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LME report: 30 November 2013

The metal markets drifted sideways in a week during which business would be curtailed by the Thanksgiving holiday in the US.

The recent big news – the deal between the main world powers and Iran over the latter’s nuclear programme – has had relatively little impact on markets, though it did contribute to modest easing of the oil price and a slight improvement in appetite for riskier investments.

The Federal Reserve (US central bank) is also edging towards “tapering” its quantitative easing policy.  While this has been signalled for a long time, and should not spark a sell-off of riskier investments such as metals, it nevertheless makes many traders nervous.  One member of the Fed suggested that if the next non-farm payroll number, due on 6 December, is again over 200,000, tapering could start in December.

While waiting for the big picture to evolve, the markets saw the preliminary purchasing managers’ index (PMI) for manufacturing in China, prepared for the bank HSBC by Markit Economics, ease to 50.4 in November from 50.9 in October, pointing to less growth.  This was attributed to slowing export orders, and slower restocking.

In contrast, the preliminary PMI for manufacturing in the eurozone, published by Markit, edged up to 51.5 in November from 51.3 in October.  Overall performance of the eurozone was however held back by slower growth in services.

Also, the business climate in Germany, as measured by the Ifo economic research institute, improved and stood at its best level since the spring of 2011.  The relevant index stood at 109.3 in November, up from 107.4 in October.

The London Metal Exchange’s (LME’s) recently announced plans to reduce the queues for getting metal out of approved warehouses did initially reduce the premiums payable for physical metal, but these have now started to go up again.  And given the smelter closures observed in the developed countries, physical premiums could rise further.

Also, the Shanghai Futures Exchange is to start trading aluminium, copper, lead, and zinc between 2100 and 0100 hours Beijing time from 20 December.  This corresponds to 1300 to 1700 hours London time, so it remains to be seen what impact this will have on trading on the LME.

In detail

On the London Metal Exchange, aluminium for delivery in three months hovered at around $1,776 per tonne earlier this week, down from $1,784 a week earlier. Stocks of aluminium in warehouses approved by the exchange edged up to 5,410,275 tonnes earlier this week from 5,335,050 tonnes a week earlier.

Three month aluminium alloy barely moved, standing at $1,788 per tonne earlier this week against $1,790 a week earlier.  LME stocks slipped to 59,840 tonnes earlier this week, from 60,540 tonnes a week earlier.

Three month copper recovered to $7,070 per tonne earlier this week, from $6,996 a week earlier.  LME stocks eased to 437,500 tonnes earlier this week from 448,950 tonnes a week earlier.

Three month lead was effectively unchanged at around $2,091 per tonne earlier this week, down from $2,092 a week earlier.  LME stocks dipped slightly to 233,625 tonnes earlier this week, from 236,125 tonnes a week earlier.

Three month nickel was holding at $13,545 per tonne earlier this week, down from $13,760 a week earlier.  LME stocks edged up to 249,012 tonnes earlier this week, from 244,614 tonnes a week earlier.

Three month tin barely moved, standing at around $22,900 per tonne earlier this week, down from $22,910 a week earlier.  LME stocks eased to 11,090 tonnes earlier this week, from 11,480 tonnes a week earlier.

Three month zinc edged up to around $1,899 per tonne earlier this week, from $1,893 a week earlier.  LME stocks slid to 973,350 tonnes earlier this week from 996,550 tonnes a week earlier.

Steel billet’s three month position edged up to $250 per tonne earlier this week, from $245 a week earlier. LME stocks eased to 17,615 tonnes earlier this week from 17,680 tonnes a week earlier.

Precious metals eased.  Spot gold bullion was trading at around $1,253.00 per ounce earlier this week, down from $1,275.80 a week earlier.  Spot silver eased to $20.22 per ounce earlier this week from $20.42 a week earlier, and spot platinum traded at $1,391 per ounce, down from $1,406 a week earlier.

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