LIVE FUTURES REPORT 24/02: Fresh cancelation fails to bolster LME zinc price; copper slips below $5,700/t

The three-month zinc price on the London Metal Exchange was lower during morning trading on Monday February 24, with price action down by 2.4% and trading at its lowest level since July 2016, while copper futures also fell through nearby support levels.

Zinc’s outright price on the LME recently traded at $2,059 per tonne on Monday morning, falling from an intra-morning high of $2,101 per tonne, while turnover was high at some 4,900 lots exchanged as of 9.45am London time.

Yet zinc’s price decline comes against a fresh cancelation of some 1,300 tonnes this morning, the bulk of which was booked out of LME-registered warehouses in Vlissingen, the Netherlands. Total LME zinc stocks remain well supported however at some 75,375 tonnes, while 75,175 tonnes remain on-warrant.

Meanwhile, forward spreads in LME zinc continue to trade in contango, with the metal’s benchmark cash/three-month spread recently trading in a $19-per-tonne contango.

“Over the past few weeks we have seen the build-up of out of the money put option positions as longs bought insurance and speculative players looked for a cheap entry level in case of a collapse,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.

“Some of these are getting closer to being in the money which will inevitably trigger delta hedge selling. If the equities keep falling and the metals also start to follow them this could turn out to be a very long week indeed,” he added.

Elsewhere in the complex, the three-month copper price failed to hold above the $5,700-per-tonne level this morning, slipping by 1.3% to recently trade at $5,688 per tonne.

Similarly, copper’s price decline comes against a fresh outflow of 1,850 tonnes, the bulk of which was removed out of LME-registered warehouses in Rotterdam, the Netherlands.

Total LME copper stocks now sit at 161,575 tonnes, while on-warrant material now sits at 116,600 tonnes.

Price action for the red metal jumped above $5,800 per tonne last week, but failed to close above that level last week, while forward spreads continue to trade in contango, with its cash/three-month spread recently trading in a $17.93-per-tonne contango.

Other highlights
  • In other commodities, Brent crude oil futures fell by 3.02% this morning, recently trading at $55.86 per barrel.
  • Meanwhile, the dollar index rose over the morning, recently trading 0.24% higher at 99.58.
  • In European data released this morning, the German Ifo business climate index for the February period was better at 96.1, topping expectations at 95 and improving from the previous level of 95.9.

Hassan Butt

hassan.butt@fastmarkets.com

Published

Hassan Butt

February 24, 2020

10:26 GMT

London