International Metals Early Review September 5
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August 27 14:05:44, 2022
Last Friday, due to the continued decline of the dollar and the reduction of inventories, LME copper rose sharply, and the intra-day closing price was as high as $3688, up $60. It once touched a high of $3,725, which was later hit by profit-taking pressure. Other base metals also rose sharply, but the gains were far less than those of copper. The COMEX indicator for December contract was reported at 167.35 cents/lb, up 2.55 cents, and set a new contract high. Last week, LME stocks fell by 2,425 tons to 65,525 tons, Shanghai stocks decreased by 3,228 tons to 39,671 tons. After the news that two inventories were simultaneously reduced, LME electronic trading began to rise, and there was a sharp increase in on-floor trading hours. The reduction in inventory also led to the continued strength of spot prices, LME spot / three-month premium has reached 255 US dollars, a new high since August; domestic Huatong spot price reached 35,700 yuan, making Shanghai copper near strong and weak Pattern. With the hurricane devastating, rising oil prices and signs of slowing U.S. economic growth, the market expects the Fed will only raise interest rates once again or even stop raising interest rates this year, which has caused the U.S. dollar to fall continuously last week. The euro has reported against the U.S. dollar at 1.2521 and the U.S. dollar index at 86.46. The U.S. dollar fell to a new low since the end of May. The decline in the US dollar makes LME copper denominated in US dollars appear to be “cheapâ€, and a large number of funds bought a large amount of money to push up prices. From the chart point of view, LME copper has broken all the pressure lines, indicating that it is in a very strong market state, and there is still momentum for the market to rise. [Overseas Institutions Review] Barclays Capital's copper price hit a record high of $3,700 on Friday and closed at $3,627 on Thursday. LME stocks have fallen by a massive 2,400 tons when the market expects stocks to return further, which constitutes strong support for copper prices. At the same time, Shanghai's inventories fell by 3,200 tons to 39,700 tons, and China's copper market is in a tight spot. Although investors are assessing the impact of high oil prices on the metal market, copper prices have rebounded strongly. Long-term oil prices at $70 are not good for global economic growth and metal demand. Considering the strong fundamentals (low inventory and output growth are not satisfactory), we expect that only a slowdown in economic growth will have a negative impact on copper prices. Importantly, long-term interest rates are low, and 10-year bond yields have fallen to 4%, which helps offset the negative impact of high oil prices and continues to stimulate metal demand. The Fed will rethink the process of rising interest rates. We do not lower our expectations for metal prices, but the metal market may cool, which will lead to a flattening of the forward price curve. The risk of sharp fluctuations in copper prices has intensified, but the upward trend continues. The ISM manufacturing index fell from 56.6 in July to 53.8 in August, indicating that US manufacturing continues to expand. The new order sub-index was 56.4, compared with 60.6 in July. Manufacturers' inventory continues to decline, and the decline is faster than before. We believe that the ISM has not changed the US’s expectation of a 4% GDP growth in the third quarter, so the Fed is unlikely to reassess the economic outlook. The purchasing managers' index in other regions also slowed, but still pointed to expansion: Japan 53.8, Europe 50.4. Triland Metals Copper: The decline in inventory, technical breakthroughs, the dollar weakened; supported by the above factors, copper prices rose to new highs. Afterwards, a profitable sell-off occurred in the market (partly due to the weakening of the U.S. dollar), and the American smelting company (Asarco) announced that negotiations between the employer and the employee will soon reach an agreement. The drop in inventory led copper prices to break through the previous record high of 3,670, after which speculators also contributed. Copper prices hit 3725 and encountered profitable selling. It closed at 3685, gaining 59 the same day and gaining 75 the week. The spot premium for the three-month futures is 250. Viewpoint: Weekly chart did not close above 3700 and stayed on the sidelines. Aluminium: Copper prices strengthened in the morning and aluminum prices also rose. However, speculative buyers have continued to sell, making the upside difficult. At noon, aluminum prices hit 1900, but then fell back from this position. It closed at 1880 and gained 8 the same day, with a fall of 13 that week. Opinion: Keep watching as the price of aluminum is limited to 1850/60-1900/10. Still