METALS-London copper climbs as bets on delayed Fed hike dent dollar

Date Jun 19 2015 08:55:16


China home prices fall 5.7 pct y/y in May

Coming Up: U.S. Philly Fed business index for June at 1400 GMT


(Reuters) - London copper climbed on Thursday as market expectations shifted towards a December U.S. rate hike, which dented the dollar, and suggested industry may have longer to access cheaper capital.


The U.S. economy is growing moderately after a winter swoon and likely strong enough to support an interest rate increase by the end of the year, but concerns remain over the recovery of the labour market, Federal Reserve officials said.


The Fed's caution and a potential Greek eurozone exit underscored global economic risks to copper demand, at a time when its fundamental picture is also showing signs of stress, said Jonathan Barratt, Chief Investment Officer at Sydney's Ayers Alliance.


Copper was partly under pressure due to the seasonal summer slowdown, he said.


"But there's more - it's still a buyer's market and there's also a lot of questions about what's happening in steel and iron ore," he added.


Steel and iron ore are typically used earlier in the construction cycle than copper and are sometimes seen as forerunners to copper demand. Dalian iron ore futures fell 4 percent to hit their downside limit on Wednesday as Shanghai steel prices fell to a fresh all-time low.


Three-month copper on the London Metal Exchange CMCU3 rose 0.7 percent to $5,784 a tonne by 0205 GMT, having closed a tad softer in the previous session when it plumbed a new 3-month trough at $5,728 a tonne.


Barratt sees strong support for copper around $5,600.


The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 traded up 0.2 percent at 41,950 yuan ($6,757) a tonne.


Reflecting the struggles facing China's property industry, average new home prices in China's 70 major cities fell for the ninth consecutive month in May from a year earlier, down 5.7 percent.


China's real estate investment growth continued to slow in the first five months of 2015 to the lowest since May 2009, with inventory levels remaining high in lower-tier cities.


The dollar fell to its weakest in a month against an index of currencies, boosting the allure of metals for buyers holding other currencies. .DXY


This helped drag LME zinc CMZN3, nickel CMNI3 and lead CMPB3 up between roughly half and 1 percent. LME aluminium CMAL3 however was hemmed near this week's 16-month lows, amid ample supply.


Greece's leftist government faced a barrage of warnings on Wednesday that it risked being forced out of the euro zone and left without support if it failed to strike a swift aid-for-reforms deal with its creditors.


($1 = 6.2086 Chinese yuan renminbi)



Edited by SHMET

Aluminium premiums settle after rout, consumer buying supports CMAL0

Date Jun 19 2015 08:54:34

Premiums returning near levels seen before big rally

Steeper forward curve sparks more financing deals

"Premium arbitrage" as metal moves from Europe to U.S.


(Reuters) - Surcharges for physical aluminium have settled close to equilibrium levels after tumbling by up to three-quarters this year, supported by consumer buying and more attractive conditions for financing deals.


Tapering Chinese exports of the metal will also help stabilise surcharges; a glut of aluminium had been a big factor in setting off a slide in premiums late last year and early in 2015.


The surcharges, or premiums, which consumers pay on top of the London Metal Exchange cash price CMAL0 for immediate delivery of metal, have settled closer to levels seen several years ago before a sizzling rally sent them to record highs.


"Everybody's looking for some stabilisation, both producers and consumers don't want to see this volatility any more," said a trader in Europe. "If you look at historic levels, we're not far away from those."


In Europe, premiums paid over the London Metal Exchange cash price CMAL0 were quoted at $180-$190 a tonne for duty-paid material in Rotterdam, recovering from lows of around $130 last month after tumbling from a peak of $500 in November 2014.


"This is a more normalised range, reflecting the cost of transport and everything else, but it's hard to know whether it will remain here," said a producer source.


Consumers, who had held off buying to wait for premiums to slide even further, have been forced back into the market as they run low on metal, helping to underpin the surcharges.


"There's been a huge wave of consumer buying. We sold a lot over the past several weeks," said a trader in London.




Another factor has been a steeper forward curve on the LME, boosting the profitability of financing deals, which lock up metal in warehouses, taking material off the market.


"I think you probably need the forward curve to steepen a little further in order to encourage more financing trades to be put on," said Nic Brown, head of commodity research at Natixis.


Another element was shipping metal from Europe to the United States by investors to take advantage of higher U.S. premiums.


"There's been a bit of premia arbitrage going on... which would have given some support to premia here, while we could see further downside in the U.S., but not much," said analyst David Wilson at Citi in London.


