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LME report 18 January 2014

Nickel was the base metal which saw its price boosted when Indonesia’s ban on ore exports came into force.  Three-month nickel rose to over $14,000 (£8,500) per tonne. 

Chinese stainless steel manufacturers buy the ore for their nickel pig iron from Indonesia, so they may well have to revert to buying nickel once they run out of nickel pig iron.

Other metals marked time despite help from rising Chinese imports.  For example, copper shipments exceeded 400,000 tonnes for the fourth consecutive month in December, and aluminium imports rose to 125,000 tonnes – their best monthly total since September 2009.

Also, Indonesia’s ban was softened to allow exports of concentrates of copper, iron ore, lead, and zinc (as well as manganese) to continue for another three years, provided that taxes are imposed on these exports, and be raised every six months until concentrate shipments stop.  There was also a let out for mining companies that promised to build smelters locally.

The markets also suffered disappointment when US non-farm payroll data showed that the American economy had only created some 74,000 new jobs in December; this was well below the 196,000 jobs that the markets were expecting.

This set off a flurry of speculation about whether the Federal Reserve (the US central bank) would have to rethink its tapering programme (the reduction in money being pumped into the economy).  It is unlikely that the Fed would flinch in response to one month’s data, especially as the unemployment rate dipped to 6.7% from 7% (though that was for the bad reason of people dropping out of the labour market).

The markets’ disappointment also caused the dollar to weaken, which inevitably boosted dollar denominated metal (and other commodity) prices, since it allowed traders with budgets in other currencies to bid a higher dollar price while staying within their chosen limits.

The payroll report also showed that some 273,000 American workers were stopped from working in December by the fiercely cold weather that has been affecting the country.  This is about twice as many as the 138,000 or so who might be prevented from working in an average year.  It had caught forecasters unprepared.  And the possibility remains that the impact of weather will also be severe in January.

In detail

On the London Metal Exchange, aluminium for delivery in three months edged up to around $1,763 per tonne earlier this week, from $1,762 a week earlier. Stocks of aluminium in warehouses approved by the exchange dipped to 5,430,750 tonnes earlier this week from 5,455,400 a week earlier.

Three month aluminium alloy held at $1,800 per tonne earlier this week, little changed from $1,810 a week earlier.  LME stocks edged down to 56,340 tonnes earlier this week, from 56,440 a week earlier.

Three month copper eased back to $7,276 per tonne earlier this week, from $7,291 a week earlier, while LME stocks eased to 340,775 tonnes from 356,125 tonnes during this time.

Three month lead slipped to around $2,141 per tonne earlier this week, from $2,163 a week earlier, while LME stocks dipped to 212,500 from 215,000 a week earlier.

Three month nickel pushed up to $14,050 per tonne earlier this week, from $13,640 a week earlier.  LME stocks rose to 261,648 tonnes earlier this week, from 260,862 tonnes a week earlier.

Three month tin rose to $21,900 per tonne earlier this week, from $21,410 a week earlier.  LME stocks eased to 9,620 tonnes earlier this week, from 9,655 a week earlier.

Three month zinc rose to around $2,043 per tonne earlier this week, from $2,017 a week earlier.  LME stocks dipped to 901,300 tonnes earlier this week from 922,850 tonnes a week earlier.

Steel billet’s three month position rose to $365 per tonne earlier this week, from $300 a week earlier. LME stocks stood unchanged at 16,510 tonnes after this time.

Precious metals responded to the lower dollar.  Spot gold bullion was trading at around $1,249.60 per ounce earlier this week, against $1,240.10 a week earlier.  Spot silver was at $20.33 per ounce against $20.19, while spot platinum was firmer at $1,435 per ounce against $1,416.

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