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09.02.2017

Base metals firmer despite dollar rebound

Base metals firmer despite dollar rebound

The base metals are firmer this morning, Wednesday February 8, with the three-month London Metal Exchange prices up an average of 0.7%.

Gains varied between 0.4% for tin and zinc prices and 1.4% for copper prices that are up $80 per tonne at $5,887 per tonne – boosted by news that workers at Escondida are set to strike from Thursday. Volume has been average with 8,777 lots traded as of 07:09 GMT.

Precious metals prices are little changed this morning, with spot platinum up 0.4% at $1,006.50 per oz, while the rest are either side of unchanged with gold prices at $1,231.10 per oz.

On Tuesday, the LME base metals were generally weaker, down by an average of 0.5%, led by a 1.4% drop in tin prices to $18,985 per tonne, although at the day’s lows prices were down 3.2% at $18,630 per tonne. Precious metals were also weaker on Tuesday, with palladium prices off 1.6% at $759 per oz, platinum prices were down 0.9%, silver prices were off 0.3% and gold prices were off 0.1% at $1,231.90 per oz.

In Shanghai this morning, tin prices are off 0.3%, while the rest are up an average of 1.3%, led by a 2.2% rise in lead prices, while copper prices are up 1.4% at 47,460 yuan per tonne. Spot copper prices in Changjiang are up 1.4% at 47,170-47,370 yuan, meaning the spread is in a small contango, while the LME/Shanghai copper arb ratio is at 8.06.

In other metals in China, May iron ore prices are up 4.3% on the Dalian Commodity Exchange, on Shanghai Futures Exchange steel rebar prices are up 3.5%, while gold prices are up 0.5% and silver prices are up 0.1%. In international markets, spot Brent crude oil prices are little changed at $54.68 per barrel.

In equities on Tuesday, the Euro Stoxx 50 closed down 0.1% and the Dow closed up 0.2%. Asia this morning is more bullish, the Nikkei, ASX 200 and CSI 300 are up 0.5%, the Hang Seng is up 0.7%, while the Kospi is off 0.5%.

In FX, the dollar index at 100.55 is rebounding again – if this is more than just a counter trend move then this could weigh on metals prices. The euro is weaker at 1.0661, as is the Australian dollar at 0.7628, albeit it after a strong rally this year, while sterling (1.2498) and the yen (112.37) are fairly flat. The yuan is weaker at 6.8512, while other emerging market currencies are also slightly weaker having been strong of late.

Data out today showed a drop in Japan’s economic watchers sentiment to 49.8 from 51.4, US crude oil inventory data is out this afternoon, the market will be looking for any signs that inventory is building and later this evening there is data out on Japan’s core machinery orders and M2 money supply – see table below for more details.

The base metals have to varying degrees been consolidating in recent days, but they have taken on a firmer tone again this morning and they for the most part remain well placed to tackle overhead resistance. The exception is tin that seems to have reacted to confirmation from companies that China has removed the 10% export duty on tin. Rumours had been in the market for some time so we are surprised prices have fallen as much as they have, especially as tin prices in China are at a premium of some $1,900 per tonne to LME prices. China has also been a net importer of refined tin in recent years so there may not be much incentive to export even if the 10% export tax is removed.

Gold prices have continued to show strength by extending the rally in recent days, silver and platinum have been following gold’s lead while palladium continues to trade its own fundamentals. Given the strength in the precious metals of late, we would not be surprised if the stronger dollar proves to be a headwind, but overall we expect the geopolitical uncertainty to underpin uptrends in the precious metals.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

Overnight Performance

GMT

07:09

+/-

+/- %

Lots

Cu

5887

80

1.4%

3912

Al

1839

8.5

0.5%

1385

Ni

10420

70

0.7%

1104

Zn

2810

11

0.4%

2032

Pb

2353

17.5

0.7%

320

Sn

19055

70

0.4%

24

 

Average

 

0.7%

        8,777

Gold

1231.07

-0.83

-0.1%

 

Silver

17.65

0

0.0%

 

Platinum

1006.5

4.5

0.4%

 

Palladium

760.1

1.1

0.1%

 
 

Average PM

0.1%

 

 

 

SHFE Prices 07:09 GMT

RMB

Change

% Change

Cu

47460

650

1.4%

AL

13700

80

0.6%

Zn

22920

310

1.4%

Pb

19210

415

2.2%

Ni

86820

600

0.7%

Sn

143960

-370

-0.3%

Average change (base metals)

0

 

1.0%

Rebar

3239

110

3.5%

Iron ore

641

26.5

4.3%

Au

276.95

1.4

0.5%

Ag

4161

6

0.1%

 

Economic Agenda

GMT

Country

Data

Actual

Expected

Previous

5:00am

Japan

Economy Watchers Sentiment

          49.8

          51.9

          51.4

1:00pm

UK

MPC Member Cunliffe Speaks

     

3:30pm

US

Crude Oil Inventories

 

2.7M

6.5M

11:50pm

Japan

Core Machinery Orders m/m

 

3.2%

-5.1%

11:50pm

Japan

M2 Money Stock y/y

 

4.0%

4.0%