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LME METALS round-up: 28 September

This week there was more of the markets’ favourite medicine, but it was tempered by doubts about whether it was quite as effective as everyone had been assuming and hoping.  It was not quite enough to depress prices, but a few long positions were being liquidated.

The Bank of Japan (Japan’s central bank) has announced plans to buy a further JPY 10 trillion ($128 billion) of Japanese government bonds and treasury bills, adding to the liquidity splurge already promised by the European Central Bank and the US’s Federal Reserve.

A number of relatively poor indicators, however, left the markets wondering if the liquidity injections were working as well as they should.

Meanwhile, the Chinese provincial government of Yunnan said it was going to buy up some 200,000 tonnes of aluminium, about 50,000 tonnes of zinc and perhaps 20,000 tonnes of copper.  The government was aiming to support local smelters, but it helped general sentiment too.

Perhaps the most important of the indicators was the preliminary figure for the survey of China’s purchasing managers concerning (general sentiment) compiled by the bank HSBC.  This rose slightly to 47.8 for August from 47.6 in July, but remained firmly below 50 – below expectation of growth – where it has been for nearly a year.  At the same time China will be absent from the markets during the first week of October, for a holiday which includes both the mid-autumn festival, and National Day, but that also led to some stockpiling.

Analysts also noted that Japan’s exports to China fell by 9.9% in the year to August, whereas those to the “sluggish” US economy rose by 10.3% (It needs to be remembered that the dispute over the Senkaku (or Diaoyu) islands has resulted in an at least theoretical boycott of Japanese goods in China.)

The leading indicators for the US economy published by the trade association Conference Board eased by 0.1% to 95.7 (2004 = 100) in August.  While this was in line with expectations, it was nevertheless a poorer performance than the 0.4% rise seen a month earlier.

The preliminary purchasing managers’ index for manufacturing in the eurozone for September rose to its highest level for six months, according to Markit Economics, reaching 46.0, up from 45.1 in August.  But the corresponding index for composite output was at a 39-month low of 45.9, down from 46.3 in August.

Market details

On the London Metal Exchange, copper for delivery in three months was trading at around $8,238 per tonne earlier this week, barely changed from $8,241 a week earlier.  Holdings of copper in warehouses approved by the exchange rose to 220,300 tonnes earlier this week from 213,925 tonnes a week earlier.

Three month aluminium was quoted at around $2,096 per tonne earlier this week, down from $2,146 a week earlier.  LME stocks rose to 5,080,725 tonnes from 5,078,750 tonnes a week earlier.

Three month aluminium alloy dipped to around $1,980 per tonne earlier this week, from $2,090 a week earlier; LME stocks eased to 78,500 tonnes from 80,840 tonnes a week earlier.

Three month nickel was holding at around $18,274 per tonne, up from $17,906 a week earlier.  LME stocks rose to 122,442 tonnes, from 119,982 tonnes a week earlier.

Three month zinc was trading at around $2,122 per tonne earlier this week, up from $2,076 a week earlier.  LME stocks rose to 976,125 tonnes earlier this week, up from 919,900 tonnes a week earlier.

Three month lead stood around $2,287 per tonne earlier this week, up from $2,241 a week earlier.  LME stocks held at 277,600 tonnes earlier this week, down from 288,550 tonnes a week earlier.

Three month tin was trading at around $21,150 per tonne earlier this week, down from $21,300 a week earlier.  LME stocks edged up a little, standing at 12,055 tonnes earlier this week against 11,955 tonnes a week earlier.

Steel billet was trading with the three month position at around $370 per tonne earlier this week, up from $355 a week earlier.  LME stocks eased to 49,985 tonnes earlier this week from 50,115 tonnes.

Gold was still holding steady.  Spot gold bullion traded up to around $1,766.60 per ounce earlier this week, from $1,760.00 a week earlier.  But spot silver eased to $34.17 per ounce from $34.24, while spot platinum edged down to $1,625 per ounce from $1,662.

 

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 $8,190 per tonne, while resistance is likely above $8,425.
  • Aluminium: support is likely around $2,075, while resistance was likely above 2,130.
  • Aluminium alloy: support is likely around $1,675, and resistance above $2,330.
  • Nickel: support is likely around $17,750, while resistance is likely above $18,400.
  • Zinc: support is likely around $2,075, while resistance is likely around $2,150.
  • Lead: support is likely around $2,220, while resistance is likely above $2,310.
  • Tin: support is likely around $20,950, while resistance is probable above $21,900.
  • Steel billet: support is likely around $350 per tonne, while resistance is likely above $400.
  • Gold: support is likely around $1,750, while resistance is likely around $1,780.
  • Silver: support is likely around $33.90, while resistance is likely above $34.30.
  • Platinum: support is likely around $1,610, while resistance is likely above $1,670.

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