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LME METALS round up - 27 July

The eurozone’s troubles were, once again, undermining the financial markets – including metal markets.

This time there were two euro story-lines worrying sentiment.  The first was that the International Monetary Fund, the European Commission, and the European Central Bank were about to decide whether to accord Greece a final tranche of EUR 31.5 billion of aid, even as the country was falling behind with cutting debts and spending (albeit because the economy was shrinking faster than expected).  It could be crunch time, if they refused.

The second was Spain’s increasing difficulties in refinancing its debts. At its last auction, Spain managed to raise enough money, but had to pay over 7%, which is considered high. There were also concerns that a number of Spanish regions, starting with Valencia, will need to have their finances rescued by the central government.

All of this pushed the ratings agency Moody’s to put Germany’s, as well as Holland’s and Luxembourg’s, AAA credit ratings on “negative” watch. 

Strictly speaking, negative watch means that there is a risk of a cut in the rating in the next two years, but Moody’s move reflects a view that Europe may have to do more to aid Spain.  Thereafter, there is also Italy…

No wonder that the euro was around its lowest levels for about two years. This too tended to depress metal prices as it reduced the numbers of dollars that euro-based buyers would be prepared to bid for any metal that they wanted.

To add to the gloom, the preliminary purchasing managers’ composite output index compiled for Germany by Markit Economics dipped to its lowest level for over three years, standing at 47.3 in July, down from 48.1 in June. Furthermore, the preliminary composite output index for the whole of the eurozone from the same source came in at 46.4 in July, unchanged from June.

These two figures sapped what little optimism had been generated by the slight improvement in data for China seen earlier. The preliminary purchasing managers’ index covering manufacturing compiled for the bank HSBC had risen to 49.5 in July from 48.2 in June; this had suggested that the Chinese economy was contracting more slowly. 

PRICES

On the London Metal Exchange, copper for delivery in three months was trading at around $7,411 per tonne earlier this week, against $7,710 a week earlier.  Holdings of copper in warehouses approved by the exchange dipped further to 251,450 tonnes earlier this week from 252,900 tonnes a week earlier.  The charts pointed to support for the copper market at around $6,825, and to resistance above $8,050.

Three month aluminium was quoted at around $1,872 per tonne earlier this week, down from $1,921 a week earlier.  LME stocks rose to 4,845,400 tonnes from 4,806,475 tonnes during the week.  Traders indicated that the tightness seen around September and October was easing.

Three month aluminium alloy stood at $1,790 per tonne earlier this week, little changed from $1,785 a week earlier; LME holdings stood at 93,960 tonnes, down from 95,380 tonnes a week earlier.

Nickel was trading with the three month position at around $15,527 per tonne, against $16,214 a week earlier.  LME stocks edged up to 110,580 tonnes, up from 106,998 tonnes a week earlier. 

Three month zinc was trading at around $1,812 per tonne earlier this week, down from $1,885 a week earlier.  LME stocks rose to 1,007,300 tonnes earlier this week, from 996,725 tonnes a week earlier

Three month lead was trading at around $1,859 per tonne earlier this week, down from $1,905 a week earlier.  LME stocks eased to 334,850 tonnes, from 343,175 tonnes a week earlier. 

Three month tin was trading at around $17,863 per tonne earlier this week, having fallen from $18,925 a week earlier.  LME stocks fell to 11,720 tonnes earlier this week from 11,955 a week earlier. 

Steel billet was trading with the three month position at around $420 per tonne earlier this week, unchanged from a week earlier.  LME stocks stood at 43,680 tonnes, also unchanged on the week.  Precious metals were unable to avoid the negative sentiment that tended to depress all of the markets.  The weaker euro/stronger dollar also took its toll.  This left spot gold bullion trading at around $1,575.00 per ounce earlier this week, down from $1,598.30 a week earlier.  Spot silver was trading around $27.00 per ounce, where it was finding some support, down from $27.62 a week earlier.  Spot platinum was also lower, at $1,391 per ounce earlier this week, down from $1,435.

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