LIVE FUTURES REPORT 22/05: LME base metals prices down amid macro-inspired thin volumes, stronger dollar; Cu down 0.6%

London Metal Exchange base metals prices were suppressed in the morning session on Wednesday May 22, with macro-inspired bearish selling equating to thin trading volumes and a strengthened dollar exerting downward pressure.

“Base metals open in a sea of red amidst a stronger dollar [and] with low levels of general participation in our space we remain vulnerable to sharp price moves amidst lower liquidity,” Marex Spectron said in a morning note on Wednesday.

The LME three-month copper price dipped still lower, down by 0.6% from Tuesday’s $5,996-per-tonne kerb in the morning session, marking the third consecutive day that the red metal’s price has followed lower on thinner trading volumes, with 6,121 lots changing hands as of 9.30am this morning.

The LME three-month copper price continues to trade at odds with a tightening market picture, ignoring a contracting global supply deficit, attributed to imminent crackdowns in Chinese smelters, down 5.9% to 706,500 tonnes month on month in April 2019, according to Sumitomo Metals and Mining. And this physical tightening could well be exacerbated on the news that the Zambian government is looking to liquidate Vedanta’s Konkola Copper Mines.

Copper’s trading trajectory is also running counter to stock movements out of LME warehouses. Indeed, 1,550 tonnes of physical copper were removed from LME warehouses as of 9am on Wednesday, with a further 1,300 tonnes freshly cancelled.

Speculative positioning for the metal plays into the tighter picture with shorts continuing to accumulate in the copper market, with net speculative shorts up to 6.2% of open interest as of Tuesday.

Norsk Hydro’s definitive announcement on Tuesday that it would be running at full production for the second half of 2019 could finally be effecting a downward correction, albeit a marginal one, on the LME three-month aluminium price. The light metal was trading down by $9 per tonne at around $1,787 per tonne in during morning trading on Wednesday from the Tuesday kerb of $1,796 per tonne.

But aluminium could more than likely be following the LME copper price, and the rest of the base metals, to trade down on thinner volumes; just 2,878 lots had changed hands as of 9.43am on Wednesday.

Other news
  • The US dollar is up a slight 0.02% to 98.04 but continues to weigh heavy on the base metals nonetheless.
  • Data to be released from the United States on Wednesday includes crude oil inventories as well as the minutes from the Federal Open Market Committee’s latest meeting. With much hinging upon US trade tariffs and the country’s contentious relationship with China, the metals market will no doubt be looking forward to the latter.

Amy Hinton

amy.hinton@fastmarkets.com

Published

Amy Hinton

May 22, 2019

10:15 GMT

London