LIVE FUTURES REPORT 12/02: LME aluminium holds amid 12kt outflow, 15kt fresh cancelation

LME aluminium futures hit an intraday high of $1,737.50 per tonne during the morning session today – a marginal $3.50-per-tonne increase from the previous day’s close at $1,734 per tonne.

11,875 tonnes of material was taken out of the LME warehouse, the majority of which left Asian warehouses. The largest outflow of the morning – 5,000 tonnes – left sheds in Port Klang, Malaysia, while just 550 tonnes of the light metal were removed from LME sheds in Rotterdam.

A lesser 4,825-tonne inflow out of Johor, Malaysia slightly tempered this, with LME aluminium inventory now at 1,232,200 tonnes. In Port Klang, Malaysia, 15,075 tonnes of material were freshly canceled, leaving on-warrant stocks in the region at 417,900 – 50% of global LME on-warrant aluminium stocks, which are at 834,150 tonnes currently.

Other LME three-month prices were subdued, capped by ongoing uncertainty pertaining to the Wuhan coronavirus pandemic that has brought many of China’s markets, commodity and otherwise, to a halt.

“Though President Xi has also vouched that China will increase the level of support to firms that have been affected by the virus, giving businesses reassurance that the country will end the epidemic, recent attempts to put a positive spin on the situation have failed. Tales of a speedy recovery remain far-fetched and the impact on the global economy could deteriorate further. As such, we deem any recovery in base metals prices to prove short-lived but remain highly sensitive to fresh medical and political developments out of China,” Fastmarkets research analyst Andy Farida said.

LME nickel futures, a typical proxy for the Asian markets, are particularly sensitive to ongoing developments in China this morning, heading back below $13,000 per tonne, having hit a low of $12,935 per tonne during the morning session from the previous day’s close of $13,110 per tonne.

Nonetheless, 2,334 tonnes of nickel were freshly-canceled in Johor, Kaohsiung and Singapore as of 9am today, leaving on-warrant stocks at 127,236 tonnes – over half of the total 209,742-tonne global inventory. Physical stock moves were otherwise lackluster this morning, with just 1,020 tonnes of material flowing into Kaohsiung.

LME zinc stock movements have lessened if not abated, with a small 675 tonnes of material coming back into LME approved sheds versus 100 tonnes flowing out and 100 tonnes freshly canceled this morning.

Recent efforts to put zinc’s forward curve into contango via consistent material deliveries onto the LME have been successful – stocks are up 46.2% to 72,600 tonnes today from 49,625 tonnes on February 4 while the LME cash/three-month spread now trades in a $7.50-per-tonne contango from a $5-per-tonne backwardation a week ago.

Other highlights

• The US dollar index is trading down a marginal 0.04% at 98.72 this morning, capping LME base metals prices somewhat
• United States crude oil inventories for the week ending February 7 will be released today, with inventory levels expected to drop to 3.1 million barrels from 3.4 million bbls. Brent Crude futures are trading up by 0.97% in line with the anticipated drop at $55.21 per bbl this morning. United States Federal Reserve chairman Jerome Powell will testify on the country’s Semiannual Monetary Policy Report before the Senate Banking Committee for the second day today
• The US’ monthly 10-year bond auction reports are released today and are typically considered an indicator of investor confidence. The previous month’s ratio of bonds sold to bid-to-cover – the number of bids made per bid accepted – ratio was 1.87:2.4.
• The US federal budget balance, which assesses the difference in value between the federal government’s income and spending during the previous month, will also be announced today, and is expected to decrease from -10.7 billion from -13.3 billion previously.
• Federal Open Markets Committee member Harker will speak today on the region’s economic outlook in Pennsylvania.