COM: Base metals still hangs on dollar’s directions
By Leon Westgate
The base metals had another mixed day on Tuesday with a weak start giving way to a push higher during the late morning. The complex ran out of steam during the afternoon however, with the metals generally trading sideways and looking to the dollar. This morning has continued to see the dollar take charge.
The metals rallied initially, supported by much stronger Asian equity markets (bouncing back after recent pressure), and further dollar weakness. However, with the metals lacking direction, a reversal in the dollar’s fortunes has since triggered a sell-off heading into the early afternoon.
Copper had a bumpy ride, coming under pressure initially before picking up again. The dollar remains in control for the moment however with the metal coming back under pressure. LME volumes remain pretty busy with copper again seeing a lot of volume go through on-line.
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The approach of the Chinese New Year has seen physical activity in China wane however. The SHFE-LME copper arbitrage is closed while physical copper is trading at a $20-$30 discount to the SHFE February contract. That said, premiums for material held in bonded warehouse are still trading around the $100-mark.
With demand expected to increase once the holiday period ends, premiums are likely to remain fairly firm in the interim rather than fall significantly due to what is essentially seen as a short term dip in demand.
Xstrata has confirmed that an accord has been reached with its striking Sudbury workers, with a 3-year agreement being ratified. The resolution appeared to be priced in on Monday with today’s reports merely confirming the rumors that things were progressing. As such, nickel is rallying along with everything else, though the metal has run into a bit of resistance just above 18,500 and has since dropped back towards yesterday’s closing levels.
In other news, Minmetals Australian-based operation, Minerals and Metals Group, has announced that it has restarted output and shipping form it Century zinc mine after operations at the port were disrupted by a tropical cyclone.
PT Timah meanwhile has suggested that tin prices may average $20,000 mt this year, due to increased demand and limited output from the main tin producing countries. Indonesia is expected to cap output this year at around 100 kt.
