on-warrant stocks

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 copper on-warrant stocks decline Recent LME data show on-warrant copper stock outflows of 19,175 tonnes, leaving total on-warrant stocks at 30,125 tonnes, the lowest since October 2021. Cancelled warrants rose by 14,850 tonnes to 50,275 tonnes, while total exchange inventories fell by 4,325 to 80,400 tonnes. In zinc and lead, data from the International Lead and Zinc Study Group (ILZSG) show that the global zinc market remained in a supply surplus of 137kt in the first four months of the year compared to a supply surplus of 156kt a year earlier. Total refined production rose by 1.2% year-on-year to 4.56mt, while total consumption rose by 1.6% YoY to 4.42mt between January and April 2023. As for lead, total production reported gains of 2.2% YoY to 4.09mt, while consumption remained almost flat at 4.15mt over the first four months of the year. The lead market was estimated to have seen a supply deficit of 46kt between January and April, lower than the 122kt deficit during the same time last year. As for nickel, the latest data from the International Nickel Study Group (INSG) show that the global nickel market remained in a supply surplus of 20,500 tonnes in April, compared to a marginal deficit of 2,600 tonnes in the same period last year. In its recent bi-annual press release, the group forecast a surplus of 239kt for the global market this year.

Metals – Copper spreads strengthen While LME copper prices remain under pressure given concerns over Chinese demand and a more hawkish Fed, LME copper spreads continue to strengthen, reflecting some tightness in the prompt market. The cash/3m spread rallied by more than $12/t yesterday to a backwardation of $31/t – the strongest we have seen this spread since November last year. Available inventories in LME warehouses continue to fall with on-warrant stocks yesterday falling by 4,400 tonnes to just 25,725 tonnes, the lowest since October 2021. Recent data from the China Iron and Steel Association (CISA) show that steel inventories at major Chinese steel mills climbed for a second consecutive week to 16.2mt in mid-June, up 2.64% compared to early June. Meanwhile, crude steel production at major mills rose by 1.4% from the abovementioned period to 2.26mt/d in mid-June.

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 – Zinc and lead on-warrant stocks climb Recent LME data shows that total on-warrant stocks for lead increased by 1,075 tonnes to 41,225 tonnes as of yesterday, the highest since February 2022. The majority of the additions came from the warehouses in Port Klang, Malaysia. As for zinc, on-warrant stocks rose by 2,625 tonnes to 68,350 tonnes.     Agriculture – IGC lowers corn output estimates In its latest monthly update, the International Grains Council (IGC) lowered its 2023/24 global corn output forecasts from 1,217mt to 1,211mt, while consumption projections were reduced to 1,205mt from a previous forecast of 1,211mt. Weaker consumption means that global corn ending stocks are expected to increase from 272mt to 276mt. For wheat, the council revised its global ending stock estimates down from 271mt to 264mt, despite a slight increase in output forecasts. The reduction in stocks was driven by expectations of stronger demand.   The USDA’s weekly net export sales for the week ending 22 June showed strong demand for US corn and wheat, while soybean shipments dropped over the previous week. US corn shipments surged to 263.9kt, compared to the 83.1kt reported in the previous week and 208.1kt from a year ago. Similarly, wheat exports rose to 155.2kt, higher than the 123.9kt reported a week ago but lower in comparison to 496.7kt from a year ago. Finally, soybean shipments stood at 244.4kt, lower than the 626.3kt reported a week ago.

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: LME zinc on-warrant stocks rise The latest LME data shows that total on-warrant stocks for zinc continued to see large inflows, rising by 37,425 tonnes (biggest daily addition since January 2021) yesterday to 130,950 tonnes. The majority of these inflows occurred in Singapore warehouses. Total readily available stocks for zinc have witnessed net inflows of 54,550 tonnes in the last two days alone, whilst net inflows for the month total 66,425 tonnes. The stock build has seen the cash/3m spread coming under some pressure, falling from a backwardation of US$36.50/t last week to a contango of US$4.25/t yesterday. Iron ore remains under pressure in ferrous metals as steel mills in China extend production cuts, while the struggling Chinese property market has further dampened the raw material demand outlook. Mysteel reports that steel plants in Jiangsu province in China have started to reduce steel production by between 20%-30% for the latter half of the year. Steel mills in other provinces, including Shandong, have also started trimming their output levels as a result of production controls. Falling home prices in July further highlight the deepening property crisis in China.

Metals – Global steel output rises The latest data from the World Steel Association (WSA) show that global steel production rose 6.6% YoY to 158.5mt in July, as rising output in China, India and Russia offset lower production from Europe. However, cumulative global steel output remained almost flat at 1,103mt in the first seven months of the year. Meanwhile, Chinese steel production reported a significant rise of 11.5% YoY to 90.8mt in July, while output in India and Russia also rose 14.3% YoY and 5.8% YoY respectively. In contrast, monthly crude steel output in the EU fell 7.1% YoY to 10.3mt last month. The International Copper Study Group’s (ICSG) latest update shows that the global copper market remained in a supply deficit of 90kt in June. However, the ICSG estimates an apparent surplus of 213kt in the first half of the year following higher output from China and the DRC, compared to a deficit of 196kt during the same period last year. Global mine and refined copper production increased by 2% YoY and 7% YoY, respectively, while overall apparent refined demand increased by 4% YoY in 1H of 2023. In aluminium, recent LME data shows that on-warrant stocks for aluminium witnessed inflows for a second day. On warrant stocks increased by 38,000 tonnes to 246,575 tonnes yesterday, the largest increase since April. Meanwhile, total exchange inventories rose by 38,725 tonnes to 529,775 tonnes yesterday, the highest since 13 July.    

Metals – Zinc exchange inventories fall LME data shows that exchange inventories fell by 3,175 tonnes to 148,400 tonnes yesterday. The majority of the outflows were reported from warehouses in Singapore and Malaysia. Meanwhile, on-warrant stocks extended their decline for a fourth consecutive session, falling by 1,300 tonnes to 89,450 tonnes. In copper, China’s CMOC Group Ltd. said that it will ship out all of its stranded copper stockpiles of about 240kt in the DRC by the end of this month. The company also expects its copper output from the DRC to rise to 600kt in 2024 following capacity upgrades. Recent data from the China Iron and Steel Association (CISA) shows that steel inventories at major Chinese steel mills fell to 14.7mt in late August, down 11.5% compared to mid-August. The association also reported that crude steel production at major mills fell 7.7% from mid-August to 2.05mt/d in late August, as weaker profit margins weighed on output. World Gold Council data shows that central banks continued to expand their gold reserves, reporting net additions of around 55t in July. The People’s Bank of China (PBoC) was once again the largest buyer, adding 23t during the month, resulting in year-to-date purchases of 126t. Meanwhile, the National Bank of Poland (NBP) was the second largest buyer, increasing its gold reserves by 22t over July to a total of 299t.