LIVE FUTURES REPORT 04/06: LME copper price sinks 0.8% despite 20kt fresh cancelation; lead falls below $1,700/t

The three-month copper price on the London Metal Exchange was down during morning trading on Thursday June 4, falling below the $5,500-per-tonne support level in a complex-wide downturn that saw risk appetite soften, while lead futures led on the downside with a 1.9% fall over the morning.

Copper’s underlying price on the LME was recently seen at $5,468 per tonne, down just under 1% from Wednesday’s closing price of $5,524 per tonne, while turnover was low at less than 4,500 lots exchanged as of 10am London time.

Yet downward pressure has emerged across European equity markets this morning, with investors heeding caution ahead of this afternoon’s European Central Bank meeting, where market expectations continue to point to further stimulus measures to boost a crawling European economy.

Meanwhile, this morning’s fresh cancelation of 20,275 tonnes of grade A copper cathodes out of LME-registered warehouses in New Orleans, the United States, did little to bolster the red metal’s price slump. Total on-warrant LME copper stocks are now at 165,175 tonnes.

But copper’s forward curve remains wide, with the metal’s benchmark cash/three-month spread recently trading in a $25.25-per-tonne contango.

“Despite riots, a stalled economy and a global [economic] slowdown, investors keep buying and the metals duly follow along for the ride. Yesterday’s moves in metals and particularly copper were focused on the option declarations, and with the copper’s $5,500-per-tonne strike price that has now gone, there seems little reason for copper to stay up at those numbers,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note on Thursday.

“Nickel’s sudden fall in the afternoon into the $12,600s was also an indication of how quickly these metals could correct especially if the analysts who are looking for a 10-15% US equities correction are proved right,” he added.

Elsewhere in the complex, the three-month lead price was the laggard over the morning, falling by 1.9% to recently trade at $1,690 per tonne, down from Wednesday’s closing price of $1,722 per tonne.

Forward spreads continue to trade in a wide contango for LME lead, with the cash/three-month spread recently seen in a $19.75-per-tonne contango.

But continued weakness in the global automotive sector remains a prominent headwind for the LME lead price, with poor buying appetite from end-use application seeing the metal's LME price susceptible to sharp downturns in recent months.

Other highlights
  • In other commodities, Brent crude oil futures were down by 0.46%, recently trading at $39.23 per barrel.
  • West Texas Intermediate (WTI) was recently at $37.15 per barrel, an incline of 0.04%.
  • In data from the United Kingdom this morning, the country’s construction purchasing managers’ index (PMI) level for the May period was recorded at 28.9, missing an expected level of 29.5, but up from the previous level of just 8.2.
  • Later, the US will release data on unemployment claims for the May period.

Hassan Butt

hassan.butt@fastmarkets.com

Published

Hassan Butt

June 04, 2020

10:47 GMT

London