Palladium Steadies With UBS Flagging ‘Sweet Spot’ for Hot Metal
20 January 2020
Palladium steadied after a record-breaking rally, with investors considering whether the metal has risen too high, too fast.
Prices swung between gains and losses on Monday, after surging to a fresh record of $2,577.27 an ounce as tight supply conditions show little sign of easing. The metal pared some of its gains in the afternoon as a holiday in the U.S. depressed activity in most major markets.
Palladium’s recent jump left some investors worried that a price pullback is due. Still, overall sentiment remains bullish.
The metal is in a “real sweet spot” of recovering industrial production globally, higher purchases from the auto sector, and constrained mine supply, said Wayne Gordon, executive director for commodities and foreign exchange at UBS Global Wealth Management.
“Setbacks after these sort of rallies, given the very thin nature of volumes in the market, isn’t that surprising,” Gordon said. “If industrial production surprises to the upside, and so does autos’ demand, well, then palladium can get a heck of a lot tighter.”
Spot palladium was steady at $2,492.69 an ounce at 3:43 p.m. in London, paring this year’s gain to 28%. Platinum dropped as much as 1.2%, but still held above $1,000 an ounce, while gold and silver were little changed.
Palladium’s surge is rooted in positive fundamentals, with production trailing demand as stricter emissions standards boost consumption by carmakers. Uncertain power supply in South Africa also threatens to curtail operations.
Producers also lack the capacity to boost output easily in response to price increases because palladium is largely mined as a byproduct. The cost to borrow palladium has jumped to the highest in over a year.
“Palladium’s particularly strong fundamentals suggest that it can continue to trade far beyond cost dynamics,” TD Securities said in a note. “We see a smaller risk for a sharp decline in prices.”
Palladium’s technicals meanwhile are stretched, with the 14-day relative strength index topping 90 for a second day. A number above 70 signals to some traders that an asset may be overbought, although palladium has held above that level for two weeks without a pullback.
The metal has been surging together with U.S. equities as there’s still some spare liquidity in the market, while investors are searching for assets whose fundamentals guarantee high returns, said Gianclaudio Torlizzi, managing director of consultancy T-Commodity Srl A Socio Unico. FOMO, or the fear of missing out, is adding fuel to the fire. “Or better to say TINA -- there is no alternative,” he said.
The U.S. stock market has showed some signs of exhaustion so a setback is possible -- in equities and in palladium -- although it’s hard to say how big it could be, Torlizzi said.
METALS-Copper slips on U.S.-China concerns, but vulnerable to squeeze - Reuters News
LONDON, Oct 8 (Reuters) - Copper prices slipped on Tuesday as investors feared that U.S.-Chinese trade talks would make little progress, but the metal was vulnerable to a squeeze higher due to heavy bearish positions, an analyst said.
Washington blacklisted Chinese companies over Beijing's treatment of predominantly Muslim ethnic minorities while President Donald Trump said a quick trade deal was unlikely.
"The consensus remains sceptical about a resolution, but a mini-deal, just on tariffs, might be a concrete expectation," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
"The risk-reward now points to the upside for copper and aluminium in particular because the short positioning is elevated," he said.
"This makes them vulnerable to a squeeze higher in case a truce between the U.S. and China is reached."
The net speculative short position for LME copper has risen to 12% of open interest, the highest in a year, while for LME aluminium it has climbed to 31%, according to estimates by Marex Spectron, the broker's Alastair Munro said in a note.
Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, will begin trade talks in Washington on Thursday, the first minister-level negotiations in several months.
Three-month copper on the London Metal Exchange (LME) failed to trade in official open-outcry activity but was bid down 0.6% at $5,687.50 a tonne, trimming gains of 1.4% in the previous session.