bullish on aluminum prices, the upper end of the target is 1950; if the weekly closing price is lower than 1850, it is difficult to achieve the upstream goal. The chain reaction brought by Hurricane Katrina on the Basemetal website may be far-reaching. The hurricane has led to soaring oil prices, which in turn has hurt US consumer sentiment and economic growth prospects. The negative impact of the hurricane on the economy may be enough for the Fed to suspend interest rate hikes, which in turn will cause the dollar to weaken further. The weaker dollar on the surface is a positive factor for metals (gold prices are still rising), but will the energy crisis further slow the U.S. economic growth? If this is the case, the energy crisis will undoubtedly harm global demand and further suppress the metal market. Once this sign shows, the fund may adjust its position. The Refco copper bull market cycle has obviously entered the late stage, but there are few signs of peaking. Copper prices may further test the 3720/25 and 3755/60 regions. Initial support is located at 3,630,835, and the next support is at 3570/75. Clearly, the more crucial 354-5/50 area needs to be broken in order to trigger a stronger correction and push the copper price back down to the 340,000/5 area. Only closing below this area can fully confirm the formation of the second top and weaken the price of copper. Trading Strategy: Waiting for a clear signal from the market before considering a re-establishment of short positions. The medium-term and long-term technical aspects of aluminum continue to deteriorate, and the recent rebound appears to be part of the consolidation model. There are signs that the short-term uptrend has been completed, with initial support at 1850/55 and the next support at 1830/35. It is expected that aluminum prices will retest the more critical 1785/90 area in the next few weeks. The resistance is at 1900/05; the aluminum price needs to return to this resistance level in order to extend the uptrend near the 1920/25 area. Only by closing above 1950/55 can the fundamental trend be improved. Trading Strategy: Continue to hold short positions in 1900 and 1920 positions. The stop loss is set above 1905 with targets of 1790 and 1740. Reuters LME: Tight supply and weaker U.S. dollar hit a record high of $3,725 Friday The London Metal Exchange (LME) copper jumped nearly $100, or 2.6%, hitting a record high of $3,725 per ton. The US dollar was weakened by Hurricane Katrina and the supply was tight. The dollar fell to a three-month low of 1.2589 against the euro, making copper denominated in dollars seem to be cheaper for buyers holding other currencies, and other metals also rose. Traders said that investment fund buying and short covering helped easily push copper prices higher than their previous high of 3,670 and made the 3,700 level the next upside target. A senior metal trader said that everyone wants a share, they buy in big money, the current market is driven by speculative funds. Three-month copper fell back to 3,688 U.S. dollars, but still rose by 60 U.S. dollars from Thursday's close of 3,628. Kemp, an analyst at Sempra Metals, said that after the hurricane, the U.S. economy remained uncertain, and the hurricane swept through the Gulf Coast on Monday. The hurricane will have an impact on inflation because the price of gasoline, oil, etc. will rise. However, whether this will affect the core inflation rate remains controversial. Tight supply tensions also affected the market, with LME copper stocks currently at 65,525 tons, far higher than the 31-year low of 25,525 tons hit in July. However, the same period last year, copper stocks reached more than 100,000 tons, and the reverse price difference is very strong. The reverse spread is currently 246/254 US dollars per ton, but once reached 280/290 in July, the highest since December 1995. The aforementioned senior metal dealer stated that this is unusual and unbelievable, but the bulls are still holding positions. Spot copper rose to a record high of US$3,955 per tonne. High oil prices may hurt demand Bartlett Capital analyst Stubby said that if oil prices continue to be high at US$70 per barrel, it will not be good for global economic growth and metal demand. news. She added that given the support of fundamental factors such as low inventory and disappointing production growth, we expect that only a serious slowdown in economic growth will have a negative impact on copper prices. Richardson of Deutsche Bank stated that the overall outlook for commodities is positive and that the continuous development of global industrial production has kept copper prices high for a long time. Supply chain pricing pressures, increased budgets for capital expenditures, and prolonged regulatory approval processes are all factors that bind suppliers, and they also contribute to price volatility. Source: Bohua Information