Good morning,
A quiet start to the week with our complex having recently subjected to a large bout of western world risk reduction and with the Chinese spec still sidelined. The latter reflected in the continuing Shanghai open interest declines with aggregate totals at levels not seen since February/March.
China remains a negative with the state of their property sector reflected in the Shanghai’s property index declining to levels last seen on 29th April and as the market was reacting positively to some real estate supportive measures.
SGX Iron ore now down almost $20 from its late May peak and at levels last seen the 1st week of April. However aside from the passive arb bid which has slowed the price descent, we are now beginning to see some signs of official exchange inventory draws. Finally, although not enough yet to confidently suggest that the downstream consumer has returned. This week’s LME Asia meet in Hong Kong will provide some measure as to the parlous state of Chinese sentiment. Their plenum meet next week the 3rd July garnering great significance.
It is half year end on Friday. That around US PCE data which is another inflationary measure for the FED. It will therefore be interesting to see if there are any rotational flows that can benefit our space especially given then BCOM energies sub index is now up more than its industrial metals counterpart on a ytd basis. As we get to Wednesday afternoon that might give us some clue as to those month end flows.
For overall, we have become a bit of a backwater with many worried that the recent slowdown in PMIs and the absence of onshore engagement mean we have seen the highs for 2024. And given it has been the disappointing demand inputs (ours having been a supply led rally), we will be scouring signs for how those averaging books will be set up for July 2nd ring closes, it being the start of a new pricing window.
In the meantime, we chop although our space so much cleaner now with synthetic shorts worthy of note: think the substantive outflows from real money accounts. Moreover, the trade now living on a hand to mouth basis. Sentiment one would hazard, is overall depressed and therefore bearish.
Price performance at cob 21st June 2024:
Ali
- Marex position estimates shows the long having cut from 31.7% and 147.5k lots at its recent peak on 22nd May to 8.1% and 38k lots at Thursday’s close.
- So the long has cut considerably with bearish nano supply readings daily since 12th June bar that one positive demand bar last Thursday.
- Expect a substitution drive to receive official backing around the imminent 3rd plenum. China a big ali producer. Its recent Chinese copper smelter increase more reliant on concentrate and secondary supply sources.
- Shanghai aggregate open interest drops another 8.9k lots or 1.75% its 16th consec decline. At 500.8k lots it has dropped from peak of 686.8k lots on 30th May when price was north of $2750. Lowest aggregate total since 4th March when price was in the low $2200s.
- Shanghai daily on warrant stocks draw and at 163kt down from the 17th June peak of 179kt.
- Comex stocks draw to 37.2kt from 39.4kt on 20th June.
- LME on warrant stocks see a tiny build. Recent financier draws having seen then reduce from its peak of 926kt on 14th May to 467kt last.
- Price finding some support into $2500. More into last week’s $2470 low.
- Resistance into the $2520/30 area – the two trend lines converging and then then 200 hour ma at $2527. Then $2550.
Copper
- Comex aggregate open interest has declined from its recent peak of 317k lots on 13th May to 264k lots last and the lightest total since 15th March.
- Likewise, Shanghai aggregate open interest today resumes its declines and down 5.9k lots to 524.2k total from peak of 633.6k lots on 17th May as price got into its high. Lowest total since 13th March and when price was $8800-8900.
- The long on the LME by Marex estimates having approximately halved. Nano data having become much more choppy of late.
- July Sep comex spread offered today and into $0.25b from Friday’s $1.35b settle and last week’s peak of $7.40b on 20th June.
- Comex stocks down to 9.1kt and lightest since October 2008.
- Shanghai daioly on warrant stocks sees a 147t increase but essentially unchanged but NOT drawing meaningfully yet.
- LME stocks still seeing those inflows into Asian warehouse locations – Chinese smelter material had rumored to be shipped. Need to see these really cease.
- Shift in fx this morning has been supportive. Yuan recovering from lows since last November. Dollar also selling off.
- Price still doing consolidation work around $9615 and the 50% retracement of the ytd range.
- Resistance into $9725/35 then $9775/9800.
- Support $9550 area.
Nickel
- Shorts building on both exchanges. Marex pos estimates on LME show short 11.5% and 15.9k lots at last Thursday’s close and the largest spec short since 12th April. It having peaked at 37.7% and 55.8k lots on the 28th March.
- Nano data having become more choppy although the profile remains bearish.
- LME stocks see another small build and at 86.1kt up from 36.6kt last October to the highest since October 2021.
- Shanghai daily on warrant stocks decline to 19.5kt from 23kt on the 3rd June.
- Onshore stainless has held the 14/17th June lows but its recovery tentative.
- Support into $17k then the $16,525/50 area of lows from late March.
- Resistance into 8 day ma at $17,410. A break above that with potential to trigger some covering.
- Resistance above into $17,550 and previous low then the $18k area.
- Remember nickel a market which exhibits a short gamma profile at points.
Zinc
- Has become very choppy in its trading pattern since its collapse from $2900 to $2750 on the 7th June.
- Its long having reduced to only 4.5% and 6.9k lots at last Thursday’s close down from the peak of 30.2% and 48.2k lots on the 3rd May.
- So the long now out with Marex nanolytics data getting more choppy.
- Shanghai aggregate open interest has seen tiny increases these last few sessions but only up 5.3k lots since Tuesday’s low and at 191.5k lots down from recent peak of 244.6k lots on 29th May. Last week’s low of 186k lots the lightest since early February.
- The weakness in the ferrous space making it tougher for zinc to maintain bounces with SGX iron ore back to early April levels.
- Stocks yet to see meaningful draws from the peaks.
- LME on warrant stocks down from 239kt on the 7th June to 224kt last.
- Shanghai daily on warrant stocks down to 255kt from 269kt on 13th June.
- LME cash to 3s settling Friday at $57.08c easing from $51.03c on 17th June but still tighter than the $62.9c settle on the 7th June.
- Resistance into $2875/2900.
- Support $2825/35 then $2775/85.
Lead
- Shanghai aggregate open interest down for the 3rd consec session albeit today’s drop only 1.2k lots or 0.8% but at 156.1k lots down from the 19th June peak of 215.2k lots. 30th April saw the recent aggregate low at 103.7k lots.
- Lead having seen a small short established LME has been seeing that cover on the bounce off the lows.
- Friday’s nano data the first negative combined supply reading since 14th June.
- LME on warrant stocks have risen to 202kt from 145kt on 5th June albeit still off the 264kt from first week of April.
- In contrast Shanghai daily on warrant stocks have declined to 50.9kt from 71.4kt on 18th June.
- LME cash to 3s into $43.86c from $65.03c on 3rd June but having eased from recent peak of $39.95c on 20th June.
- July showing 1.7k lots of the $2200s. Below the $2150s x 1.1k. Above the $2250s x 1.4k.
- Wedge pattern forming on hourly.
- Support into $2175 then $2150 area.
- Resis into $2200 then $2225.
LME Stocks
• Copper sees another build which our desk has suggested is likely to continue into month end. More deliveries into Asian locations which is suggestive of more of that Chinese smelter material which had been telegraphed. At 120kt Asian LME locations now at the highest level since February 2019. See chart below.
• Otherwise, minimal draws across likes of ali, lead, zinc and tin.
Shanghai On Warrant Stocks
- Copper up tiny. At 255kt still only off 14kt from the 13th June peak of 269kt.
- The rest see draws although still not substantial enough to mark a price turn. But supportive at margins.
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
