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LME METALS round-up: 17 August

The markets are starting to worry that the slowdown in Europe is beginning to affect Chinese growth.

Both of these major economies published disappointing figures.  In China’s case, exports grew by just 1% year-on-year in July, according to official figures, well below the 11.3% seen in June, and also well below the expectations of 8%. 

In Europe, the Eurostat agency noted that both the full union of 27 countries, and the core eurozone of 17 countries saw their gross domestic product contract by 0.2% in the second quarter of this year; in the first quarter both of these areas had seen GDP stagnate (grow by 0%).  Germany, however, managed growth of 0.3% in the second quarter, while Italy, Spain, and Portugal all showed declines, of 0.7%, 0.4%, and 1.2%respectively. 

The UK was also down by 0.7% on the quarter.

Meanwhile, the indicator of economic sentiment for Germany prepared by the ZEW economic research institute fell by 5.9 points to minus 25.5 points.  This means that the German economy is expected to cool during the next six months.  The indicator is, however, not as low as the minus 60 mark seen at the height of the crisis in 2008.

Equally, industrial production in the full union dipped by 0.9% between May and June of this year, while in the eurozone it contracted by 0.6% during this time.

A more detailed look at the Chinese data shows the country’s exports to the eurozone fell by 16.2% (year-on-year) in July, though domestic demand was also below expectations with imports, for example, increased by on 4.7% (y-o-y in July) against a figure of 6.3% in June, and hopes of a 7.0% increase in July.  Earlier Chinese retail sales disappointed, rising by 13.1% year-on-year in July, below the 13.7% seen in June, and below the 13.6% hoped for by the markets.

Elsewhere, Japanese GDP numbers were also disappointing.  The country’s economic output rose by just 0.3% between the first and second quarters of this year, about half of what had been expected, to give an annualised growth rate of 1.4%.  Domestic demand contributed growth of 0.4% between the two quarters, but external demand fell by 0.1%.

Metals details

On the London Metal Exchange, copper for delivery in three months was trading at around $7,445 per tonne earlier this week, down from $7,535 a week earlier.  Holdings of copper in warehouses approved by the exchange eased to 237,500 tonnes earlier this week from 245,050 tonnes a week earlier. 

Three month aluminium was holding at around $1,864 per tonne earlier this week, down from $1,886 a week earlier.  LME stocks rose to 4,896,725 tonnes from 4,874,650 tonnes a week earlier.

Three month aluminium alloy stood at $1,770 per tonne earlier this week, compared with $1,800 a week earlier; LME stocks stood at 90,720 tonnes, down from 92,380 tonnes a week earlier.

The three month position of nickel was quoted at around $15,377 per tonne, down from $15,787 a week earlier.  LME stocks eased to 115,878 tonnes, from 116,670 tonnes a week earlier.

Three month zinc was holding at around $1,834 per tonne earlier this week, down slightly from $1,854 a week earlier.  LME holdings fell to 966,025 tonnes earlier this week, from 988,625 tonnes a week earlier.

Three month lead traded at around $1,875 per tonne earlier this week, down from $1,896 a week earlier.  LME stocks stood to 322,700 tonnes, against 326,025 tonnes a week earlier. 

Three month tin was at around $17,900 per tonne earlier this week, down from $18,220 a week earlier.  LME stocks edged down to 11,660 tonnes earlier this week from 11,705 a week earlier. Exports of refined tin from Indonesia dipped by 14% between June and July, to some 8,298 tonnes in July.

Steel billet was trading with the three month position at around $395 per tonne earlier this week, unchanged on the week.  LME stocks were at 55,835 tonnes, down from 57,070 tonnes a week earlier.

Precious metals were barely changed with spot gold bullion at around $1,615.80 per ounce earlier this week, against $1,615.00 a week earlier; spot silver was $27.99 per ounce, against $28.00, and spot platinum was unchanged at $1,408 per ounce.

The charts

Chartists, who plot the prices of various commodities (and securities) on graphs, seek to observe patterns which will help them predict how the various markets are going to behave. One may have more or less faith in the value of this type of analysis, but it is undeniable that significant numbers of traders follow what the numerous chartists are saying, and frequently act on their opinions.

The following are more or less representative of what the charts are forecasting for the main metals:

  • Copper: support is likely around $7,200 per tonne and $6,800, while resistance is likely above $7,800 and $8,000.
  • Aluminium: support is likely around $1,830 and $1,500, while resistance was likely above 1,900.
  • Aluminium alloy: support is likely around $1,675, and resistance above $2,330.
  • Nickel: support is likely around $15,000, while resistance is likely above $16,400 and $19,075.

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