Market and product

Base metals struggled on Wednesday morning in brisk LME trading – the previous moves higher proved unsustainable, with retreating into negative territory.

Copper and nickel were hardest hit – both fell 2.1 percent, with the former sinking to two-and-half-month lows.

“Weak global stock markets, which express higher risk aversion among market participants, are evidently weighing on metal prices. After making moderate gains yesterday, they find themselves under pressure across the board this morning,” Commerzbank noted.

The Shanghai composite ended 1.27 percent lower at 2,807.514 while the FTSE 100 was down 0.46 percent to 6,139.14.

The dollar has also gained ground, with the index up around 0.25 percent at 94.80 after hawkish comments from several Federal Reserve officials, who noted yesterday that two or three interest rate increases this year are possible.

The minutes of the previous FOMC meeting could shed some light on the Fed’s thinking.

“As they did last week, the metals’ early attempt to rebound has run into selling. Prices look vulnerable again; at best they are testing recent lows while they try to hammer out a base; at worst they will continue to correct,” FastMarkets’ William Adams said.

“Poor Chinese data out of late, combined with a more hawkish outlook for US interest rates and a correspondingly firmer dollar, could weigh on prices,” he added.

In data today, the CPI and the final core CPI are due from the EU. The US has crude oil inventories, which will be watched with interest – the previous week’s decline sparked a run higher.

Brent oil has been moving towards $50 because of supply disruptions around the world but at $49.09 per barrel was down 0.39 percent on Tuesday’s closing level.

Meanwhile, the LME commitment of trade report (COTR) showed that speculative market participants retreated from metals last week. Net long positions were “reduced significantly”, particularly in copper, aluminium and nickel, which has also contributed to the price decline, Commerzbank noted.

Copper at $4,579 per tonne was down $98 on Tuesday’s close. Tightness in the forward curve has also eased – cash/threes was last at a backwardation of just $4.50.

Stocks fell a net 100 tonnes to 156,850 tonnes and cancelled warrants.

Aluminium fell $9 to $1,536; stocks fell 4,600 tonnes to 2,571,125 tonnes and cancelled warrants dropped 4,550 tonnes at 1,056,650 tonnes.

Nickel was $185 lower at $8,610 although stocks declined 1,680 tonnes to 404,178 tonnes. Cancelled warrants fell 1,488 tonnes to 122,388 tonnes.

Lead was $20 lower at $1,702; stocks and cancelled warrants both fell 850 tonnes to 180,450 tonnes and 23,475 tonnes respectively. Zinc dropped $25 at $1,702 – inventories fell 1,000 tonnes to 388,475 tonnes.

Tin at $16,780 was down $180 after stocks rose 105 tonnes to 6,615 tonnes. Steel, cobalt and molybdenum were neglected.