Current U.S. premiums, based on the nearby CME premium contract AUPc1 are 8.35 cents/lb ($184 per tonne), down from a record of 24.25 cents in February.


Further support for premiums should come from an expected decline in Chinese exports of aluminium, traders and analysts said.


Chinese exports of unwrought aluminium and products have surged 35 percent so far this year to 2.06 million tonnes but weaker international prices are expected to dampen shipments in coming months.


Edited by SHMET

METALS MORNING VIEW – Metals consolidate but remain under pressure

Date Jun 17 2015 08:55:58


Base metals prices suffered further weakness on Monday, especially tin that dropped 4.2 percent to $14,280 at one stage, while the rest were down an average of 2.4 percent at the day’s lows – they ended the day down an average of 1.4 percent with tin recovering the most off the intraday lows, it ended down 0.5 percent at $14,830, while copper was off 1.5 percent at $5,827 and lead was off the most with a 2.5 percent decline to $1,815.50. All the metals except nickel set fresh lows yesterday for this pull-back.


Precious metals were mixed yesterday – at the day’s lows they were down an average of 0.7 percent, they closed with silver up 0.8 percent at $16.05, gold up 0.4 percent at $1,185.50 and the PGMs off 0.4 percent on average. A weaker dollar helped provide some lift, but we feel concern over Greece was probably the main supporting factor for gold prices.


This morning, the base metals are up an average of 0.2 percent as consolidation sets in, tin and nickel are off slightly, while the rest are up between 0.3 and 0.4 percent, with copper at $5,842. Volume has been even lighter than normal with 1,950 lots traded against an average last week of 2,278 lots at a similar time of day.


Gold prices are unchanged this morning and the rest of the precious metals are up between 0.1 and 0.3 percent as consolidation sets in. Silver has just managed to find enough support around its support line to avoid another tumble and likewise gold is holding up relatively well – while the PGMs are the weaker cousins.


In Shanghai, the base metals are down by an average of 0.5 percent with nickel leading the drop with a one percent fall to Rmb 97,210, aluminium is unchanged, while the rest are off between 0.2 and 0.9 percent with copper off 0.4 percent at Rmb 42,350. Spot copper in Changjiang is off 0.6 percent at Rmb 42,450-42,630, the backwardation with the futures is at an equivalent of $45 per tonne and the LME/Shanghai copper arb ratio is at 1 to 7.25.


Precious metals in Shanghai are firmer with gold and silver up 0.4 and 0.6 percent respectively.


Equities remain under pressure on the back of concerns over Greece – the Euro Stoxx 50 was down 1.9 percent and the Dow was off 0.6 percent yesterday and the weaker tone has spread to Asia where the Nikkei is off 0.5 percent, the Hang Seng and Kospi are down 0.6 percent and the CSI 300 is off 1.3 percent.


Currencies – the euro is surprisingly robust considering the situation over Greece, it is at 1.1272, so there is still a lot of complacency that an 11th-hour deal will be reached – given the turmoil that could follow any Grexit a deal is likely to be conjured up – but we are surprised the market is not taking out some insurance in case the worst case scenario unfolds. The German bund has lifted off recent lows, which suggests some safe-haven buying, but the dollar index at 94.88 remains fairly weak but that maybe ahead of tomorrow’s FOMC announcement. Sterling is stronger at 1.5604, the aussie is at 0.7750, the yen is weaker at 123.57, as is the yuan at 6.2080 and the rouble is last at 54.40.


The economic agenda is fairly busy with CPI data out of Germany and a barrage of price data out of the UK. In addition, ZEW data is out for Germany and the EU, plus there is EU employment change data and US housing data. The European Court of Justice (ECJ) is also set to rule on whether the ECB’s outright monetary transactions (OMT) are legal. The OMT has been the vehicle the ECB has used to lend money indirectly to individual governments, such has Portugal, Spain and Greece. It would be ironic if the ECJ’s decision ended up being a catalyst rather than Greece.


Sentiment in the base metals has been weaker of late. This has shown up in the weaker performance across the metals and judging by some large moves and spikes lower it seems as though liquidity is thin, but there does seem to be dip buying around. For now, we feel the path of least resistance remains to the downside, especially with so much uncertainty over Greece.


The precious metals are generally weak, gold prices are holding up better than the rest, although silver’s support line is holding for now. The PGMs, however, look washed out with gold prices now at a $91 premium to the platinum price. The lack of support for gold given the Greece situation remains a surprise, it shows how unloved gold is at present, but if push comes to shove, that may change.

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