L'ANALISI = ArcelorMittal: tra prezzi acciaio a picco e calo consumi - Agenzia Italia (AGI)
Roma, 16 nov. - "L'Italia e' il perno attorno al quale riscrivere l'equilibrio del mercato siderurgico europeo". Il parere e' di Gianclaudio Torlizzi, fondatore di T-Commodity, societa' di consulenza sulle materie prime, secondo cui, "con ogni probabilita', ArcelorMittal, al netto degli errori del governo e degli interventi della magistratura, difficilmente abbandonera' l'Italia, ma sfruttera' l'occasione per strappare un consolidamento produttivo e tagli occupazionali". Di certo la crisi dell'acciaio in Europa e' evidente. "Il mercato", osserva l'esperto di commodities intervistato dall'AGI, "e' in condizioni di grande debolezza a causa del forte rallentamento del comparto automobilistico tedesco, iniziato gia' lo scorso anno". Tra il primo trimestre 2018 e settembre 2019 il prezzo del coils a caldo, quello prodotto dall'Ilva, e' precipitato mediamente da circa 550 a meno di 400 euro alla tonnellata. "E questo", rileva Torlizzi, "sta mettendo in difficolta' tutte le acciaierie: i consumi frenano e fanno scendere il prezzo dell'acciaio, ma il costo delle materie prime che servono per produrlo, come il minerale di ferro, non cala, sostenuto dalla domanda cinese".
In questa situazione i produttori europei si trovano schiacciati. "E la loro marginalita'", afferma Torlizzi, "e' rimasta stritolata. Il disastro dell'Ilva, su cui comunque pesano gli elementi politico-giudiziari locali, va dunque contestualizzato all'interno di una situazione difficile di tutto il comparto siderurgico in Europa". Come dimostra l'andamento del titolo ArcelorMittal in Borsa, passato dagli oltre 30 euro di inizio 2018 ai meno di 15 di oggi. E neanche le prospettive sono rosee. I produttori riferiscono che dal settore dell'auto tedesco non arrivano segnali di ripresa: da inizio anno la produzione e' scesa del 20% rispetto al 2018. "Tutto cio'", incalza l'esperto, "non fa che aumentare il problema della sovracapacita' produttiva dell'acciaio in Europa. E se si vorra' assistere a una ripresa sostenibile dei prezzi nell'arco del 2020, una razionalizzazione produttiva e' imprescindibile". Lo Steel Committee dell'Ocse calcolava l'eccesso di produzione globale in 425,5 milioni di tonnellate gia' per il 2018. E prevedeva che se tutti i progetti comunicati e i nuovi impianti annunciati fossero stati realizzati la capacita' produttiva sarebbe cresciuta di un ulteriore 4-5% tra il 2019 e il 2021. "Il punto", osserva Torlizzi, "e' chi si debba fare ora carico dei tagli produttivi". La differenza tra la capacita' produttiva potenziale massima e quella effettiva, in Europa, si aggira attualmente sui 50-60 milioni di tonnellate. Che si traducono in un eccesso di manodopera tra occupati diretti e indotto.
Il processo di riduzione della capacita' produttiva in Europa e' gia' stato avviato. Gli stop sono stati tanti negli ultimi mesi: Salzgitter ha chiuso un altoforno da 600.000 tonnellate all'anno; ArcelorMittal ha fermato altoforni nei siti di Cracovia, delle Asturie e di Brema e ridotto la produzione a Dunkirk e Eisenhuttenstadt; Ssab ha tagliato 1,8 milioni di tonnellate all'anno di capacita' negli impianti di Raahe in Finlandia e Oxelosund in Svezia; Liberty ha annunciato di voler estendere il taglio del 20% della capacita' della sua acciaieria di Ostrava. Nonostante tutto, pero', ritiene Torlizzi, "Arcelor Mittali non se ne andra' mai dall'Italia: innanzitutto perche' siamo il secondo mercato manifatturiero in Europa e, poi, per non correre il rischio di lasciare campo libero a un concorrente, magari cinese. Anche tra gli operatori non prevale l'idea di un abbandono ma quella di una razionalizzazione produttiva in linea con il nuovo scenario". Quello che, conclude l'esperto, "ha spinto ArcelorMittal a chiedere quest'anno per 5 volte ai clienti un aumento dei prezzi e per 5 volte vederselo rifiutato".
