LONDON (Commodity Online): The base metals started Thursday looking rather leaden footed anyway, with weaker energy complex weighing on prices. However, a shaky start for the complex gave way to a bout of heavy liquidation during the afternoon, with much worse than expected US housing data triggering a sell-off.
Interestingly, in spite of Thursday’s sharp decline, the metals didn’t come under further pressure during Asian trade overnight. Instead there has actually been very little price action this morning, with the metals stabilising and generally picking up heading into the afternoon.
This afternoon is a busy one in terms of economic data, with the release of the August US Durable Goods Orders (expected +0.4%) the Uni. of Michigan Confidence (expected at 70.5), and the August New Home Sales figures (expected +1.6%).
Technical signals and the dollar continue to play a big part in determining short-term price direction, however the economic data will likely dictate how the metals get on this afternoon.
Copper reached a low of $5,930 in the immediate aftermath of Thursday’s US housing data, before stabilising and recovering slightly. Copper saw exceptional turnover, with well over 14,000 lots trading on LME Select as fund selling was met by consumer buying.
Prices held up overnight, with copper trading back around the $6,000 level heading into the afternoon.
Of note, Shanghai copper stocks declined for the first time since mid-July, falling 5,559 mt. While this may be taken as a bullish sign, declining SHFE inventories heading into Q4 have been a feature of the market over the past few years.
In other news, Nexans - the worlds biggest cable and wire maker - is reportedly looking at cutting its production capacity in France by over 50% from 500 ktpy to 200 ktpy, in line with current production levels. This year, the company expects to produce around 240 kt of basic copper wiring.
Aluminium saw another significant decline in on-warrant stocks this morning - down 8,675 mt - after a 4525 mt jump in cancelled warrants in the US (Chicago and Detroit the main locations). The data has had little impact on prices however, with aluminium trading sideways into the afternoon.
Elsewhere the other base metals are still being hindered by a lack of interest and low volumes. As such the metals are generally tracking copper and the currencies.
Courtesy: Commodities Research, Standard Bank
