main factor which has supported zinc prices of late.
- Although this market the best example of that choppy price action we have discussed and which has become apparent over past week.
- Long liquidation prog on LME paused yday and see how the fast money’s short position continues to cover.
- Shanghai aggregate open interest down 4.3k lots or 2.3% for the 2nd consec session.
- China zinc producer’s operating rate seeing a pick up to 87.14%, from the low in April at 82.26%.
- LME zinc price ignored today’s ferrous and steel price movement initially but followed the later sell off.
- See how Shanghai July Aug spread get offered to 20 contango this morning, easing from recent peak on 13th June at 25 backwardation.
- Shanghai on warrant stocks picked up since 13th June at 82.7kt to 87.5kt. Then in contrast, LME on warrant stocks declined to 227kt.
- Support into $2735/55 – recent lows and trend line. More into $2700 with $2705 representing 61.8% retrace taking move from $2409 low on 27th March to $3185 peak.
- Resistance into $2875/2900.
Lead
- A minimal short position now established on the LME with the fast money having been on the offer.
- Shanghai aggregate open interest up 12.3k lots or 7.4% for the 6th consec session, increased to 178.1k lots, the highest level since 27th September 2023 at 181.8k lots. Length continues to build onshore.
- In terms of onshore fundamentals, SMM reported that the recent tightness in the supply of recycled batteries has been the main factor supporting domestic lead prices. The unexpected reduction and shutdown of recycled lead smelting enterprises in Anhui has tightened the supply of lead ingots.
- See a seasonal chart attached below to illustrate the May operating rate for Chian primary lead producers slowed down, declined to 67.04% from the high in March at 67.99%
- LME and SHFE on warrant stocks continues to build up, especially LME’s restocking momentum has been speed up of late.
- As with copper daily price has stalled into its 8 day ma at $2172. More resistance into $2200.
- Support into $2115/25
Macro
- 13:30hrs Retail Sales
- 14:15hrs Industrial Production
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
