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January 2021 | Base Metals


Base metals prices, broader markets bullish

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Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were up across the board this morning, Thursday January 21, showing dips and pauses are attracting further buying, with tin and nickel leading on the upside.

US equity futures and many Asian-Pacific equity indices are setting record or multi-decade highs.

Base metals
Three-month base metals prices on the LME were up by an average of 0.6% this morning, led by a 1.5% rise in nickel ($18,455 per tonne) and 1% gain in tin ($21,950 per tonne), with the latter challenging the triple highs from 2016, 2018 and 2019 that lie between $21,800 and $22,000 per tonne. The rest were up between 0.2% and 0.5%, with copper up by 0.3% at $8,068 per tonne.

The most-traded base metals contracts on the SHFE were also up across the board by an average of 1.4%, led by a 2.2% rise in March tin, followed by a 1.9% rise in March aluminium, with the March contracts of nickel, lead and zinc up by between 1% and 1.4%, while March copper lagged behind with a 0.5% gain to 59,370 yuan ($9,177) per tonne.

Precious metals
Spot gold was up by 0.2% at $1,873.22 per oz this morning, while the rest of the precious metals were up by an average of 0.6% – see table below for more details.

Wider markets
The yield on US 10-year treasuries has slipped and was recently quoted at 1.08%, down from 1.10% at a similar time on Wednesday.

Asian-Pacific equities were mainly positive this morning: the Kospi (+1.49), the ASX 200 (+0.79%), the CSI (+1.62%) and the Nikkei (+0.82%), while the Hang Seng (-0.39%) bucked the trend.

Currencies
The US Dollar Index turned lower on Tuesday and continues to drift lower this morning; it was recently quoted at 90.30, this after a recent high of 90.96. The recent low was at 89.21 on January 6.

The other major currencies were firmer this morning in light of the dollar weakness: the euro (1.2131), the Australian dollar (0.7757), sterling (1.3703) and the yen (103.45).

Key data
Thursday’s economic data includes a Bank of England credit conditions survey, UK industrial order expectations from the Confederation of British Industry, while the European Central Bank will decide on interest rates, release a policy statement and hold a press conference. There is also data on EU consumer confidence.

US data includes initial jobless claims, the Philly Fed manufacturing index, building permits and housing starts.

Today’s key themes and views
As we said earlier in the week it will be interesting to see the depth and durability of any pullback in the base metals to gauge how strong underlying sentiment is. With nickel and tin leading on the upside, zinc and aluminium rebounding and copper and lead climbing back toward highs, sentiment remains robust with tailwinds strengthened while the markets wait for more details on the latest US fiscal policy. We wait to see if copper prices break higher, which would provide some confirmation that the underlying bull trends are intact.

Gold prices were rallying again this morning and are in sight of the upper boundary of their down channel that is at $1,882 per oz. Overall, we see the yellow metal continuing to consolidate its September 2018 - August 2020 bull run and it would take a move back above $1,965 per oz to suggest the uptrend is resuming.

William Adams
Fastmarkets