= L'ANALISI = Attacco Riad, attesa per prezzo petrolio sui mercati - Agenzia Italia (AGI)
Il 6% della produzione mondiale di greggio manca. La fornitura in Arabia Saudita e' dimezzata. Ogni giorno vengono prodotti 5,7 milioni di barili di petrolio in meno. Il gas naturale e' tagliato del 18% e la produzione di etanolo e Gnl e' crollata del 50%. Sono i numeri che sintetizzano l'attacco compiuto con i droni (o missili, sta emergenza anche questa ipotesi tra gli analisti militari) contro le due maxi raffinerie dell'Est del Paese. Altri numeri, che riguardano l'economia globale, arriveranno domani con l'apertura delle Borse. Quantificheranno l'aumento dei prezzi al barile e, soprattutto, quanto cambiera' l'economia geopolitica. "Al netto della forte volatilita' dei primi giorni, per l'apertura di domani e' previsto un rialzo tra i 5 e i 10 dollari al barile, l'attacco di ieri andra' a inserire nella valutazione del greggio il fattore di rischio geopolitico", spiega all'Agi Gianclaudio Torlizzi, direttore generale della societa' di consulenza T-Commodity. "Le societa' e i trader valuteranno che un gruppo di ribelli armato di droni puo' mettere in ginocchio la fornitura del piu' grande esportatore di petrolio. E questo rischio potra' costare tra i 10 e i 20 dollari, non di certo poco. Questo perche' l'Arabia Saudita ha mostrato una vulnerabilita' delle sue infrastrutture e di non essere in grado di affrontare queste nuove tecnologia. Non si tratta piu' di sabotaggi di navi nello Stretto di Hormuz ma di droni che non si riescono a intercettare".
Ripercussioni inevitabili vi saranno anche sui bilanci della Saudi Aramco, il gigante statale petrolifero che da diverso tempo tenta la quotazione in Borsa. La Ipo e' stata piu' volte rinviata proprio a causa del calo del prezzo del greggio. "Nell'immediato ovviamente ci sarebbe stato un calo, se Aramco fosse gia' in listino, ma nel lungo termine avrebbe guadagnato dipendendo comunque dal valore del greggio". Negli ultimi due anni i ribelli Houthi hanno lanciato decine di droni e di missili a corto raggio contro l'Arabia Saudita. Molti sono stati intercettati dalle difese aeree saudite; altri sono caduti senza fare danni. Pochissimi hanno causato danni e comunque sempre limitati. I droni Houthi usati per colpire le raffinerie di Abqaiq e Khurais. Il primo e' situato a 60 chilometri a sud-ovest di Dhahran, la sede principale del gigante petrolifero Aramco, e ospita il piu' grande impianto di lavorazione del petrolio. Khurais, a 250 chilometri da Dhahran, e' uno dei principali giacimenti petroliferi dell'azienda statale. I droni Houthi che sarebbero stati utilizzati nell'attacco sono basati su modelli iraniani, spesso sviluppati dalla tecnologia nordcoreana. Sono per lo piu' a corto raggio, fino a 300 chilometri. Tuttavia, un gruppo di esperti delle Nazioni Unite aveva dato conto a gennaio dello spiegamento di droni a lungo raggio "che consentirebbero alle forze Houthi di colpire obiettivi in profondita' in Arabia Saudita e negli Emirati Arabi Uniti". La portata massima di questo sistema, soprannominato UAV-X, sarebbe tra i 1.200 e i 1.500 chilometri, a seconda delle condizioni del vento. La distanza tra i territori dello Yemen controllati dai Houthi e l'Abqaiq e' di circa 1.300 chilometri. Ma alcuni analisti sono convinti che l'attacco sia stato compiuto non con droni ma con missili lanciati dall'Iran o dall'Iraq.
METALS-Copper falls despite China's move to boost lending - Reuters News
By Eric Onstad
LONDON, Sept 6 (Reuters) - Copper failed to get fillip on Friday from China boosting bank lending because the trade dispute between the biggest metals consumer and the United States still weighed on the market.
