Uncertainty on global growth, trade war weighs on market

August 16, 2019

LONDON (Aug 16) - Industrial metals prices were mixed on Friday, weighed down by uncertainty over how much weak global economic growth is undermining demand, but some metals saw support from potential shortages.

"People are taking stock and trying assess what the next move is, not just for the economy and the trade war but for central banks around the world," said Geordie Wilkes, head of research at broker Sucden Financial in London. "With the macro(economic) and trade war uncertainty, as well as the situation in Hong Kong, from a demand perspective there's downside, but support can come from supply-side shocks, like we've seen in nickel."

Benchmark nickel on the London Metal Exchange hit a 16-month peak earlier this month on fears major producer Indonesia would bring forward an export ban of ore.

On Friday, LME nickel had shed 1.2% to 16,055 a tonne by 1045 GMT, as investors took profits on a rally that has sent prices up 35% since early July. On the Shanghai Futures Exchange, however, the most active nickel contract climbed as much as 3.7% to 127,700 yuan ($18,132.51) a tonne.

* NICKEL SPREADS: The premium of LME cash nickel over the three-month contract jumped to $40 a tonne, a decade high, signalling tight nearby supplies in the LME system. Traders said the tightness was probably largely due to a large position on the LME. Data showed that one party had control of 50%-80% of available inventories and short-term futures.

* PHILIPPINES: The Philippines' top exporter of high-grade nickel ore is expected to shut its mining operations soon as ore deposits are nearly depleted, a ministry official told Reuters.

* COPPER STOCKS: Over the past three days, copper inventories in LME-registered warehouses have jumped by 22% to 331,975 tonnes.

* CHINA OUTPUT: China produced 801,000 tonnes of refined copper in July, up 4.8% year-on-year, while alumina output was

 up 2.9% in the same period to 6.22 million tonnes, official data showed.

* TRADE WAR: "A meaningful trade deal is unlikely to be reached before the next U.S. Presidential elections in late 2020. We expect most base metal prices to remain weak over the coming months... with the exception of nickel which continues to show resilience due to supply-side fears in Indonesia," Fitch said in a note.

* PRICES: LME aluminium rose 0.1% to $1,784 a tonne, zinc advanced 0.8% to $2,282.50, lead dropped 0.8% to $2,048 and tin slipped 2.3% to $16,760.


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