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SHFE morning report; weaker U.S. and Chinese data

Important Facts about Today’s Market:

 

  • New Zealand Employment Change QoQ rose to actual 1.2% (forecast 0.8%)
  • Germany Unemployment Change – 30K actual (forecast -10K)
  • UK Construction Purchasing Managers Index (PMI) fell to actual 52.2(forecast 52.4)
  • The US ADP Nonfarm Employment Change to actual 263K (forecast 187K)
  • Also US ISM Non-Manufacturing PMI fell to 55.2 (forecast 57.0)
  • US Crude Oil inventories to -3.641M while exp. was -1.661M
  • FED Statement & FED Interest Rate Decision

 

SHFE

 

Base metals today on the Shanghai Futures Exchange were broadly lower during Asian morning trade, as desolate economic data from China and the USA weighed on market sentiment.

US Car sales

Firstly, under-performance in US car sales during April combined with China’s weaker PMI data has left market participants concerned over weaker economic growth in these two countries, according to a Shenzhen-based senior analyst. 

Secondly,the perceived weakness has dampened market sentiment and sent the base metals prices into retreat this morning.

“Prices drifted lower as investors fretted about weaker than expected manufacturing activity in China. Metals also fell as US carmakers reported steeper-than-expected US sales declines, suggesting demand will be weaker in that region.”

Thirdly, sales at all six of the biggest automakers in the USA fell again in April, with each company’s figures coming in below analysts’ estimates resulting in the fourth consecutive month of falling sales in aggregate, according to National Australia Bank (NAB). (Metal Bulletin)

“On Monday, March US personal spending figures disappointed (0.0% compared with 0.2% expected) and now the new drop in car sales confirms the view that not all is well with the US consumer. The recent soft US data releases are challenging the view that a rebound in activity should be expected in [the second quarter].”

 

China

Meanwhile, China has also had its fair share of disappointing data this week.

Following, China’s official NBS manufacturing PMI fell to 51.2 in April from 51.8 in March and below market expectations of 51.6, while the country’s non-manufacturing PMI also dropped to 54.0 in April from 55.1 in the previous month. Additionally, China’s Caixin manufacturing PMI fell to 50.3 last month from 51.2 in March.

“These three numbers taken together point to the same issues, that there is a slowdown in new domestic orders, export orders are falling, there is rising unemployment and a fundamental weakening in business confidence. Also, looking at the extreme, we may have to face the fact that the Chinese economy may be starting to embrace a downtrend,” Bands Financial Ltd said on Tuesday.

 

Copper price dips

SHFE June copper contract stood at 46,610 yuan per tonne as of 03:48 London time. Down 180 yuan compared with the previous session’s close.

“Tightened credit in China during April will continue to put pressure on copper prices,” China’s Galaxy Futures said on Wednesday.
After suffering a mild downturn in April, copper is facing more headwinds going into May, according to INTL FCStone Inc analyst Edward Meir.
“The market finds itself in somewhat of a soft spot going into [the second quarter] given that the big events driving values higher last quarter, namely the Escondida and Grasberg outages, are now behind us and the next wave of labour negotiations will not take place until later this year,” Meir said. (M.B.)

In conclusion, workers at PT Freeport Indonesia have continiued a month-long strike. At the world’s second-largest copper mine Grasberg. The strike is expected to hinder expansion plans at the mine.Strikers are persistent, it is the 3rd day of protests.

 

 

 

Market NEWS Today (25.04) Copper price rises; base metals consolidate

,

Top 5 things you need to know in the financial Markets on Tuesday:

  • Global stocks, euro extend French election rally
  • Dozens of U.S. earnings ahead
  • Oil attempts to break 6-day losing streak (later in text)
  • North Korea conducts live fire drill as tensions rise
  • U.S. slaps tariffs on Canadian lumber

For further info about these subjects, visit https://www.investing.com/

 

LME :

Base metal prices on the London Metal Exchange were generally up this morning, with copper seeing the biggest increase.

Lead and tin were the only base metals to see a decline, but aluminium is trading only at $1 per ton higher than Tuesday’s kerb.

