By Leon Westgate
Thursday was a day of turmoil in the markets as risk aversion kicked in following President Obama’s comments on the US banking industry. Commodities and equities all came under pressure, with the US equity markets being particularly hit.
Overall however, the base metals held up surprisingly well. Exceptional volumes were seen, particularly in copper where over 18,500 lots traded on LME Select, with the weakness sparking significant 2-way buying interest rather than a complete rout.
This morning has seen the metals make a mixed start, though copper has again been very busy, with over 8,000 lots trading on LME Select by midday. As noted above, copper saw 18,500 lots trade on LME Select, a huge amount to go through online and equivalent to just under 87% of the total inventory held in LME warehouses.
Nevertheless, in spite of the weakness elsewhere in the global markets, prices only fell $95 on the previous day. This morning has seen prices trade sideways, briefly dropping below $7,200 before picking up again heading into the afternoon.
Elsewhere, SHFE copper inventories fell 3,28 mt, while available LME inventories declined 5,375 mt after a 4,925 mt jump in cancelled warrants. Of note, the main location for the cancellations was Busan (+4,800 mt) suggesting that the activity may be related to SHFE-LME arbitrage interest.
The other base metals were also pretty busy on Thursday, with aluminium seeing over 10,000 lots trade on Select, Lead over 4,600 lots and Zinc just under 7300 lots. Price-wise the metals generally took direction from copper, the exception being nickel which ignored the rest of the complex and traded sideways.
Zinc has broken free from copper this morning, coming under sustained selling pressure. Also weighing on prices are the latest Chinese import/export numbers showing that Chinese exports of zinc jumped in December, on the back of the negative SHFE-LME arbitrage, while imports also fell after a solid performance yesterday, nickel has come back under pressure.
Overall, the metal remains range bound and appears to be trading very technically at the moment.