China's central bank said on Friday it was cutting the amount of cash that banks must hold as reserves for the third time this year, releasing 900 billion yuan ($126 billion) in liquidity to shore up the slowing economy.
The central bank, however, said there would be "no flood-like stimulus".
"It comes on top of the last couple of days, where we saw the market recover quite strongly. It raises the question of how much further the market can rally at this stage while the trade war is still on," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"Some additional stimulus measures had been expected, so I think that's probably adding to the lack of reaction."
Copper rebounded from a two-year low hit on Tuesday after the United States and China agreed to hold further trade talks to resolve a dispute that has weakened global growth and metals consumption.
Benchmark copper on the London Metal Exchange was down 0.4% at $5,822.50 a tonne by 1040 GMT.
* COPPER TECHNICALS: Copper failed to break through its 50-day moving average at $5,841 this week, prompting speculators to hold back.
"The downside pressure is not over, the downside risks are still concrete," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan. "Some shorts have covered, but not any big positions yet."
A break above the 50-day moving average would signal that the market was stabilising and may be poised for a new wave higher, he added.
METALS-Nickel breaks $15,000, extends rally to new one-year peak - Reuters News
By Eric Onstad
LONDON, July 18 (Reuters) - Nickel prices charged to a one-year peak on Thursday as more speculators piled in, prompting jitters among some investors that the rally had entered bubble territory.
Nickel - used to make stainless steel and batteries for electric vehicles - has surged by nearly a quarter since July 2 on the London Metal Exchange, fuelled by demand from a combination of industrial buyers and speculators, traders say.
Shanghai nickel prices rose the maximum 6% on Thursday, extending their rally into a ninth day.
"It's overbought, but the trend is clearly up," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan. "I know that lots of players are hedging by buying puts in the market, that's the smart thing to do."
Xu Aidong, chief nickel analyst at research house Antaike, said nickel's run was spurred by a 10% jump in China's stainless steel output in the first half of the year.
A looming ban on Indonesian nickel ore exports is still affecting prices even though it will not come into force until 2022, Xu added.
LME benchmark nickel climbed 2.8% to $14,850 a tonne in closing open outcry activity, paring gains after touching $15,115, the highest since June 29 last year.
Nickel volume was 19,476 lots at 1600 GMT, nearly surpassing the combined levels for copper and aluminium, usually the heaviest traded metals.
METALS-Nickel hits 3-week high on Fed rate cut signal, China growth hopes - Reuters News
By Eric Onstad
LONDON, June 20 (Reuters) - Nickel and other base metals marched higher on Thursday after the U.S. central bank signalled rate cuts and investors hoped that the economy of top metals consumer China would recover.
Both nickel and copper touched the highest levels in more than three weeks, partly fuelled by speculators buying back bearish positions, traders said.
Metals got impetus after the U.S. Federal Reserve on Wednesday said the case for lower rates was building, pointing to an easing of monetary policy as early as next month.
Industrial metals were showing signs that they might extend the gains, but needed more good news, said Gianclaudio Torlizzi, a partner at consultancy T-Commodity in Milan.
"I'll remain with a cautious stance as long as base metals stay below their 200-day moving averages, which are the watershed levels," he said.
Nickel was the only metal on the London Metal Exchange that had breached that level, regarded as key by investors who use chart signals to guide their positions, he said.
"We need some more news to really turn bullish. We still have to see that the Chinese economy has really bottomed and is recovering," Torlizzi added.
Three-month nickel, the top gainer on the LME, climbed 1.7% to $12,300 a tonne in closing open outcry trading, the highest since May 28.
METALS-Zinc hits 1-1/2 month low, others recover on trade deal hopes - Reuters News
By Eric Onstad
LONDON, May 2 (Reuters) - Zinc prices hit their lowest since mid-March on worries about global demand and as inventories climbed, but other metals were supported by hopes that a U.S.-China trade deal would be agreed.
Investors have been worried after data on Tuesday showed factory growth in top metals consumer China slowed unexpectedly in April, with a survey on Thursday showing that Euro zone factory activity contracted for a third month.
