Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

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March 2019 | Base Metals

Aluminium prices edge up further this morning, others tread water anticipating direction

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Three-month base metals prices on the London Metal Exchange were for the most part firmer this morning, Wednesday March 20.

The exceptions were copper and tin prices that were both down by 0.1%, with copper at $6,454 per tonne, compared with $6,459 per tonne at Tuesday’s close. The rest were up by between 0.2% for aluminium and 0.6% for both zinc and lead.

Volume was average, with 6,563 lots traded on LME Select as at 7.05am London time, compared with 6,236 lots at a similar time on Tuesday.

Spot precious metals prices were mixed: gold and silver were down by 0.3% and 0.5% respectively, with gold at $1,302.59 per oz, compared with $1,306.10 per oz at the close on Tuesday, while platinum and palladium prices were up by 0.8% and 0.6% respectively.

In China, base metals prices on the Shanghai Futures Exchange were mainly firmer, the exception being May copper that was off by 0.1% at 49,190 yuan ($7,329) per tonne, compared with 49,250 yuan per tonne at Tuesday’s close. May lead was little changed, while the rest of the May contracts were up between 0.6% for tin and 1.4% for nickel.

The spot copper price in Changjiang was up by 0.1% at 49,920-50,230 yuan per tonne this morning from 49,885-50,195 yuan per tonne at a similar time on Tuesday, while the London/Shanghai copper arbitrage ratio was little changed at 7.62.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was considerably weaker, down by 5.1% at 604.50 yuan per tonne from 637 yuan per tonne at the close on Tuesday. On the SHFE, the May steel rebar contract was down by 0.6% at 3,772 yuan per tonne compared with 3,794 yuan per tonne at Tuesday’s close.

In wider markets, the spot Brent crude oil price was firmer by 0.15% at $67.78 per barrel from $67.68 per barrel at the close on Tuesday.

The yield on US 10-year treasuries was firmer this morning - it was recently quoted at 2.6041% from 2.5932% at a similar time on Tuesday. The yields on the US 2-year and 5-year treasuries remain inverted - they were recently quoted at 2.4613% and 2.4178% respectively. The German 10-year bund yield was stronger at 0.1000% after 0.0750% at a similar time on Tuesday morning.

Asian equity markets were mixed on Wednesday: the Nikkei (+0.20%) and the CSI 300 (+0.04) were up, while the Hang Seng (-0.35%), the Kospi (-0.02%), the ASX 200 (-0.36%) all fell.

This follows a mixed performance in western markets on Tuesday: in the United States, the Dow Jones Industrial Average closed down by 0.10% at 25,887.38 and in Europe, the Euro Stoxx 50 was up by 0.62% at 3,409.

The slide in the dollar index has halted for now, being recently quoted at 96.49, compared with a low on Tuesday of 96.29. This may be the calm before the storm as the market waits to hear the latest stance from the Federal Reserve when the Federal Open Market Committee (FOMC) reports this evening.

The other major currencies we follow are also consolidating: the euro (1.1349), the Australian dollar (0.7087), sterling (1.3240) and the yen (111.57).

The yuan is range bound - it was recently quoted at 6.7020 compared with 6.7157 at a similar time on Tuesday. Most of the other emerging market currencies we follow are flat-to-firmer, suggesting little stress in their markets.

Economic data already out today included the German Producer Price Index (PPI), which fell 0.1% after having previously been up 0.4%. There are numerous UK data prices indices out, as well as the Confederation of British Industry (CBI) data on order expectations, US crude oil inventories and the FOMC economic projections, statement, interest rate decision and press conference.

The metals are for the most part consolidating in, or near, high ground, with aluminium setting fresh highs for the year earlier today, while lead prices are in mid-ground as they adjust to the recent re-warranting of cancelled warrants. Overall, the metals seem to be waiting for fresh direction from US-China trade talks and for the most part are well placed to extend this year’s rallies. But that could mean they are also setting themselves up for a fall, should disappointing news emerge.

The heat has come out of the August-to mid-February gold rally and prices are now consolidating either side of $1,300 per oz and could be mapping out a bearish head-and-shoulder pattern on the price charts. Silver is in a similar set-up, while palladium prices remain entrenched in their robust upward trend and platinum prices are still attempting to climb.

William Adams