Oil prices VOLATILE; firstly UP on positive expectations, then falling DOWN after overnight gains

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Top 5 things about Monday’s Market:

  • Macron cruises to victory in France
  • Euro SLIPS as Macron relief rally loses steam
  • Global stocks mixed; Europe trades lower after French election
  • Oil gives up strong overnight gains
  • China’s april exports, imports rise less than expected

More info on these 5 from: www.investing.com

Prices; Monday Overnight Gains

Saudi Arabia’s energy minister stated that OPEC is seriously discussing the idea to prolong output cuts. The extension of oil output cuts will happen in June. And it would also likely cover all the year long period of time. It will maybe even enter the 2018. Despite U.S. production and drilling which is constantly increasing their margins and profits, the oil sector is limited. And the U.S. drilling can’t be permanent.

Brent crude futures were at $49.48 per barrel at 0652 GMT (2.52 a.m. ET). That is up for 38 cents, or 0.75 percent, from their last close.

U.S. West Texas Intermediate futures were at $46.52 per barrel. Which is up 30 cents, or 0.7 percent from their previous price.

Energy Minister of Saudi Arabia Speaking

Today, Khalid-Al-Falih, Saudi’s energy minister explained that oil market is now rebalancing. After long years of oversupply and overstressed ambient on this market. He said they are still expecting OPEC’s decision to bring the bright trends for future oil prices.

“Based on the consultations I have had with participating members, I am rather confident the agreement will be extended into the second half of the year and possibly beyond.” (Reuters)

His speech was held during an industry event in Kuala Lumpur. In Malaysia’s capital, on Monday.

 

Exports:

The Organization of the Petroleum Exporting Countries  along with other producers, together with Russia, agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year. In ordet to prop up the stressed market. Saudi Arabia is de-facto leader of all the producing countries. With the biggest stake with its individual oil outputs.

 

The positive comments and upward prices came after a long last week’s plummeting trends, which pumped the negative speculations into the Oil market. The countries who are not included in this output cut deals, also contributed to low prices. Including the United States, where output is simply exalted. It has took off in recent period so strongly, that it has a huge impacts on market.

 

Bringing the decision

Next official OPEC’s meeting will be on May the 25th. And finally, decision on whether to continue the cuts will be brought out to light. Officially.

“Oil may have seen the worst of the selloff for now, as the market turns its attention to the OPEC meeting at the end of the month.” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore. ( Reuters)

French Election Impact on Oil Prices

Some of the market participants say that the victory of Emmanuel Macron in the French presidential election against far-right Marine Le Pen also supported oil prices. Bringing the hopes of more stable European economy, which automatically added to positive speculations. And implemented great hopes into the markets.

Still, both Brent and WTI crude are holding below $50 for now.

U.S. drilling continued to pick up last week, with the rig count climbing by 6 to 703.

Since a low point in May 2016, U.S. producers have added 387 oil rigs, or about 123 percent, Goldman Sachs said. (Reuters)

 

Change of trends:

Finishing with info that Oil price again edged lower, erasing strong overnight gains !! U.S. crude was at $46,17 a barrel, down 5 cents, or around 0.1% . While Brent Shed 6 cents to $49.04!

Doing businesses in the markets these days (the upcoming week) would certainly be very challenging for all the race participants. Rather than last week, which was filled out with suspicions on whether the oil prices will go a bit higher & what would happen in European market.

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SHFE & Market today: May the 8th

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Important facts about today’s Market:

 

  • China Trade Balance (USD) rose to actual 38.05B while forecast was 35.50B
  • China Imports y-o-y fell to actual 11.9% while expected was 18.0%

 

 

Shangai Futures Exchange:

Copper price slided during Asian morning trading hours on Monday May 8. The performance of red metal was weaker, as well as the contracts on the London Metal Exchange.

“The pull-back of SHFE copper prices this morning was mostly impacted by the weakness in LME copper prices. This was a result of a build-up in LME copper inventory last week.” (Metal Bulletin)

The three-month copper contract on the LME was 0.98% or $55 per tonne lower as of 03:19 BST.

LME copper inventories were the highest since October 2016. They rose a net 36,800 tonnes to 354,650 tonnes on Friday May 5. This followed rises of 32,925 tonnes and 31,250 tonnes on May 4 and 3, respectively.