"I think it's still premature to buy. The current picture is that the worst is over, but conditions remain weak in the global economy. We need to see some real improvement for metals prices to really find the bottom," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"But in zinc and copper, supplies are still pretty tight, so I think that will keep us from seeing severe losses."
Benchmark zinc on the London Metal Exchange fell 1.5 percent in closing open-outcry trading to $2,731 a tonne after touching $2,717, its lowest since March 11.
Most industrial metals slumped on Wednesday as computer-driven funds sold after an options expiry, with aluminium and lead prices hitting their lowest in more than two years.
METALS-Copper hits highest in a week on Chinese hopes and soft dollar - Reuters News
By Eric Onstad
LONDON, April 9 (Reuters) - Copper touched a one-week high on Tuesday and other base metals also gained on speculative buying fuelled by technical signals, optimism about a rebound in China's economy and a weaker dollar.
Zinc, however, extended its decline on worries about rising supply from Chinese smelters ramping up output.
"It seems that the macro picture in China has improved recently, and also the market seems to think that the dollar might come off a bit in the days ahead," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
Driving the upswing in prices were Commodity Trading Advisor funds, which mainly use technical signals such as momentum, while macroeconomic funds remained wary and on the sidelines, Torlizzi added.
"The market is still a bit tricky. Everybody's long, but things may change pretty quickly. It's too early to think a bull run has begun for the base metals."
METALS-Copper hits 7-1/2 month high on trade hopes, sliding stocks - Reuters News
By Eric Onstad
LONDON, Feb 22 (Reuters) - Copper prices climbed to their highest since July on Friday as inventories tumbled and investors bet on a U.S.-China trade deal.
Optimism over a trade deal has been rising as top U.S. and Chinese trade negotiators haggle over the details of a set of agreements aimed at ending their trade war.
"Copper is getting a lot of momentum from the trade talks. If we get a deal, there wouldn't be much obstacle for copper to return to the low $7,000s," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
Benchmark copper on the London Metal Exchange has broken the key level of $6,400 a tonne, which marks the upper boundary of a range that has held for the past six months, he added.
"If this confirmed today on the weekly chart with a close above $6,400, it would mark the start of new bull cycle for copper."
LME copper gained 1.6 percent in closing open outcry trading to $6,478 a tonne, its highest since July 4.
The metal, widely used in construction and manufacturing, posted a 4.6 percent gain this week, its biggest weekly jump since the week ended Sept. 21 last year.
METALS-Copper pulls back as economic growth worries return - Reuters News
LONDON, Sept 20 (Reuters) - Copper ended two days of gains on Thursday as concerns resurfaced about the health of the global economy and higher U.S. interest rates ahead of a central bank meeting.
Investors widely expect the U.S. Federal Reserve to increase interest rates next week, but future monetary policy remains uncertain.
"What is breaking the advance of metals is the uncertainty about the next Fed meeting and general liquidity in the financial system," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"The next big trade is to sell the dollar and buy commodities, but we need a trigger, which I think will be the next Fed meeting. If they are not too hawkish, that might be the signal for funds to start to be a bit more aggressive in metals."
Copper jumped to its highest in three weeks on Wednesday after a new round of U.S.-China trade tariffs were not as severe than expected, but investors remained wary about the impact on global economic growth and most base metals lost steam on Thursday.
Benchmark copper on the London Metal Exchange was down 0.9 percent at $6,066 a tonne by 1036 GMT.
Copper has slumped 18 percent since touching a 4-1/2 year peak of $7,348 in June but has recovered 5 percent from a one-year low of $5,773 in August.
METALS-Zinc, copper gain on short-covering amid optimism on China - Reuters News
By Eric Onstad
LONDON, Aug 7 (Reuters) - Base metals rose on Tuesday on short-covering amid optimism top consumer China will prop up its economy with stimulus measures and that the country's currency is stabilising.
Shares in Chinese infrastructure firms received a boost from expectations of increased spending on public works projects.
