Good morning,
Our price action this week summed up by the rally in the precious space yesterday. Our metals remaining under pressure likely related to a RV offer but also the mere fact we remain a bit of a backwater.
China’s imports and their declines a reminder of the domestic demand issues it faces with its reliance on exports resulting in its trade surplus reaching an all time high in June. Trade conflicts and the bifurcation of the world’s economies raise the question how long those exports can be maintained. Monday sees the start of the 3 day plenum. And noticeably ahead of that property names and the Shanghai Property Index have rallied hard. A clear hope of some real estate relief although a reminder of those moves to dissuade short sellers as we alluded to in yday’s note.
Given the moves onshore to protect its banking sector (credit relief) amid the recent surge in bond interest (instructing rural banks to reduce duration of those bond holdings) see also how China’s banking index has rallied today.
This morning, we have arrived to more pressure although would remind you today represents the final day of the official 5 day index roll window. Moreover, Monday sees the LME price cash for 3rd Wednesday. Noticeably ali and nickel have both seen further signs of a consumer scale down bid on the price weakness. Whether that brings a cash bid to that ring 2 close given the lower prices remains to be seen.
But positioning also remains key with tin seeing some long liquidation as mean reversion sell signals were triggered by last night’s settle. In contrast then, nickel is short with the potential for some mean reversion buy signals if we maintain this morning’s gains.
As for copper given the recent trend has been for deliveries to LME Asian warehouses we note this morning’s draw – the result of cancellations but around which we question whether those inflows are coming to an end. The other thing that stands out is how its relationship with the dollar has somewhat dissipated this week. The dollar having weakened as bets on a FED cut in September rise we having no seen positive reaction….yet….
Price performance at cob 11th July 2024:
Ali
- Punchy turnover overnight – running up 33% compared to 20d average.
- LME ali price makes fresh lows at $2465 but this week we have seen a far eastern consumer bid.
- LME ali net combined reading yday seeing the heaviest supply reading since 19th Feb. No signs of any turn yet although one could argue that the negative supply picture has been going on since early June now.
- According to the latest data from the General Administration of Customs on July 12, the export volume of unwrought aluminum and aluminum products nationwide in June 2024 was 610,000 tons, representing a mom increase of 7.96% and a yoy increase of 23.8%. This reflects weaker consumption onshore.
- SHFE aggregate open interest seeing a 14.6k lots or 3.1% increase. Short position is growing.
- China aluminum spot inventory has been declining for a few week but yday’s data saw a minimal draw, down to 776kt from 777kt.
- China alumina units operating rate seeing a big decline, down to 80.61% in June from the peak in May at 83.55%. In contrast, China electrolytic aluminum operating rate increased to 95.57% in June.
- All three exchanges inventory has been largely unchanged.
- See how China 99.7% ali premium and European ali premium increased further today. In contrast, the mid western US ali premium dropped from the peak on 3rd June.
- Weekly support into 21 week ma at $2472 and down to its 200 week ma which comes in at $2441.
- $2454 also representing 50% retrace taking move from Dec low to May peak./
- Resistance into $2525/50.
Copper
- Price was under continued pressure today but then bounced following release of LME and Shanghai stocks data – both drawing.
- Long liquidation continues for LME copper since 9th July owing to the fast money cut their long positions.
- Shanghai aggregate open interest down 2.9k lots or 0.5% for the 4th consec session.
- Currency has been supportive this week where brought some upward momentum to copper prices.
- Liquidity index continues to improve further which is a positive support to copper prices.
- China copper stocks seeing further stock withdraws since 3rd June to 250.8kt. Weekly Shanghai bonded inventory instead still built up its inventory.
- COMEX stocks remained at 9.4kt where is a relatively low level. In contrast, LME and SHFE stocks all seeing stock withdraws.
- China copper concentrate import increased to 2.3 million tonnes in June whilst China copper concentrate output dropped slightly to 1.005 million tonnes.
- Weekly shows the range copper finds itself in. $9500-$10K.
Nickel
- One of today’s outperformers – with a decent turnover which is running up 16% compared to 20d average with a $210 intraday range traded.
- A consumer bid evident once again evident on this week’s break of $17k. Potential for bullish mean reversal buy signal tonight.
- Does the recent moc offer, which commenced 2nd July, come to an end as we exit the official roll window?
- LME nickel still seeing short building prog mainly owing to fast money.
- Both feedstock prices on the like of nickel sulfate price and nickel pig iron prices hold off at its low level.
- Onshore stainless prices dipped lower initially but made a rally afterwards which nickel followed this movement but ranged bound since London kicked off.
- All the onshore renewable energy equity index managed to traded higher today which also brought support to nickel prices.
- LME nickel warrant stocks continue to build and to the highest level last seen in October 2021. In contrast, SHFE weekly deliverable and daily warrant noted stock draws.
- Attach daily to show you how price has closed below its lower boll band last two sessions. If it closes above it tonight (last at $17,820) we think it has similar potential as that seen late March. Ie bounce even if not to the same magnitude!
- Support below $16,500/50.
- Resistance into $17,300 then $17,600.
Zinc
- China zinc concentrate inventory at ports seeing a small build but still running far below historical levels.
- Onshore concentrate tightness situation continues whilst consumption has not shown any catalyst to bloom yet.
- Long liquidation seen on LME zinc since 5th July due to the fast money now flattening their long positions.
- Shanghai aggregate open interest up 2.4k lots or 1.3% for the 2nd consec session.
- Ferrous and steel prices managed to trade higher this morning but zinc prices have ignored this movement.
- LME and SHFE on warrant stocks have been largely unchanged whilst Shanghai weekly deliverable stocks declined tiny.
- Price breaching the rising trend channel on daily but finding support into its 21 day ma at $2909.
- $2905 also this month’s low.
- More support into $2850/75.
- Resistance $2975/3000.
Lead
- A flattish position remains, and the fast money are rebuilding their short positions.
- Shanghai aggregate open interest seen very minimal changes.
- Both Shanghai daily warrant and weekly deliverable stocks seeing stock builds whilst LME warrant stocks declined o 192kt from the recent high on 4th July at 202kt.
- Shanghai July Aug spread traded into 20 backwardation, easing from the peak on 5th July at 105 backwardation.
- Price holding this rising trend line on daily.
- Support into $2175 then $2145 and the 200 day ma.
- Resistance into $2225/50.
Macro
- 13:30hrs PPIs
- 15:00hrs U of Mich Sentiment
LME Stocks
Shanghai On Warrant Stocks
Shanghai Weekly Deliverable Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
