Oil price drops; Base Metals down

Main economic events in Market Today:

• U.S. Core Durable Goods Orders (MoM)(Apr) fell to actual -0.2% while forecast was 0.4%
• U.S. Gross Domestic Product (GDP) QoQ fell to actual 0.7% while forecast was 1.2%
• U.S. GDP Price Index QoQ rose to actual 2.2% while forecast was 2.0%
• U.S. Michigan Consumer Expectations came to actual 88.1 while the forecast was 87.0
• European Central Bank Coeure Speaks

Base metals were mostly lower during Asian morning trade today. The Oil price impacted even the base metals movement, and it put a cap on copper price.

“On Thursday, base metals prices had rallied then dropped after the OPEC [Organization of the Petroleum Exporting Countries] announcement and after the dollar strengthened. LME copper prices were supported by issues at Grasberg but gains were checked by concerns over Chinese demand.” (Mailyard Futures, China)
SHFE copper prices will probably continue fluctuating around 46,000 yuan per tonne.

OPEC countries agreed on May 25th about extending the output cuts. However, this had a huge fast impact on Oil prices in negative way. The hedge funds reacted right away, and the global oil price went lower than predicted.
“Since May 15, when the Saudis and Russians announced their intention to extend the cuts for nine months rather than six, prices gained more than $2 in anticipation of an agreement today. Now, prices have roughly returned to May 15 levels,” SG added.

The Brent crude oil price dipped as low as $51 per barrel on Thursday, the lowest since May 15.

Grasberg copper mine strike

Freeport McMoRan Inc said Thursday that mining and milling rates at its Grasberg mine are affected by the extended strike. Also by a “large number” of approximately 4,000 absentee workers. Who were deemed to have resigned.

Increasing labor tension is a further disruption for Freeport. Involved in a long dispute with Indonesia over rights to the giant mine, which has cost both sides hundreds of millions of dollars.

Copper prices leveled three-week highs yesterday.  Concerns about extended disruptions at Grasberg triggered these movements.

“As a result, a large number of these workers were deemed to have resigned, consistent with agreed industrial relations guidelines and prevailing law…”

”When asked to comment, the Union officials were not available.” (Reuters)

The most of Freeport’s 30,000-strong Indonesian workforce is “productively and safely” working.

On May 15, Freeport said the strike is not legal and “voluntary resignation is the consequence” for workers ignoring demands to return to work. The workers who were absent for five consecutive days. (Reuters)

Workers now considered “resigned” are in addition to an estimated 2,000-3,000 workers Freeport placed on absence as of mid-April. At that time, approximately 10 percent of its 32,000 member workforce was “demobilized” under aims to cut the costs

The SHFE September nickel contract fell down for 700 yuan or 0.9% to 75,220 yuan per tonne. It happened  due to concerns over escalating nickel ore exports from the Philippines and Indonesia. And slower demand from the Chinese stainless steel sector.

Other base metals lower

Firstly,  July aluminium contract fell 10 yuan or 0.1% to 14,080 yuan per tonne. Secondly, The SHFE July zinc price slipped 40 yuan or 0.2% to 22,205 yuan per tonne.  Following, the SHFE July lead price increased 50 yuan or 0.3% to 15,980 yuan per tonne.

Finishing, the SHFE September tin price decreased 510 yuan or 0.3% to 145,490 yuan per tonne.