China Railway was reported in domestic media as saying China would boost its fixed asset investment in railways to 800 billion yuan ($117 billion) in 2018, an increase of 9.3 percent over its original plan.
"The Chinese government continuing to stimulate the economy is a good sign, but more importantly, the fact that the yuan is not making new lows versus the dollar seems to be pushing some short-covering on the metals," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"Last week, when the Chinese government tried to stop the yuan depreciating, was the trigger which supported the bottoming of the metals. I think August may be a bullish month for Chinese-related assets like metals."
Three-month zinc on the London Metal Exchange closed 1.3 percent higher in final open outcry trading at $2,600 a tonne after falling 2.4 percent on Monday.
Zinc has shed nearly a fifth since mid-June, largely due to fears about trade conflicts weighing on global growth and metals demand.
Torlizzi said he had gone long on lead and zinc. The latter was challenging its 25-day moving average at $2,598, a positive technical sign used by computer-driven investors, he added.
METALS-Copper pares losses, some see fresh 11-month low as bottom - Reuters News
By Eric Onstad
LONDON, July 6 (Reuters) - Copper rebounded on Friday from a fresh 11-month low, as some investors regard the recent sharp losses as exaggerated and believe the metal has hit bottom.
Copper, widely viewed as a bellwether for the global economy, has been battered by escalating trade tensions that resulted in the United States imposing tariffs on $34 billion of Chinese imports and Beijing quickly retaliating.
The recent downtrend - which has seen copper shed 14 percent since touching a 4-1/2 year peak of $7,348 in early June - was fuelled by computer-driven speculators and long liquidation by Chinese hedge funds, said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
"Many people are wondering if the long-term bull market is over. I don't think it's over but copper has to hold above $6,200, which is the watershed level for the long-term uptrend," he said.
"It doesn't make any sense to have such a gloomy sentiment on metals demand. This is a good opportunity to go long again," Torlizzi added, saying he had already taken a long position.
Three-month copper on the London Metal Exchange fell as much as 2 percent to $6,221.50 a tonne, its lowest since July 25, 2017, before recovering to $6,282, down 1 percent, by the close of open outcry trading.
LME copper shed more than 5 percent this week, its steepest weekly drop since January 2015.
METALS-Zinc hits 10-month low as inventories rise, speculators sell - Reuters News
By Eric Onstad
LONDON, June 25 (Reuters) - Zinc prices hit the lowest in over 10 months on Monday as a rise in inventories signalled supplies were healthy and speculators put pressure on the market.
Daily data showed zinc on-warrant inventories - those not earmarked for delivery - in warehouses certified by the London Metal Exchange rose 2,300 tonnes to 241,525 tonnes. They have shot up 83 percent since the beginning of March.
The steady rise in stocks has mirrored a breakdown in prices, which have shed a fifth since touching the strongest in over a decade of $3,595.50 a tonne on Feb. 15.
"The charts on zinc don't look good, the break below $2,970 was worrying," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
Benchmark LME zinc was down 1.3 percent at $2,878 a tonne by 1030 GMT after touching $2,856.50, the lowest since Aug. 7 last year.
METALS-Aluminium weighed down by options activity, copper gains - Reuters News
By Eric Onstad
LONDON, May 10 (Reuters) - Aluminium fell on Thursday after three sessions of gains, pressured by trade selling and bearish options activity, while copper gained on lower inventories and speculative buying.
Benchmark aluminium on the London Metal Exchange was down 1.6 percent at $2,331 a tonne by 1400 GMT.
"Aluminium is finding very strong resistance just below $2,400. The reason is in the option market, which is mostly bearish on the June delivery," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"There's risk of more downside and I think the market will try to break the $2,170 support," he added.
Aluminium had gained about $200 at this week's highs since touching a low of $2,175 on April 24.
METALS-Lead hits 2-1/2 month low on firm dollar and weak shares - Reuters News
By Eric Onstad
LONDON, March 1 (Reuters) - Lead prices touched their lowest in 2-1/2 months on Thursday, with other industrial metals also under pressure from a stronger dollar and general risk aversion that also hit global equities.
