cancelled warrants

The Commodities Feed: Copper spread tightens on inventory withdrawals Oil prices are trading under pressure this morning on demand side uncertainties as Saudi Arabia increased the official selling price for July deliveries for all regions. LME copper continues to see inventory withdrawals as demand in Asia picks up.   Energy – Saudi increases the official selling price for oil Saudi Arabia increased its official selling price for all regions for July, a day after the nation pledged an additional oil supply cut for the same month. Saudi Aramco will sell the Arab Light crude for buyers in Asia at a US$3/bbl premium for July deliveries, an increase of US¢45/bbl compared to June 2023.The premium for the US and European deliveries has increased by US¢90/bbl, while buyers in the Mediterranean region will see an increase of US¢60/bbl. The hike in premium comes as a surprise considering ongoing demand concerns and that Saudi Arabia has been pushing for supply cuts to bring the oil market into balance.   Metals – Declining copper on-warrant stocks tighten LME spread Recent LME data shows that total on-warrant stocks for copper dropped by 17,750 tonnes – the biggest daily decline since October 2021 – for a second consecutive session to 71,575 tonnes (the lowest level in almost a month) as of yesterday. The majority of the outflows were reported from South Korea’s Busan warehouses. Meanwhile, cancelled warrants for copper rose by 18,025 tonnes after declining for three consecutive sessions to 27,375 tonnes yesterday, signalling potential further outflows. The cash/3m for copper stood at a contango of just US$4/t as of yesterday – compared to YTD highs of a contango of US$66.26/t from 23 May – indicating supply tightness in the physical market.   In mine supply, Peru’s latest official numbers show that copper output in the country rose 30.5% year-on-year (+1.2% month-on-month) to 222kt in April. The majority of the annual production gains came from the higher output levels from mines like Southern Peru Copper, the Las Bambas and Cerro. Cumulatively, copper production grew 15.7% YoY to 837.5kt in the first four months of the year. Among other metals, zinc production in the nation increased 31.4% YoY to 130.6kt in April.   In ferrous metals, the most active contract of iron ore trading at the Singapore Exchange extended its upward rally for a fifth consecutive session and traded above US$108/t this morning on speculations of more supportive steps from China to accelerate its economic growth. The recent market reports suggest that the People’s Bank of China is likely to cut the reserve-requirement ratio for banks and might also lower interest rates in the second half of the year. Meanwhile, BBG also reported that the Chinese government is preparing a new batch of measures to push growth in the property market.     Agriculture – US crop planting maintains the pace The USDA’s latest crop progress report shows that US corn plantings continue to rise with 96% of plantings completed as on 4 June, compared to 93% of planting done at this point in the season last year and the 5-year average of 91%. Similarly, soybean plantings are also growing, with 91% planted as of 4 June – well above the 76% seen at the same stage last year and the 5-year average of 76%. Meanwhile, spring wheat plantings are 93% complete. This is above the 81% planted at the same stage last season and in line with the 5-year average. Meanwhile, the agency rated around 36% of the winter wheat crop in good-to-excellent condition, up from 34% a week ago and 30% seen last year.   The USDA’s weekly export inspection data for the week ending 1 June indicated a drop in demand for US grains over last week. The agency stated that US corn export inspections stood at 1,181kt, lower from 1,346.4kt in the previous week and 1,458.5kt reported a year ago. For wheat, export inspections stood at 291.6kt, down from 391.3kt from the previous week and 355.3kt reported a year ago. Similarly, soybean export inspections fell to 214.2kt, compared to 243.1kt from a week ago and 370kt from a year ago.   The director general of the Ivory Coast's cocoa regulator, Conseil Café Cacao, stated that the domestic cocoa crop is expected to improve in 2022-23 (compared to the previous year) despite intensifying concerns about a potential outbreak of the swollen shoot virus. Ivory Coast cocoa production is stabilizing despite a slow start, taking the season's harvest projections between 2mt-2.2mt. Last week, the International Cocoa Organization (ICCO) projected an increase of 4% in Ivory Coast's cocoa output this season, reaching 2.20mt.

