By Leon Westgate
Fresh fund buying emerged during Monday afternoon, seeing much of the base metals complex - copper and aluminium in particular - make solid gains. Monday’s momentum faded a little bit this morning; however, another burst of activity has seen prices rally again heading into the afternoon.
The proximity of quarter-end and the fast approaching Easter holiday may see some risk come off the table however, particularly with the release on the US Nonfarm Payroll data on Friday - a day on which the LME and many other futures markets will be closed.
While the Chinese sparked off copper’s rally on Monday morning, it was fresh fund buying that drove prices higher during the afternoon. Copper continued to rally after the 5pm kerb close, trading up to $7,800.
This morning saw prices come under pressure during Asian trade with the Chinese selling copper from the outset. Prices have recovered from the initial sell-off however, with further fresh buying triggering stops and short covering that have helped propel copper above $7,800 heading into the afternoon.
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Meanwhile in other news, Boliden AB has agreed an off-take deal to sell 36 kt of copper to China Minmetals over 3 years. To put that in perspective, Boliden has combined copper production capacity from its Finnish and Swedish operations is ~430 ktpy.
Aluminium has continued to rally today, with the metal climbing above $2,300 heading into the afternoon. The metal briefly traded above $2300 this morning, helped by a short-lived rally in the euro, before drifting back. Another burst of activity during the early afternoon has however seen attention switch away from dollar watching, with prices strengthening once again.
LME aluminium stocks were up 31,350 mt this morning, the bulk of the increase being due to 34.600 mt of metal entering New Orleans. Large movements in and out of US warehouses have become a regular occurrence, and are generally ignored by the market. The increase does however mask resumption in the steady outflow of material from European locations seen over the past week or so.
The other base metals are quiet volume wise, and are looking to the likes of aluminium and copper for direction heading into the afternoon.
