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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


Tin, nickel, aluminium extend gains, other metals consolidate

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Base metals prices on the London Metal Exchange and the Shanghai Futures Exchange were more up than down on the morning of Tuesday January 18, with tin, nickel and aluminium on the LME extending gains, while the other metals were consolidating.

• United States two-year treasury yields rise above 1%, highlighting market expectations for a US rate increase in March
• European Union passenger car registrations down 22.8% year on year in December, fall 2.4% in 2021

Base metals
Three-month copper prices on the LME were down by 0.1% at $9,744.50 per tonne and lead was little changed at $2,352 per tonne on Tuesday morning, but the rest of the base metals were up by an average of 0.9%, led by a 1.3% rise in tin ($41,900 per tonne).

The most-traded base metals contracts on the SHFE were mixed. The February contracts for lead and zinc and March copper were down by around 0.2%, with copper at 70,060 yuan ($11.043) per tonne. The February contracts for aluminium, nickel and tin were up by 0.9%, 0.8% and 3.7% respectively.

Precious metals
Spot palladium prices were up by 0.8% at $1,883 per oz. The other precious metals were little changed, with gold ($1,817.03 per oz) and silver ($22.98 per oz) both down by 0.1%, while platinum ($974 per oz) was unchanged. The rebound in the dollar seems to have capped the recent strength in the sector.

Wider markets
The yield on US 10-year treasuries continues to climb and was last at 1.83%, up from 1.78% on Monday.

Asia-Pacific equities were mainly weaker on Tuesday, the exception was China’s CSI 300 that was up by 0.67%, while the rest were weaker: the Kospi (-0.89%), the Hang Seng (-0.41%), the Nikkei (-0.27%) and the ASX 200 (-0.12%).

Currencies
The US Dollar Index was rebounding on Tuesday morning and was recently at 95.35, this after last week’s sell-off low of 94.62. The Index is still below recent support of 95.50 that was broken on January 12.

With the dollar rebounding, other major currencies are giving back recent gains: the euro (1.1396), the Japanese yen (114.88), the Australian dollar (0.7195) and sterling (1.3638).

Key data
Data already out on Tuesday showed Japan’s revised industrial production climbing 7% in November, compared with an initial reading of 7.2%. The Bank of Japan kept interest rates at 0.1%, but raised its outlook on inflation to 1.1%, from 0.9%.

Later, there is data on the employment situation in the United Kingdom, Italy’s trade balance, EU and German data on economic sentiment from the Zentrum fur Europaische Wirtschaftsforschung (ZEW). In the US, the Empire State manufacturing index, housing market index and data on long-term purchases of treasury international capital are due.

The World Economic Forum in Davos is also under way.

Tuesday’s key themes and views
Base metals look upbeat for the most part, with nickel, aluminium and tin pushing the envelope on the upside, while the other metals are consolidating after recent strength. Overall, the inflationary outlook and generally strong economic activity bode well for the outlook for demand and while shipping disruptions remain, supply is likely to remain tight. One of the areas to watch that could dampen sentiment for metals is the broader market’s reaction to higher interest rates - if equities correct then, that could drag metals prices downward too.

Higher US treasury yields and a rebounding dollar seem to have capped gold prices for now, but concerns about inflation and geopolitical tension are expected to keep the metal underpinned.