By Hassan Butt / July 10, 2018 / www.metalbulletin.com /
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Base metals prices on the London Metal Exchange were mostly down during morning trading on Tuesday July 10, led by a significant drop in zinc prices, while ongoing uncertainty around Sino-US trade relations hampers the complex.
Falling more than 3% over the morning, zinc prices are trading at their lowest point since June 2017 as the metal continues to struggle against a tight fundamental backdrop.
Zinc's nearby cash/three-month and July/August spreads are both backwardated at $11 per tonne and $17 per tonne respectively, with the metal's rising stock levels equally supportive of lower prices.
"A short-covering rally emerged last Friday (July 6) and the timing of the technical rebound goes hand-in-hand with LME zinc's improved micro dynamics. A previous dominant warrant holder with 40-49% of the available warrants has increased their holdings to 50-79%," Metal Bulletin analyst Andy Farida said.
"With metal in such tight hands, the LME zinc price could be subject to a short-covering rally if short-sellers are unable to find enough metal to roll-over their positions," he added.
Elsewhere, broad weakness in lead, nickel and copper prices has taken effect, with lead's three-month price edging 1.7% lower during the morning session.
Continued uncertainty surrounding trade relations between the United States and China have added further bearish sentiment toward base metals, deterring investor sentiment amid worries of a slowdown in global economic growth.
Pledging retaliatory measures against the US this morning, China's intentions to raise anti-dumping tariff rates on certain optical fiber products from the North American country could spur further discord between the world's two largest economies.
That said, a sharp rebound in tin prices has been largely incongruous with the rest of complex' losses, with the metal climbing 0.8% over the morning and making a firm approach back towards $20,000 per tonne.
A rising LME inventory count had supported tin's gradual decline in prices over the June-July period, with total stocks at their highest since April 2017.
But this morning's fresh cancelation of 175 tonnes across Port Klang and Rotterdam has added further weight to a potential rebound rally for tin.
Zinc, lead prices drag; tin recovers
The three-month copper price recently traded at $6,354 per tonne, a $36 fall from Monday's close. Stocks climbed a net 75 tonnes to 270,625 total tonnes, while 600 tonnes were freshly canceled in Rotterdam. Aluminium's three-month price fell $16 to $2,105 per tonne. Inventories increased by a net 1,300 tonnes to 1,116,550 tonnes. Nickel's three-month price recently traded $75 lower at $14,140 per tonne. Inventories were down 1,548 tonnes to 263,994 total tonnes, with 72 tonnes freshly canceled in Singapore.The three-month zinc price was down $79 at $2,626 per tonne. Stocks fell 1,950 tonnes to 250,000 tonnes.Lead's three-month price recently traded at $2,300 per tonne, a $39 fall from Monday's closing price. Inventories were down 825 tonnes at 129,775 total tonnes, with 25 tonnes freshly canceled in Moerdijk. The three-month tin price was up $165 at $19,810 per tonne, while inventories remained stable at 3,285 tonnes.
Currency moves and data releases
The dollar index was up 0.02% at 94.11.In other commodities, Brent crude oil was up 0.61% at $78.76 per barrel.In data today, China's consumer price index (CPI) rose 1.9% year on year in June, compared with 1.8% for May, data from the country's National Bureau of Statistics showed. Meanwhile, China's producer price index (PPI) rose 4.7% last month, beating an expected reading of 4.5% and a previous rise of 4.1% in May.Later, we have industrial production from Italy and France along with UK data that includes gross domestic product (GDP), manufacturing production, goods trade balance, construction output, index of services and industrial production.US data out later includes NFIB small business index and Jolts job openings.