SHFE Copper tracks LME prices lower:

Firstly, LME copper inventories rose a net 36,800 tonnes to 354,650 tonnes on May 5. Secondly, deliverable copper stocks at SHFE-approved warehouses dropped 14,130 tonnes or 6% over the past week to 215,231 tonnes on May 5.
 “The fall down in SHFE copper stocks was happening due to the dip-buying from consumers. Anyway, as the copper price continued to hover at a low level. This made market participants show doubts as to whether the real demand could support the expanding inventories within consumers.” ( analyst from Guotai Jun’an)

 

Secondly, In supply news, Glencore reported lower copper production during the first quarter of the year due to its Antamina operation. The miner’s copper output reached 324,100 tonnes during the first three months of the year. It is a decline of 3% compared with the corresponding period of 2016.


Nickel prices jump off on immerse-buying: 

Thirdly, SHFE September nickel price soared 920 yuan to 73,920 yuan per tonne.
“The rally in nickel prices this morning was mainly a result of dip-buying following the falls seen last week.”

Following, last week saw nickel prices come under pressure amid the expectation of increased supply after the Philippines’ Commission on Appointments rejected Regina Lopez’ appointment. As the country’s environmental secretary. Lopez and her strict crackdowns on the Philippine mining industry were loosely regarded as important factors in keeping laterite ore export volumes from the Philippines low. Once the rainy season in the country had finally ended.

Aluminium prices slide down on rising stocks:

Speaking about Aluminium prices, the SHFE June price slipped to 13,755 yuan per tonne as of 03:18 BST. It is down 125 yuan from the previous session’s close. In addition,  aluminium stocks rose 12,327 tonnes to 403,905 tonnes on May 5.

“Aluminium is still consolidating after recent price jumps. Moreover, the market might be waiting in anticipation [of better prices] following aluminium supply-side reforms [in China. However, chances are that the actual deficit might not be as large as people expect.”

 

 

Currencies & Data:

 

The Brent crude oil spot price rose 0.67% to $49.73 per barrel while the Texas light sweet crude oil spot price was up 0.69% to $46.78. Following, the dollar index was up 0.16% at 98.74 on Monday as of 03:18 BST.

In equities, the Shanghai Composite dipped 0.61% to 3,083.99. 

  • US unemployment claims for April came in at 238,000, below the forecast of 246,000. Preliminary non-farm productivity and unit labour costs during the first quarter came in at -0.6% and 3%, respectively.
    • China’s April yuan-denominated trade balance stood at 262 billion yuan, beating both the forecast and the previous month’s balance of 197 billion yuan and 164 billion yuan, respectively.
    • While the country’s dollar-denominated trade balance for April stood at $38.1 billion, exceeding expectations of $35.3 billion and March’s balance of $23.9 billion.
    • UK Halifax house price index and BRC retail sales, EU Sentix investor confidence and US labour market conditions are due.

The EURO hit a seven-month high against the dollar after Emmanuel Macron won yesterday’s elections. This is a victory that should further boost the currency, as political concerns fade, and investors focus on the eurozone’s economic recovery.

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Emmanuel Macron is the new president of France!!!

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The Result

Emmanuel Macron was elected president of France. Sunday May the 7th with a business-friendly vision of European integration, defeating Marine Le Pen. Who is a far-right nationalist who threatened to take France out of the European Union. (Reuters)

The centrist’s emphatic victory, which also smashed the dominance of France’s mainstream parties, will bring huge relief to European allies. Who had feared another populist upheaval to follow Britain’s vote. Wanting to quit the EU and Donald Trump’s election as U.S. president.

The definite victory of french centrist Emmanuel Macron, who overbeated the other candidate.. Marie Le Penn, will bring huge diferences to the Euro system. And also have great impact on country’s policies.

 

AFP

According to preliminary estimates, of the AFP agency: Macron won between 65 and 66 percent of the votes. Which is a really astonishing result. Having in mind that the turnout was not so high.

He is the 39-year-old foregone investment banker. Who earlier served for two years as economy minister but has never previously held elected office. He will now become France’s youngest leader since Napoleon. His promise is to surpass outdated left-right disharmonies.

 

May the 7th

Today In France today was the day of final decisions, the second round of presidential elections. About 47 million voters called to choose between the pro-European candidate Macron and radical rightist Marine Le Pen.

The belgian newspaper “Soar”  announced earlier today that the Macron could win 60 percent of the vote, citing data from the four agencies for public opinion research.

The Belgian list didn’t stated how the voters backed the National Front leader Marine Le Pen.