Nickel prices set fresh lows for the year at $9,245 per ton yesterday but is the metal is currently trading at $9,265 as it continues to suffer from free-falling prices earlier this month.

French Elections Results:

There may be some slight growing confidence in the market due to the results of the French elections over the weekend. Presidential candidates Emmanuel Macron and Marine Le Pen won the first round of voting in the French election on Sunday and will head into a run-off second round on May 7.

Alastair Munro of Marex Spectron noted: “While our latest speculative positioning estimates broadly highlights the recent theme of long liquidation, with nickel and zinc now seeing shorts established, traders in the base metals complex focus on broad trading ranges.”

Copper prices also found support in the news that US president Donald Trump will unveil more details of his tax reform plans on Wednesday.

Copper price rises

The three-month copper price saw a $40.50 increase to $5,695.50 per ton. Copper stocks fell by 2,600 tons to 262,250 tons. LME on-warrant stocks have fallen four days in a row. Anglo American has reported a 3% year-on-year drop in copper production during the first quarter of 2017.

Munro said: “Also Freeport has indicated plans to increase open pit production at Grasberg to 145kt/day and deep zone ore output to 40kt/day. It appears that union workers are still planning to strike in May.” Workers at Freeport-McMoRan’s Grasberg copper mine are said to be planning a month-long protest around the same time that exports are expected to resume.

 

Other base metals up

The three-month aluminium price rose by $1 to $1,947 per ton as it aims to bounce back above $1,950 per ton. Aluminium stocks fell by 9,325 tons to 1,668,325 tons, with 105,425 tons of freshly cancelled stock.

Nickel is trading at $9,265 per ton, a $5 increase on yesterday’s kerb. Stocks fell by 324 tons to 386,172.

The three-month zinc price has seen a $13.50 per ton increase to start trading at $2,617.50 per ton. Zinc inventories fell by 1,525 tons to 351,675 per ton.

 

Tin and lead decline

Lead was one of only two metals to fall, seeing a $2.50 decline to $2,160.50 per ton. Stocks were down 600 tons to 166,325.

The three-month tin price fell by $30 per ton and is currently trading at $19,620 per ton. Inventories fell by 75 tons to 3,095 tons.

 

Currency moves and data releases

  • The dollar index was recently down 0.06% to 98.99.
  • In other commodities, the Brent crude oil spot price was up 0.12% to $51.66 per barrel.
  • In equities, the FTSE 100 was up 10.56 to 7,275.24.
  • On the economic agenda, data on US CB consumer confidence, house price index, new homes sales and UK public sector borrowing is due today.

 

 

 

 

Base metals subdued; Aluminium went slightly up

 

Essentially lower levels

Base metals prices started a holiday-shortened week mostly on the defensive. With LME premarket trading on Tuesday April 18 seeing lower levels. – Potentially supportive macroeconomic developments were shrugged off.

The exception was aluminium. It pushed higher on weekend news that planned Chinese capacity extensions were being put on ice.

On the other hand, copper and zinc were wafting. Near last week’s three-month lows, nickel touched its softest for two-and-a-half months. Lead hit its weakest for two months.

“Sentiment was a bit sloppy last week, and that has carried over today it seems. There is a run of short weeks now so business looks like being a bit patchy at times.”

Consequently, there was a muted reaction to Monday’s upbeat Chinese data! First quarter GDP grew 6.9% year-on-year, marking the fastest growth rate in 18 months. And most noteworthy beating forecasts of 6.8%

 

Metals session except Al

 

The rest of the session may see the lackluster trend being maintained ahead of a string of metals.

“The base metals have been showing weakness in recent weeks and have so far not seen any pick-up even amid the shift into the seasonally strong second quarter. The lack of upside momentum in most of the metals since mid-February has increased the chance of stale long liquidation,” William Adams of Metal Bulletin said.

 

 

Aluminium

Aluminium goes it alone; China supply clenching?

The three-month aluminium price forged higher, recently trading at $1,928 per tonne, up $18 from the Thursday close. The local government in Xinjiang, western China, halted three new aluminium projects with combined capacity of 2 million tons per year for violating rules aimed at curbing output.

