Industrial metals: Exchange-registered LME inventories continue to be reduced

by David Fleschen

The further appreciation of the US dollar - yesterday the EUR-USD exchange rate was below the 1.05 mark for the first time in over five years - also weighed on industrial metals prices yesterday. With the slight countermovement of the greenback this morning, metal prices are also rising again somewhat. Copper rose to USD 9,900 per tonne, making up for yesterday's losses. Aluminium is trading at a good USD 3,050 per tonne and zinc at USD 4,160 per tonne, although this only reverses a small part of yesterday's losses. Measured by the LME industrial metals index, metal prices have fallen by almost 5% since a week ago. In addition to the firm US dollar, continuing demand concerns in China in the wake of the ongoing lockdown measures are probably also contributing to the lower prices. Purchasing managers' indices (PMIs) will provide an insight into the mood in Chinese industry tomorrow.

The Bloomberg consensus expects both the official and Caixin PMIs to have slipped significantly deeper into contractionary territory in April. The growth outlook for the Chinese economy is thus likely to have deteriorated further, even though the government has recently announced more support measures. The fact that the exchange-registered inventories in the LME warehouses are being further reduced has apparently receded into the background for market participants. The situation for aluminium and zinc is coming to a head: aluminium stocks have meanwhile melted down to just over 570 thousand tonnes, the lowest value since November 2005. And a good third of this is still requested for delivery. The situation with zinc is even more precarious: there are less than 100 thousand tonnes of zinc in the LME warehouses, of which only 35% is available to the market. Should this development receive more attention again, this could give rise to renewed price increases.

Source: Commerzbank Research, Photo: Fotolia

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