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

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January 2022 | Base Metals


Base metals prices upbeat following last week’s dip buying

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Base metals prices on the Shanghai Futures Exchanged registered strong gains on Wednesday January 12, building on the increases on the London Metal Exchange a day earlier. LME metals are having a mixed Wednesday morning, but they generally look upbeat, especially tin and nickel.

* Dollar Index testing support from late-November.
* Weaker-than-expected Chinese consumer prices (CPI), 1.5% in December after 2.3% in November, provides room for further monetary policy easing in China.

Base metals
Three-month prices on the LME were mixed: tin ($41,255 per tonne), copper ($9,830 per tonne) and nickel ($21,980 per tonne) were the main gainers, with increases of 1.4%, 1% and 0.8% respectively, while the rest were either side of unchanged.

The most-traded February base metals contracts on the SHFE were up by an average of 2.8%, led by a 5.4% rise in tin. Nickel gained 4.2%, zinc rose by 3.2% and copper went up by 2.2% to 71,120 yuan ($11,154) per tonne. Aluminium and tin were up by 0.9% and 0.7% respectively.

Precious metals
The precious metals segment was mixed on Wednesday morning, with platinum ($974.50 per oz) rising 0.6% and palladium ($1,912.50 per oz) shedding 0.4%. Gold was off by 0.1%, at $1,819.70 per oz, and silver was up by 0.2%, at 422.79 per oz.

Wider markets
The yield on United States 10-year treasuries remains elevated and was recently at 1.75%, but below Monday’s high of around 1.8%.

Asia-Pacific equities were strong too on Wednesday: the Kospi (+1.54%), the CSI 300 (+1%), the ASX 200 (+0.66%), the Hang Seng (+2.66%) and the Nikkei (+1.92%).

Currencies
The US Dollar Index, at 95.67, is relatively weak since it is close to a two-month low of around 95.50. We wait to see if Wednesday’s US consumer price index (CPI) data provides support to the dollar.

The other major currencies were mixed this morning: the euro (1.1358), the Japanese yen (115.42) and the Australian dollar (0.7206) were consolidating, while the sterling (1.3632) continues to rally strongly.

Key data
Key economic data already out on Wednesday, in addition to China’s CPI, showed that China’s producer price index climbed 10.3% in December, from 12.9% in November; Japan’s economic watchers sentiment edged up to 56.4 in December, from 56.3 in November; and Germany’s wholesale price index climbed 0.2% in December, after a 1.3% climb in November.

Later on Wednesday, there is data on European Union industrial production and US data on crude oil inventories and the Beige book.

In addition, United Kingdom monetary policy committee member Jon Cunliffe and US Federal Open Market Committee member Lael Brainard are scheduled to speak.

Wednesday’s key themes and views
Overall, base metals look robust and are either consolidating or trending higher, with tin setting record highs, nickel setting fresh multi-year highs - it is at its highest since 2012 - and the rest looking well placed to push higher. The fact that recent weakness once again found dip buying suggest there is little appetite to be short of metal and the metals are reflecting the inflationary environment and strained supply chains.

Gold prices have picked up in recent days, driven by what we think is a combination of geopolitical tension, concerns about inflation and, more recently, the weaker dollar.