 

 

Other near multi-month lows

 

The three-month copper price slid to $5,663 per tonne, a $29 decline, and looks vulnerable to a test of last week’s $5,615 low. While three-month zinc price was at $2,593 per tonne, a $31 loss, with a test of $2,558 – last week’s low-point – possible. Also, three-month lead price skidded as low as $2,200 per tonne, a $39 loss, while nickel fell to $9,560, down $190. Most noteworthy, three-month tin price stood at $19,795 per tonne, however, a $190 advance.

 

Currency moves and data releases

 

The dollar index was recently down 0.29 at 100.29.

Brent crude oil fell $0.61 to $55.00 per barrel.

In equities, the UK FTSE 100 index fell nearly 70 points to around 7,258.

In data today, US building permits, housing starts, the capacity utilisation rate and industrial production are due.

 

Crude Oil Update

Venezuela’s crude-stained oil tankers banned at sea (*check the link below)

http://www.reuters.com/article/us-venezuela-oil-tankers-insight-idUSKBN17K0CE

  • June West Texas Intermediate crude oil futures are trading lower shortly before the regular session opening as investors react to a bearish government report.

Government data released on Monday showed that May output is expected to rise by 123,000 barrels per day to 5.19 million bpd.

If this information is right, May production will post its biggest monthly increase since February 2015 and the highest monthly production level since November 2015.

Overcoming the angle at $53.08 will indicate the return of buyers. This could create a labored rally into angles at $53.39, $53.77 and $53.95. Other is the last potential resistance angle before the $54.14 main top.

OPEC commented on its plans about extending to cut productio . But it may not be strong enough to turn this market around.

 

Global OIL market nears balance even as stocks go up

 

 

Global OIL Demand

In the beginning, after nearly three years of surplus production, global demand for oil is finaly close to run out. Non counting the growth in the overhang of unused crude oil.

International Energy Agency said that in March, oil stocks in OPEC fell by 17.2 million barrels per day. “Over the first three months of the year, stocks were up by 38.5 million barrels, or 425,000 barrels per day (bpd), after a large increase in January.”

Yet, OECD stocks fell by 8.1 million barrels in February. To 3.055 billion barrels as demand outpaced supply to the tune of around 200,000 bpd between January and March.

Stocks are still 330 million barrels above the five-year average.

Inconsistency Reasons

 

There are several possible explantions for the inconsistency. For example, demand is overstated or the supply is understated in the estimates. On the other hand, explanation lies with “less visible” stocks, inclouding stocks held at sea. That stocks held at the sea can be either in transit or for speculative reasons. And they can also be on land, but outside the OPEC countries.

“Indeed, a look at data from various sources shows stocks drawing in some non-OECD countries over (the first quarter of 2017). Non-OECD stocks are thought to be roughly equal in size to OECD volumes, but there is far less data available about them.” As the IEA info shows.

“The net result is that global stocks might have marginally increased in the first quarter, versus an implied draw of about 0.2 million barrels per day”

We have an interesting second half to come…

 

Global Level

 

Looking at the global level, oil held offshore fell to 58.4 million barrels in March. It started from 82.6 million barrels at the end of 2016. Iranian offshore stocks also fell to 4 million barrels in March. It has started from 28 million barrels when sanctions were lifted in early 2016.

“In other words, the full extent of the production cuts has not hit yet,” Bernstein said.

The price of oil LCOc1 has increased to around $56 a barrel. It went from a 13-year low of $27 hit in January last year, which has encouraged a raft of new supply.

For the second half of 2017, the IEA expects non-OPEC supply to rise by 485,000 bpd, above its previous estimate of 400,000 bpd. The one of main reasons would be led by increases in U.S. production growth.

Indeed, although the oil market will likely tighten throughout the year, overall non-OPEC production, not just in the U.S., will soon be on the rise again.

Oil market is a volatile, very interesting market to work on. Especially when it comes to predicting possible trends based on the geopolitical activities around the world.