Turnout in the second round of French presidential elections, which came out this afternoon stood at 65.30 percent, according to the French Ministry of Foreign Affairs. This is significantly lower than the 69.42 percent of how people voted at the same time in the first round two weeks ago.

Afternoon turnout at 17 hours is significantly lower compared to the same time in the first round on April 23, and in relation to the second round of the previous presidential elections in 2012, when the  71.96 percent of voters gave their vote.

By the afternoon turned out 28.23 percent of the electorate, which is almost the same as in the first round two weeks ago. In the first round of April the 23th, 28.54 percent of voters did not vote, which is almost the same response as today. Voters turnout today is a bit lower than in the second round of the previous elections in 2012, when he was two percentage points higher, or 30.66 percent.

 

Market impacts

 

The victory of the Emmanuel Macron will lead to a higher position of euro, which would definitely change climate in every aspect of financial markets.

Macron’s straight away idea will be to secure a majority in next month’s parliamentary election for En Marche! (Onwards!).  This political motion that is faintly a year old, in order to execute his program.

 

 

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World’s biggest IPO is coming: Aramco splits advisory roles, denominates Brunswick

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The markets are waiting for the biggest public offering in history to become truth.

“An IPO so big it will likely make any Silicon Valley unicorn look like a blip in the market.” (Forbes)

Aramco in Investors eyes

Investors will maybe have to wait another year or two, before Aramco goes public.

Some doubts on the high valuation of Saudi Aramco are certainly present. Because of high calculations. J.P. Morgan (Aramco’s loyal commercial banker) and Michael Klein (formerly of Citigroup) have been advising Aramco on the financial restructuring. Which is necessary for this process.

In the beginning, the IPO was expected to take place in early 2018. Later the expected date was pushed off to late 2018. Maybe even early 2019. This is likely due to Aramco’s desire to complete the financial restructuring process. In order to make the company more attractive to investors.

 

Consulting

Saudi’s crown jewel Saudi Aramco, has denominated advisory firm Brunswick to join FTI Consulting. All of that in order to run media and investor relations for what will be the world’s biggest initial public offering. (IPO)

This idea of selling parts of Saudi’s oil giant Aramco through IPO, came as a result of hopes it would raise company’s share sale. Also raising around 5% of the company’s value for about $100 billion. In 2018, ideas  are to list this 5% sale in several countries.

 

Brunswick

Brunswick was latterly denominated to run the external and media communications for the IPO. While U.S.-based FTI will focus on managing investor deals & relations.

Asked to give a comment on this subject, Brunswick spokeswoman refused to comment. Also FTI declined a request for comment. And finally Aramco refused giving any comments on this matter.

 

Possible stock exchanges for IPO

Mohammed bin Salman, Deputy Crown Prince, said Aramco is going to list its shares on the Kingdom’s stock exchange. As well as on one or more foreign stock exchanges, but did not reveal which one exactly.

Possible exchanges are London, New York and Hong Kong. Those may be the ones for the listing.

Aramco is asking governments of important countries, including China and large institutional investors convincing them to buy shares of the IPO. Although the full details of the listing, including Aramco’s size and value, are still unknown.

The $100 billion IPO price tag, is based on entire Aramco being valued at $2 trillion. Still, some analysts believe the ultimate valuation could be much lower. And that the real papers could show something which is well professionally hidden from the wide public eyes.

Noteworthy, Aramco is everyway one of the most profitable and largest operating giants in the world. Also it plays the biggest role in Saudi’s economy. The IPO should be very wisely done, because it will later have impact on company’s doing business.

 

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Last week’s review (LME)

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Base metal prices

After seeing a two-days smashing on the close, May the 5th was a widely better for base metals in the afternoon trade.

3-months nickel price went up on $125 per tonne; as it tried to compensate some of its biggest declines this week.

Friday’s copper’s price was fairly plane and was consolidating around the $5,540 per tonne mark. That was despite further LME inventory growth in friday, which brought the increase of stock over the last couple days to over 100,000 tonnes.

Copper market was impacted by the China’s financial tightening these days. It had a big impact on all the copper weekly prices.
“Friday’s base metal prices were soft but mostly holding above the lows established in Thursday. LME copper stocks increased another 37,000 tonnes. Noteworthy, these deliveries were largely priced. Seems like another tranche of merchant deliveries from Chinese smelter offtakes,”

Zinc and aluminium prices saw small increases, whilst lead and tin prices declined.

