LIVE FUTURES REPORT 05/04: LME base metals prices consolidate in low-volume trading; zinc holds above $2,900/t

Base metals prices on the London Metal Exchange were broadly rangebound during morning trading on Friday April 5, with a national holiday in China prompting quiet Asian trading while continued strength in the US dollar above the psychological level of 97 was also limiting commodity investment.

Zinc’s three-month price continued to find support above the $2,900-per-tonne level amid near record lows in LME on-warrant material. Total deliverable material is now at 44,225 tonnes.

In addition, the cash zinc price continues to trade near $3,000 per tonne, while the metal’s cash/three-month indication remains backwardated at $68.75 per tonne.

“[Thursday] seemed to be heading for another dull equity market day and then the copper market was woken with a jolt at 30,000 tonnes of material into LME warehouses. Typically when this happens it’s material being moved around [Asia] in arbitrage plays but this time it was delivered from Europe to [Asia] in varying sized parcels,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning report.

“One theory that has been put forward is that this is a result of Credit Suisse severely cutting back their commodity finance book. If this is the case, how much more metal and not just copper could appear in the LME warehouse system?” Freeman added.

Switzerland-based trading companies handle 60% of the world’s metals trade, as well as 35% in oil and 60% in grains, according to the Swiss Trading & Shipping Association.

Meanwhile, copper’s three-month price continues to trade near $6,450 per tonne after the 30,000-tonne delivery on Thursday. On-warrant material is now at 176,650 tonnes, with just 11% of stock now cancelled, a marked improvement from last month’s dip to 21,600 tonnes on-warrant.

Volumes traded remain thin over the morning, with aluminium leading the complex at 2,270 lots having changed hands.

Other highlights
  • Brent crude oil continues to trade near $70 per barrel amid support from Organisation of the Petroleum Exporting Countries (OPEC) supply cuts, while continued pressure on Venezuela’s oil industry also remains a contributing factor.
  • The US dollar index was also trading in positive territory, spurring unfavorable conditions for commodity investment. The index reached a daily high of 97.33 over morning trading.
  • The zinc-lead price differential, or switch, was recently seen at $917 per tonne. This compares with $918 per tonne at a similar time on Thursday.
  • In EU data this morning, German industrial orders rose by 0.7% in February better than the expected 0.6% gain.
  • Meanwhile, the French trade deficit narrowed to €4 billion ($4.5 billion) in February, improving from €4.2 billion in January and beating an expected dip to a €4.7-billion deficit.

Hassan Butt


Hassan Butt

April 05, 2019

10:20 GMT