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Base metals ran into selling pressure on the London Metal Exchange on Thursday morning when investors took profits after the recent run-up in metal prices.
Crude oil prices surged to three-week highs early in Asia following reports that OPEC members have reached an initial deal to cut oil output – spot Brent crude reached $49.07 per barrel.
OPEC agreed on Wednesday to reduce its oil production to 32.5 million barrels per day from 33.24 million barrels per day, Reuters reported. The deal is set to be formalised in November.
“You would expect this to filter through to cost inflation for the metals complex but a firm dollar is pinning down base prices and we’re seeing some modest profit-taking early on today,” Sucden analyst Kash Kamal told FastMarkets. “It is unusual, though, as mining stocks are flying but metal prices are lower.”
There could be some choppy end-of-week moves and book squaring because the end of the month coincides with a week-long absence from China from Monday.
Copper at $4,821 was up $2 on Wednesday’s close, having earlier jumped to $4,860 on reports of a power outage in Australia that forced BHP to suspend operations at its Olympic Dam copper-gold mine. It is not yet certain when production can restart.
Stocks increased a net 10,100 tonnes to 379,175 tonnes – a move centred on New Orleans, where inventories climbed 7,075 tonnes to 46,675 tonnes. Still, Asia stocks also rose – up 2,775 tonnes and 2,025 tonnes respectively in Busan and Port Klang.
Lead has been the stand-out performer, reaching its highest since May 2015 at $2,023 on news that Nrystar’s Port Pirie furnace faces two weeks of closure.
Nearby spreads have tightened – the benchmark cash/threes is at a backwardation of $2.25, cash/Oct at $7 and ‘Tom’/Next at $2. Stocks fell 300 tonnes to 190,700 tonnes.
Tin was holding around multi-month highs – stocks, which were unchanged for today, are at historical lows. The metal was last at $19,940, up $130, but continues to encounter strong resistance at $20,000.
Zinc was $3 higher at $2,335. There is a small backwardation on the cash/Oct date of $1.75. Stocks and cancelled warrants both fell 675 tonnes to 439,975 tonnes and 27,200 tonnes respectively.
While a Nyrstar smelter restart has had little impact on prices, prices could come under pressure if others follow suit.
“In this case the supply deficit on the global zinc market would probably turn out to be not quite as high as currently anticipated,” Commerzbank said.
Aluminium at $1,667 was up $2 – stocks fell 4,875 tonnes to 2128750 tonnes and cancelled warrants were down 3,875 tonnes to 862,800 tonnes.
Nickel at $10,625 was the only metal in negatively territory, falling $70. Stocks climbed 564 tonnes to 362,448 tonnes.
The Philippines has ordered the suspension of another 20 more mines to be suspended. They have seven days to make; if appropriate measures are made, prices may come back down, traders said.
Source: FastMarkets, 2016
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