Copper falls slightly 

Friday:The three-month copper price saw a small decline of $2.50 to $5,540.50 per tonne. Copper did hit highs of $5,591 earlier in the say as it looked to consolidate after a $202 per tonne drops earlier in the week. Copper inventories rose a net 36,800 tonnes to 354,650 tonnes – the highest since October 2016. This follows rises of 32,925 tonnes yesterday and 31,250 tonnes on Wednesday. In supply news, Anglo American is taking steps to restart operations promptly at its El Soldado copper mine in Chile.

Nickel increased after two-day low trends

The three-month nickel price picked up $125 at the kerb – it finished trading at $9,140 per tonne. Nevertheless its positive increase at the close, nickel hit lows of $8,905 at one point in the day. Nickel had declined $555 per tonne over the past couple days during premarket trading but picked back up on friday afternoon.
Stocks were up 210 tonnes to 380,712 tonnes.
“Nickel led the sector lower as the market reacted to the failure of the Philippines environment minister to be confirmed by lawmakers. Ms Lopez had been spearheading the closure of the nickel mining industry due to new environmental laws.” (ANZ Research)
Market participants saw the appointment of Lopez as Department of Environment and Natural Resources secretary as a glimmer of hope for nickel prices amid a weakened Chinese stainless steel sector and a number of China-backed nickel pig iron projects coming on stream in Indonesia.  (FastMarkets)

Base metals start to consolidate: 

The three-month aluminium price was up $4 to $1,917 per tonne, after seeing little price movement this week.  Aluminium stocks fell 10,200 tonnes to 1,599,725 tonnes.  Zinc closed trading at $2,582 per tonne, an increase of $13. Stocks for zinc were down 2,025 tonnes to 340,450 tonnes.

The three-month lead price was down $10 to $2,181 per tonne.  Inventories fell 255 tonnes to 173,725 tonnes.
The three-month tin price dropped $275 per tonne after being unchanged this morning. It closed trading at $19,575 per tonne.  Stocks for tin remain around their lowest since 1980, falling another 140 tonnes today to 2,490 tonnes.
US data released  was largely in line with estimates, suggesting the economy continues to expand at a moderate pace, with the labour market continuing to tighten.
In the blockbuster April job’s report, 211,000 Americans entered the workforce. Which is above the 194,000 estimate and a recovery from March’s figure of 98,000. As a result, the unemployment rate ticked down to 4.4%.

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Oil prices lower every day; OPEC’s effective and efficient decisions needed

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Today, it was a day of 5-month lows in Oil prices. This happened because of bothers on OPEC glut, and whether it would be extended. Nevertheless promises from Saudi Arabia about Russia’s preparation to join OPEC’s future cuts.

 

Low Prices of Oil

U.S. West Texas Intermediate crude oil futures  were more than 3 percent down in early trading. They came to a price of less than $44 a barrel. Which makes it the lowest since Nov 14. Yesterday, oil was down for 4 percent.

Brent Crude also went down for 3%. It went to a price less than $47. The lowest since november the 30th. The 30th of November was the date when OPEC activated a price rally. The day they announced that the output cuts are to start in the first half of 2017.

Trade losses

Both landmarks sleeked losses to trade near Thursday’s close by 1320 GMT. “OPEC and non-OPEC nations were really near to agreeing a deal on supply cuts.” said Adeeb Al-Aama, Saudi’s OPEC Governor.

  • “Based on today’s data, there’s a growing conviction that a six-month extension may be needed to rebalance the market, but the length of the extension is not firm yet.”

Deeper cut is not so likely. Speculations say that OPEC indeed will extend the cuts on May 25th. But the question is what is initially good about this. The 1017 has and will have 1.8 million bpd. That is the agreement which OPEC countries made in the beginning.

Hedge funds had speeded up decrease of their long positions. Thursday was a day when Brent crude trading volumes came to a record high. Counting about 542,000 contracts.

Pierre Andurand is the official in one of the worlds largest funds specialising in oil. He busted up his fund’s last long positions in oil last week. He is now running a very reduced risk at the moment.

“It is now-or-never for oil bulls,” said U.S. commodity analysis firm The Schork Report. They either put up a defense here or risk further emboldening the bears for a run at the $40 threshold (for WTI).” (Reuters)

 

Brend And WTI Futures

Both Brent and WTI futures are down about 17 percent so far this year despite OPEC efforts to support prices. The benchmarks are trading around levels last seen before the joint deal to cut output was first announced.

