By Leon Westgate
The base metals rollercoaster ride continues, with the complex recovering from yesterday’s liquidation and bouncing higher this morning. Overall, the metals remain nervous and volatile and continue to look to the FX and wider global markets for direction.
As a case in point, this afternoon’s better than expected US Durable Goods Orders are another positive sign in terms of the economic recovery; however, the initial market reaction has been to see the dollar strengthen against the euro, which has actually seen metal prices weaken slightly.
Zinc saw another increase in LME stocks this morning, with 3,925 mt entering Hull. Like New Orleans, Hull is another warehouse located somewhat off the beaten track, with the material looking like it is being parked for safe keeping rather than dispersal.
The recent inflows in zinc into LME warehouses have coincided with acute market stress and increased LIBOR rates, and may therefore be a function of financing costs rather than due to a sudden deterioration in market fundamentals. Either way, the market seems primed for further inflows of metal, with the inventory data over the coming days unlikely to have a significant impact on prices.
Price wise, zinc had a very busy start to the day, rallying during Asian trade and on the back of very good turnover, to climb back above $1,900/mt. Turnover has remained solid heading into the afternoon with volumes on LME Select currently exceeding those of aluminium. Prices have drifted back a little, with zinc starting to look towards copper for direction.
Copper had a very quiet start to the day, opening higher, but trading in a very narrow range during Asian trade. Copper has continued to trade sideways heading into the afternoon. Aluminium has followed a very similar pattern to copper, though turnover remains very subdued.