Metals – LME aluminium on-warrant stocks decline The LME copper cash/3-month spread eased slightly yesterday, falling back to a backwardation of $19/t after the LME reported an increase in on-warrant stocks. These inventories increased by 6,175 tonnes yesterday to 31,900 tonnes, while cancelled warrants fell by 9,225 tonnes to 45,150 tonnes. Meanwhile, LME on-warrant aluminium stocks fell by 28,500 tonnes (the biggest daily decline since 2 June) to 258,875 tonnes yesterday. Cancelled warrants for aluminium also rose by 27,150 tonnes to 277,550 tonnes. The cash/3m spread did not react to changes in aluminium inventory numbers, although the flat price did settle more than 2% higher on the day. However, this was more likely on the back of hopes for more Chinese stimulus.

Metals – ample copper ore supply lifts treatment charges in China Some major copper smelters in China have agreed to pay higher treatment charges for some term copper concentrate supplies from Antofagasta Plc for next year, Bloomberg reported. Treatment charges for 2024 were set at US$88/t for as much as half of concentrate term supplies for the companies, much higher than the US$76/t signed for similar contracts for this year. This is aligned with the higher spot treatment charges we have been seeing and suggests a looser concentrate market. In zinc, the latest LME data shows that total on-warrant stocks reported outflows of 5,050 tonnes (the biggest daily outflow since 7 December) to 63,275 tonnes yesterday. Most of the decline came from warehouses in Singapore and Malaysia. Meanwhile, cancelled warrants for copper rose by 4,500 tonnes to 17,000 tonnes as of yesterday, the highest since the end of December. Recent reports from Mysteel suggest that steel mills in Tangshan City, a steel-producing hub in China, will limit steel production in July amid worsening air quality. Eleven steel mills with the higher environmental protection performance rating in the region are required to cut their output by 30% during the period. Meanwhile, steel companies with a lower performance rating are expected to cut their production by 50% in July.

Metals: Chile copper production falls Copper, along with other base metals, traded lower in the morning session as weak manufacturing data from China raised concerns over the expected economic recovery in the country. The Caixin manufacturing purchasing index reached a six-month low of 49.2 in July from 50.5 reported a month earlier. It also remained lower compared to the average market expectation of 50.1. Meanwhile, a struggling real estate sector in China is also weighing on the metals complex. Preliminary data from China Real Estate Information Corp. shows that home sales by the country's biggest developers contracted 33% year-on-year (the most in a year) in July. The latest data from the National Statistics Institute of Chile shows that copper output fell by 1% YoY to 458kt in June due to a slowdown in manufacturing production. Cumulatively, copper output declined by 4% YoY to 2.55mt in the first half of the year, following a series of operational issues this year. As for zinc, LME data shows that total cancelled warrants rose by 7,425 tonnes for a second consecutive day, taking the total to 35,150 tonnes as of yesterday, the highest since 5 August 2022. Most of the inflows were reported from Singapore warehouses. Net increases for July totalled 22,650 tonnes as of yesterday when compared to the net increase of 6,825 tonnes during the same period last month. Meanwhile, total exchange inventories rose by 525 tonnes for a third consecutive day to 99,675 tonnes (highest since 26 April 2022) as of yesterday.