“So far OPEC’s strategy to draw down inventories has not worked.” (Neil Beveridge)

” If their strategy is to have any chance of success.. It is evident to us that OPEC will need to keep the output cuts active way more than the next six months. ”

Adding to cares about protruding inventories, traders pointed to exalted U.S. oil output. It is up more than 10 percent since mid-2016 to 9.3 million bpd. Which makes it almost matching output of top producers Russia and Saudi Arabia.

“Any likelihood of an increase in the level of cuts remains slim with OPEC officials playing down this possibility.” said James Woods, global investment analyst at Rivkin Securities. (Reuters)

 

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Nay oil prices are plummeting, BHP Billiton under pressure to sell its shale

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The Reasons

Two main shareholders are pressuring BHP Billiton about its oil and gas fields. $20 billion worth active to be sold, but the Company might overcome the selling because of the declining oil prices.

According to the investors opinion, BHP Billiton is a serious producer of deepwater oil and gas. But its shale business (from 2011) is now a capital reflux and shareholders would be in a better position if it sells the business. The main thing is, that now is not a really suitable moment for doing so.  Prices are having a fiasco, and the oversupply just burns it forward.

BHP officials see oil as core business, and they also see shale operations as their core value:

  • “The risk is doing it for the wrong reasons – because people are telling you do it – and getting out quickly. We’re at $40 oil. It’s not necessarily the greatest time to be contemplating that.” Said an analyst who owns BHP shares.

 

Timing is crucial

Based on recent deals performed in the Permian and Eagle Ford shale areas ($30,000 – $40,000 net care),  Australian Tribeca Partners judged that BHP could fetch $10 billion for its shale assets and their value.

BHP announced it wants to hold on to its Permian area. There it has been strengtehning its position. Doing so by picking up high grade acreage. Later it plans to trade acreage or work with other companies in order to boost production.

Company’s success was confirmed when they cut their costs by 64%. That happened in the Black Hawk region during the past 4 years.

“On many measures we’re one of the lowest-cost operators. If we aren’t he The One.” Andrew Mackenzie, company CEO told investors in April.

He was explaining his disallowance of a suggestion for company to spin off its U.S. oil and gas assets. This was suggested by fund manager Elliott Management to company.

 

Company’s Image

 

BHP can rely its glory and positive status on energy consultant Wood Mackenzie. He stated that BHP has amid the lowest costs between shale operators. In the Permian Basin area, its richest parts. Costs are about $30.20 a barrel.  

“BHP is active in the swap market, and we expect its operational success to open doors with swap and strategic partners.” Mackenzie also said in one report, thinking about the market for trading acreage with other operators.

Its less attractive Fayetteville acreage, valued at $919 million on its books at the end of 2016, is back up for sale.

The Fayetteville acreage, which value is estimated at about $919 million is upholding sale. It is the company’s less attractive acreage. And this value is assesed at the end of 2016.

 

Finishing

One way BHP could deprive shale, while retaining exposure to a potential recovery in oil prices, would be to sell the shale assets to a well-regarded shale operator. All of that in order to have a return for an equity stake in that company. And later it could sell down the track. Said BT’s Saunders.

There are different companies active in areas where BHP holds acreage. Some of them are ConocoPhillips, EOG Resources Inc, Anadarko Petroleum, and Marathon Oil Corp, and many others…

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Bar nickel inch higher; beside multi-week lows, and oil price collapse

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SHFE

 

Marginally higher trade among base metals traded on the SHFE. Due to weaker dollar during Asian morning trade on Friday May 5. But there remained near multi-week lows following an overnight collapse in the oil price. Nickel took the uptrend, as expectations of increased supply continued to push prices down.

“European markets are buoyed by the prospects of centrist Emmanuel Macron winning the second round in the French presidential election on Sunday. [May 7]”

The strength in the European markets had pushed the dollar down yesterday’s night. Reaching a November 2016 low of 98.695. Dollar index had recently rebounded to 98.78 as of 04:32 BST. But it was still much lower compared with 99.38 at approximately the same time on Thursday.

Overnight Oil Collapse

Following, an overnight collapse in the price of oil continues to keep SHFE base metals prices under pressure this morning.

The oil price is now back to its lowest point since mid-November with WTI oil sitting at $45.51 a barrel and below the level that prevailed before the OPEC’s oil production ceiling. (According to NAB.)

