Metal prices continue to rise Wednesday, feeding off the positive close from the previous day. The weaker dollar also contributed to the firming, as did relatively constructive remarks by Federal Reserve Chairman Ben Bernanke distancing the administration from the notion of nationalizing the banks. As the Chairman correctly pointed out, the government holds great sway over many of the money-center banks already, without necessarily owning a majority stake. (We assume that possessing the only checkbook in town helps immensely in this regard as well).
Surprisingly, yesterday’s metals rally was not derailed by a wobbly US equity market, which stumbled after President Obama‘s speech Tuesday night, or by poor housing data released the following day. With regard to the latter, existing home sales showed a decline of 5.3% from December levels to an annualized rate of 4.49 million units. Some of the decline could be attributable to home buyers holding back as they perhaps waited for incentives in the recent stimulus bill to come out, but the total sales number was nevertheless well below forecasts. There was some good news in the data, namely, that the inventory of existing homes fell to 3.6 million units from 3.7 million in December, and well off from a peak of 4.58 million seen last July. However, because of a parallel decline in sales, the supply of unsold homes ticked higher to 9.6 months.
Later today from the US, we get January durable goods readings (expected at -2%), as well as new home sales (expected at 324,000 units). Out of Europe, a Bloomberg purchasing managers index based on a survey of more than 1,000 executives showed that retail sales fell for a ninth straight month in February, as households cut spending amid rising unemployment and tighter credit conditions. In addition, European economic confidence fell to a record low in February, mirroring a similar decline here in the US. And from the UK, home values continue to sink, falling by an annual rate of 17.6%, the greatest amount in at least 18 years.
Metals are all higher today, as a firmer close in Shanghai copper, a slightly weaker dollar, and residual impact from Chinese stockpile purchases are helping steady the markets, but the gains are more limited than what we were seeing at this time yesterday. Moreover, given the current news cycle, none of these factors alone will be enough to cause prices to break above the topside of their trading ranges.
Later today from the US, we get January durable goods readings (expected at -2%), as well as new home sales (expected at 324,000 units). Out of Europe, a Bloomberg purchasing managers index based on a survey of more than 1,000 executives showed that retail sales fell for a ninth straight month in February, as households cut spending amid rising unemployment and tighter credit conditions. In addition, European economic confidence fell to a record low in February, mirroring a similar decline here in the US. And from the UK, home values continue to sink, falling by an annual rate of 17.6%, the greatest amount in at least 18 years.
Metals are all higher today, as a firmer close in Shanghai copper, a slightly weaker dollar, and residual impact from Chinese stockpile purchases are helping steady the markets, but the gains are more limited than what we were seeing at this time yesterday. Moreover, given the current news cycle, none of these factors alone will be enough to cause prices to break above the topside of their trading ranges.
In LME news, LCH Clearnet said yesterday that it has lowered initial margins for steel, zinc, and tin futures contracts. The new margins will be effective close of business Wednesday March 4.
Finally, we have plotted LME/Shanghai stock positions at the end of today’s piece.
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COPPER SUPPORT: $3025 / RESISTANCE: $3669
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COPPER SUPPORT: $3025 / RESISTANCE: $3669
Copper is at $3490, up $80, and close to its intraday high of $3498. A surprising dip in LME stock levels overnight (off by 2900 MT) in addition to a stronger Shanghai finish, is helping the tone today. We look for a steadier US stock market to provide the impetus for a further move higher in copper. As of this writing, the Dow is called to open 80 points higher, but we need the gains to sustain themselves over the course of the day.
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ALUMINUM SUPPORT: $1280 / RESISTANCE: $1330
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ALUMINUM SUPPORT: $1280 / RESISTANCE: $1330
We are at $1346 on ali, up only $3/MT, as another 18,000 ton LME stock increase weighs on the market. Another close above $1330 will be constructive, and could set the market up for a possible push to $1420, but it will be slow going all the way.
* Global unwrought aluminum stocks fell to 1.666 million tons at the end of January from 1.676
million tons in December and1.640 million tons in January 2008, this according to provisional International Aluminum Institute figures released overnight. Total aluminum smelter stocks, excluding finished
end-products, rose to 2.986 million tons at the end of January from 2.959 million tons in December and 2.944 million tons from a year ago.
million tons in December and1.640 million tons in January 2008, this according to provisional International Aluminum Institute figures released overnight. Total aluminum smelter stocks, excluding finished
end-products, rose to 2.986 million tons at the end of January from 2.959 million tons in December and 2.944 million tons from a year ago.
* India's National Aluminum Co (NALCO) clarified an announcement made by India’s trade secretary earlier in the week, and said that the country’s aluminum producers will seek a safeguard duty on imports from all countries, and not just those from China.
* China is likely to hold off on reinstating a 5% tax on imports of primary aluminum for a few months, as officials continue to review the implications of this policy. Last week, Chinese importers tried to cancel some spot primary aluminum ingots because of talk that Beijing planned to reinstate the tax from March 1st. Another plan to raise the tax on imports of refined zinc to 5% from 3% is also facing the same questions.
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ZINC SUPPORT: $1087 / RESISTANCE: $1200
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ZINC SUPPORT: $1087 / RESISTANCE: $1200
We are at $1152 on zinc, up $7, but there is only a $30 trading range on the day. Prices continue to climb back into the trading range, with Chinese stockpile purchases helping the stronger tone somewhat. However, a sharp jump in LME stocks overnight (+18,000 tons), should keep any upside euphoria in check.
* Teck and Korea Zinc finalized zinc treatment charges at the annual American Zinc Association's conference, with sources confirming a deal setting the benchmark at $194 per ton based on a $1,250 a ton LME zinc price. Sources said smelters were willing to settle for a lower processing fee, but wanted a greater share of the upside if zinc appreciates later this year. The deal was said to include an escalator of 12% price participation at a zinc price of $1,250 per ton and 15$ at prices above $1,500 per ton. On the downside, the de-escalator would decline to 10% on the basis of $1,250 a ton, and to 6% at below $1,000 a ton.
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LEAD SUPPORT: $850 / RESISTANCE: $1050
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LEAD SUPPORT: $850 / RESISTANCE: $1050
We are at $1041 on lead, up $11, but charts will only start to look a bit better if prices manage to close above $1050 for two days running.
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NICKEL SUPPORT: $9350 / RESISTANCE: $13,900
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NICKEL SUPPORT: $9350 / RESISTANCE: $13,900
We are currently at $10,241 on nickel, up $166, with prices bouncing on either side of $10,000 for the past few days. Nevertheless, the $9000-$9300 band has held, and we now seem to be seeing a slow recovery back into the range.
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TIN SUPPORT: $9800 / RESISTANCE: $12300
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TIN SUPPORT: $9800 / RESISTANCE: $12300
We are at $10,795 on tin, up $45; charts remain indecisive, as we are at drifting in a very tight sideways band.
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