Metals – Fresh stimulus from China for the property sector Base metals prices extended this week’s gains this morning as healthy economic data and fresh stimulus measures in China buoyed sentiment. Caixin manufacturing PMI in China increased to 51 in August compared to 49.2 in July; the market was expecting the PMI to remain around 49. This is the strongest manufacturing PMI number since February. Meanwhile, Beijing has announced fresh stimulus measures aimed at supporting the property sector. The People’s Bank of China has lowered the minimum downpayment for mortgages for both first-time buyers (from 30% to 20%) and second-time buyers (from 40% to 30%) while the minimum interest premium charged over the Loan Prime Rate has also been reduced. China is also allowing customers and banks to renegotiate interest rates on existing housing loans which could reduce interest expenses for borrowers. LME continues to witness an inflow of copper into exchange warehouses. LME copper stocks increased by another 3,675 tonnes yesterday, taking the total inventory to a year-to-date high of 102.9kt. Meanwhile, cancelled warrants for copper remain near zero levels, hinting that there may not be any inventory withdrawals from LME in the short term and total stocks could continue to climb over the coming weeks. Europe witnessed an inflow of 2,700 tonnes yesterday whilst 950 tonnes were added in the Americas and 25 tonnes in Asia. Gold prices have held steady at around US$1,940/oz as the latest economic data from the US eased some pressure on the Federal Reserve to continue with rate hikes. The core PCE (Personal Consumption Expenditure) deflator in the US increased at a flat 0.2% month-on-month in July, the second consecutive month at 0.2% which should help the Fed in getting inflation back on track to around 2%. On the other hand, data from Europe was not that supportive with core CPI falling gradually from 5.5% to 5.3% and CPI estimates remaining flat at 5.3%. The focus is now turning to today’s US non-farm jobs report which is expected to show a smaller rise in payrolls in August.

The Commodities Feed: Gold hits record highs Gold prices jumped above US$2,100/oz, surpassing their previous highs made in August 2020 on growing expectations for US rate cuts next year. A weaker US dollar and lower treasury yields, along with increased geopolitical uncertainty, are prompting the higher prices. We also look at what else is making news this Monday in commodities.   Metals – Gold rises to record highs Spot gold prices jumped to record highs of US$2,135/oz this morning on rising expectations of easing monetary policy in the US before paring most of those gains. The latest comments from Fed Chair Jay Powell suggest that monetary policy in the US is “well into restrictive territory”, leaving the market speculating that the Fed might start trimming interest rates early next year. Meanwhile, an easing US dollar and extended weakness in the treasury yields continue to support the buying sentiment for gold. Looking at the speculative positions, the latest CFTC data shows that the money managers increased their net longs in COMEX gold by 29,516 lots for a second consecutive week, leaving them with a net long of 144,410 lots as of last Tuesday, at the highest level since 9 May. The speculative buying interest for gold is likely to continue in the near term, given the ongoing geopolitical tensions and expectations of lower interest rates in the US. In copper mine supply, First Quantum Minerals has suspended production guidance for the Cobre Panama mine for 2023. First Quantum stopped commercial production at the mine last week after the Supreme Court of Panama ruled against a contract between the government and the mining company. It is estimated that the mine holds around 1.5% of the share of the global copper mined supply. Meanwhile, the latest data from Fastmarkets show that treatment charges for copper paid by Chinese smelters have dropped below US$70/t for the first time since August 2022, indicating a tightening ore supply. The LME data shows that cancelled warrants for copper increased by 5,359 tonnes to 34,525 tonnes as of Friday, the highest since 20 July. Most of the increments were reported from New Orleans warehouses. On-warrant inventories for copper dropped by another 6,350 tonnes for a seventh straight session to 139,725 tonnes at the end of last week, the lowest since 12 September. The LME cash/3m spread for copper tightened to a contango of US$72/t as of Friday, compared to a contango of US$77/t a day earlier. In China, the recent data from the Shanghai Futures Exchange (ShFE) shows that copper stocks fell sharply by 9,729 tonnes (-27% WoW) over the last week to 26,149 tonnes as of 1 December, the lowest since May 2009. Among other metals, zinc stocks decreased by 3,425 tonnes to 34,541 tonnes (lowest in over a month), while lead and aluminium inventories rose by 15.6% WoW and 1.3% WoW, respectively, as of Friday.