Despite the pressure, SHFE bases metals prices are inching higher. The exception is nickel, which is bucking the uptrend based on fears over increased supply following the rejection of Regina Lopez as the Philippines Environment Minister on Wednesday May 3.


Nickel below 76,000 yuan per tonne

September nickel contract on SHFE stood at 75,340 yuan per tonne as of 03:54 BST. Down 930 yuan compared with the previous session’s close.

“Nickel led the sector lower as the market reacted to the failure of the Philippines Environment Minister to be confirmed by lawmakers. Ms Lopez had been spearheading the closure of the nickel mining industry due to new environmental laws.”
Appointment of  Lopez as DENR secretary came as a glimmer of hope for nickel prices amid a weakened Chinese stainless steel sector. Also a number of China-backed nickel pig iron projects coming on stream in Indonesia.

Since the country relaxed its ban on the export of unprocessed ores in January, Indonesia’s first nickel ore shipment arrived in China on Monday May 1.

A possibility that Indonesia may expand its export quota, is adding to fears of increased supply in the market.
Union workers at Glencore plc’s Raglan nickel mine

have voted 99.6% in favour of a strike mandate. Means that the USW’s negotiation committee for the mine has the authority to initiate a strike if they consider it suitable. The Raglan mine, located in the Nunavik region of northern Quebec, produces more than 37,000 tonnes of nickel-in-concentrate annually.

Copper up marginally, but the pressure is present

June copper contract on SHFE stood at 45,200 yuan per tonne as of 03:54 BST. Up 20 yuan compared with the previous session’s close.


In the mean time, the LME’s three-month copper price stood at $5,530 per tonne as of 04:48 BST. Down 0.19% from last close.  LME copper inventories rose a net 32,925 tonnes to 317,850 tonnes, with 29,275 tonnes going into Busan, after a rise of 31,250 tonnes on Thursday.
Observing the supply side, Southern Copper said a strike at its Peruvian operations in April caused a production loss of

“only 1,418 tonnes of copper”.

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IRON ore in China: Imports ease in April amid gloomy glance

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Reasons

China’s April iron ore down, due to vessel-tracking and port data suggesting a decline of several million tonnes from the near-record levels recorded in March.

83.27 million tonnes of the iron ore was dismissed at Chinese ports in April. Down 3.7 percent from March’s 86.46 million.

The vessel-tracking and port data often show numbers below the official Chinese customs data. Who reported 95.56 million tonnes of iron ore imports in March. That would be the second-highest on record. The ship data does point to lower imports in April. About 3 million tonnes.

 

China’s largest suppliers

It seems that much of the decline in iron ore imports was borne by Australia. Being China’s number one supplier, with the data showing imports of 53.9 million tonnes in April. Down from 58.9 million in March.

 

Rather, second largest supplier Brazil saw Chinese imports of 18.48 million tonnes in April. UP from March’s 16.54 million.

The lower imports from Australia in April are the result of earlier weather-related disruptions. There was rainy period in Western Australia state that affected both mines and rail networks.

This means imports from Australia are likely to recover again in May, which may be a bearish signal for prices if miners such as Rio Tinto, BHP Billiton and Fortescue Metals Group decide to chase volumes over prices.

 

Forecasts & Opinions

This can already partly be seen by the 11 percent jump in iron ore shipments from Port Hedland, the terminal used by BHP and Fortescue, to 34.86 million tonnes in April from 31.5 million in March. Sailing time lasts of around two weeks between northwest Australia and China.

Ultimately iron ore prices are driven by steel prices and margins, and here the outlook is less certain, with the main Shanghai rebar contract trending lower in recent weeks. Because the resilience of China’s infrastructure and construction spending.

 

Chinese steel

While Chinese steel output has remained robust so far this year, the market seems to be rolling toward the opinion that margins will be under pressure. Specially in the second half of the year as domestic demand growth slows and exports struggle.

Already Chinese steel mills are seeing lower exports, with shipments of products sent overseas slumping 25 percent to 20.72 million tonnes in the first quarter of this year compared to the same period last year.

Exports are the key factor for the 800 million tonnes-a-year Chinese steel sector. And a significant downturn is another important factor for the industry.

 

Iron ore prices

Spot Asian iron ore prices have performed worse than Chinese steel rebar futures in recent weeks. Dropping 28 percent from a peak of $94.86 a tonne on Feb. 21 to $68.68 on Wednesday(May 3rd).

