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LME: 29 June 2013

Metal prices were well down – copper was down by about $400 (£260) per tonne, or about 6%, on the week – after China’s central bank, the People’s Bank of China (PBOC) hurried to inject liquidity into the Chinese banking system.

It is an extension of the markets’ concerns over the US Fed’s indication it would rein in liquidity. While cash from the Chinese economy does not flow into world commodity markets as freely as dollars from the US, the country has been a major buyer of US bonds (especially Treasuries or government paper)so it has contributed to global liquidity.  A further concern is that the PBOC is not nearly as transparent about its intentions as the Fed.

The latter has explained that it will start to phase out injections of cash into the economy once the economy starts reviving (and not before), but that has not stopped the markets from reacting sharply.

Meanwhile, data suggests that the Chinese economy is growing less quickly.  The preliminary purchasing managers’ index (PMI) for manufacturing, compiled for the bank HSBC by Markit Economics, came in at 48.3 in June after 49.2 in May, its lowest level for nine months as both output and new orders were down.

On the US front, the markets were waiting for data on durable goods orders and consumer confidence.  

In the eurozone the preliminary PMI for manufacturing compiled by Markit improved to 48.7 in June from 48.3 in May, and was the best showing for 16 months.  It is, nevertheless, still below 50, and taken together with previous data suggested that the zone’s recession is now in its seventh consecutive quarter.

But the European Union’s Directorate General for Economic and Financial Affairs noted that consumer confidence had improved sharply in both the eurozone and the whole union.  The relevant index for the eurozone stood at minus 18.8 in June after minus 21.9 in May, while for the whole union it was at minus 17.5 against minus 20.2.

And the business climate index for Germany compiled by the Ifo economic research institute rose to 105.9 for June from 105.7 a month earlier.  But the preliminary PMI for manufacturing in Germany from Markit eased to 48.7 in June from 49.4 in May.

In the copper market, Barclays capital noted that mine disruptions were adding up, even though it still expected copper output to grow by 490,000 tonnes this year; having already cut the firm’s estimate from 870,000 tonnes in January.

In detail

On the London Metal Exchange, copper for delivery in three months had fallen further to around $6,676 per tonne earlier this week, from $7,067 a week earlier. These are the lowest levels seen for about three years.  Stocks of copper in warehouses approved by the exchange increased to 678,225 tonnes earlier this week from 629,475 tonnes a week earlier.

Three month aluminium was trading at around $1,776 per tonne earlier this week, down from $1,837 a week earlier.  LME stocks moved up to 5,440,325 tonnes earlier this week, from 5,279,425 tonnes a week earlier.

Three month aluminium alloy held at around $1,780 per tonne earlier this week, down from $1,850 a week earlier. LME stocks eased to 69,040 tonnes earlier this week from 69,140 tonnes earlier this week.

Three month nickel dipped to around $13,370 per tonne earlier this week, from $14,180 a week earlier.  LME stocks rose to 186,198 tonnes earlier this week, from 183,624 tonnes a week earlier.

Three month zinc was relatively little changed at around $1,821 per tonne earlier this week, down from $1,837 a week earlier.  LME stocks eased to 1,065,850 tonnes earlier this week, from 1,083,775 tonnes a week earlier.

Three month lead was quoted at around $2,003 per tonne earlier this week, little changed from $2,016 a week earlier.  LME stocks stood at 195,875 tonnes earlier this week, up from 192,600 tonnes a week earlier.

Three month tin was holding at around $19,630 per tonne earlier this week, down from $20,355 a week earlier.  LME stocks eased to 14,190 tonnes earlier this week from 14,205 tonnes a week earlier.

Steel billet’s three month position rose to around $210 per tonne earlier this week, from $160 a week earlier.  LME stocks eased to 75,335 tonnes earlier this week, from 76,180 tonnes a week earlier.

Gold came under renewed pressure from the fears surrounding Chinese credit moves and the concerns over continuing quantitative easing in the US.  Spot gold bullion was trading at around $1,286.00 per ounce earlier this week, well down from $1,378.80 a week earlier.  Spot silver stood at $19.79 per ounce against $21.90 a week earlier.  Spot platinum fell to $1,357 per ounce earlier this week, from $1,432 a week earlier.

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