The sharp decline is partly due to the strong rally over the past 13 months, which saw prices almost triple. Sending iron ore to levels that appeared well overbought. Given the market remains well supplied and will have to absorb more than 100 million tonnes of new low-cost production from Australia and Brazil this and next year.

While China buys about two-thirds of seaborne iron ore, this still leaves one-third that can influence the market. Recent news are pretty positive for the major exporters.

  • Japan’s imports of iron ore in April reached the highest since vessel-tracking data started in January 2015. With 11.62 million tonnes discharged during the month, up from 10.45 million the prior month.  Asia’s third-largest importer, South Korea, saw 7.17 million tonnes offloaded in April, the most since October 2015, according to the data. (Reuters)

April’s fall in China’s iron ore imports is related to earlier weather issues in Australia. Considering the info that shipments have already recovered, there is unlikely to be any supply tightness.

So the price is exposed to Chinese demand, and then the outlook is less certain and will depend on how much spending stimulus the authorities in Beijing consider suitable.

 

 

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Base metal prices keeping a downward trend (info & data)

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Important to know of Today’s market:

  • European CB President Mario Draghi Speaks
  • Bank of Canada Governor Poloz Speaks
  • UK Services Purchasing Managers Index rose to actual 55.0 (forecast was 53.3)

For more info: https://www.investing.com/

 

LME Today:

All base metal prices on the London Metal Exchange humbled today in morning trade, May 4. After a significant sell-off on Wednesday that saw copper prices down 3.7% and nickel falling 3.3%.

Three-month copper price fell further this morning as it began trading below $5,600 per tonne. Nickel price fell additionaly $150 per tonne. All other base metals saw a slight decline.

Metal Bulletin senior analyst, William Adams, said:

“The battering the base metals suffered on Wednesday has poured cold water on last week’s attempted rebounds and has opened the way for more price weakness, especially in the case of nickel where prices have dropped to levels not seen since June last year.”  (Metal Bulletin)

Copper inventories on the LME have risen by over 60,000 tonnes over the last two days.

 

Copper below $5,600/t

On Wednesday, the LME copper price plummeted by over $200 per tonne at the close of trading. Three-month copper price is down $39.50 to $5,560.50 per tonne.
Copper inventories up 32,925 tonnes to 317,850 tonnes, with 29,275 of this in Busan. It follows a rise of 31,250 tonnes yesterday.

  • Reuters wrote that German copper products group Wieland will be acquiring the copper and steel tube business Wolverine Tube as part of its plans to expand internationally.

Workers at PT Freeport Indonesia still continuing with the one-month announced strike. They are persistent & not giving up their ideas. This is reducing the copper outputs. And will surely lead to lower supplies.
 

Other base metals fall

Three-month aluminium price fell $12.50 to $1,911 per tonne.  Stocks declined 1,175 tonnes to 1,609,925 tonnes. 

“Held well against yesterday’s sell off, trading in a $19 range (vs copper that spanned $196) with evidence of consumer buying via the spreads market. Light turnover in comparison to the copper and nickel.” (F.M.)
Nickel plunged another $150 to $9,080 per tonne. Yesterday nickel prices declined $285.  Inventories were up 30 tonnes to 380,502 tonnes.
The 3month zinc price fell $26.50 to $2,548.50 per tonne. Inventories for zinc fell 2,250 tonnes to 342,475 tonnes. Glencore’s zinc production rose 9% y-o-y, with the company adding that it currently has no plans to restart idled capacity in Australia and Peru.
Lead started trading today at $2,167.60 per tonne – a decline of $34.50 on yesterday’s close. Stocks were up 5,550 tonnes to 174,250 tonnes.
The three-month tin price decreased just $60 to $19,830 per tonne as it consolidates around the $19,800-19,900 mark.
Tin stocks on the LME fell to the lowest recorded since 1980 yesterday. Stocks declined a further 35 tonnes today and currently stand at 2,630 tonnes. (Numbers from Fast Markets)

Finishing

Metal Bulletin wrote an article on data about: Spanish unemployment, services PMI across Europe, data on UK lending, EU retail sales and a host of US data including: Challenger job cuts, initial jobless claims. Also non-farm productivity, labour costs, the trade balance. Paying attention to factory orders and natural gas storage. There’s many going on today, it will also be a challenging trade for next few days.

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