"Metals are following the macro trends, especially the U.S. dollar and U.S. equity markets, and mostly ignoring the micro elements, which remain pretty supportive," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
World stock markets fell for a third day running, while the dollar rose to six-week highs against a basket of currencies , although the dollar gave up much of its gains late in the European session after U.S. Federal Reserve chief Jerome Powell said there was no evidence the U.S. economy was overheating.
A stronger dollar makes metals more expensive for holders of other currencies.
"This sell-off is healthy, reducing the length in the market, which was pretty extreme. We're a small short on the market, but we think the downside will be limited," Torlizzi added.
METALS-Copper hits eight-week low after inventories surge again - Reuters News
By Eric Onstad
LONDON, Feb 8 (Reuters) - Copper extended its downtrend on Thursday, touching its lowest in nearly eight weeks, after another big rise of inventories highlighted that the market currently has healthy supplies.
On-warrant copper inventories in warehouses certified by the London Metal Exchange - those not earmarked for delivery - jumped by 25,700 tonnes on Thursday and have surged by 75 percent over the past three weeks.
That showed that a 12 percent rally in LME prices in December was not supported by the underlying fundamentals, some analysts said.
"This correction has been needed to put metals prices in line with the fundamentals, which are not bearish but also not that bullish," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
"Copper has broken its $6,860 support level, so there's still space for more of a correction lower. I don't think we'll go much lower than $6,500, which would be a good buying area."
METALS-Nickel rebounds as wary consumers lock in prices - Reuters News
LONDON, Nov 13 (Reuters) - Nickel prices bounced back on Monday after two sessions of losses as industrial consumers bought metal to guard against further price gains.
Nickel prices had shed 7 percent by Friday's close since touching a two-year peak of $13,030 a tonne at the start of the month.
The rally in nickel, which has gained 23 percent this year, was driven by hopes that growth in electric vehicles would boost demand for the metal in batteries. Nickel is currently mainly used to produce stainless steel.
"We're seeing good consumer hedging activity," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
"The consumer side got very scared over the last two months after the summer price rally. They are pretty willing to hedge as soon as possible in order to avoid being trapped again."
SHFE Copper Falls From 4-Year High as Metals Waver - Bloomberg News
October 18, 2017
Shanghai copper pares rally to highest since 2013, with metals mixed after sober opening speech from China President Xi Jinping at Communist Party congress, in which he highlights “severe” challenges facing world’s No. 2 economy. SHFE closes -0.4% at 54,890/ton, after as much as -1.2% earlier. LME copper -0.2% to $7,012/ton by 3:30pm in Shanghai; metal hit 3-year high of $7,177 on Monday Aluminum -0.8% in London; zinc and nickel advance.
“Everybody is waiting for more news from the congress,” Gianclaudio Torlizzi, managing director of T-Commodity srl says by phone from Milan. “There is a risk of metals cooling down after the congress and we’ll be looking to short if the market spikes again. We think the focus will be on deleveraging after the strong credit growth we’ve seen in recent months”.
METALS-Copper drifts lower ahead of quarter end, China holiday - Reuters News
"We do think the current weakness of copper represents a nice opportunity to go long," said Managing Director Gianclaudio Torlizzi of Italy-based commodity consultancy T-Commodity.
METALS-Copper hits one-month low after Fed raises rate hike expectations - Reuters News
LONDON, Sept 21 (Reuters) - Copper hit its lowest in more than a month and nickel slid as much as 6 percent on Thursday after the Federal Reserve raised expectations of another U.S. interest rate hike this year, boosting the dollar.
The Fed said on Wednesday it expected one more increase by the end of the year, driving the dollar to a two-month high versus the yen on Thursday and making dollar-priced metals costlier for non-U.S. investors. FRX/
"The losses are mostly currency driven. The dollar was the main culprit behind the August gains so now to see a higher dollar is pounding all the metals," said Gianclaudio Torlizzi, partner at metals consultancy T-Commodity.
But he said copper prices could rise. "On the fundamental side demand is not booming (but) supplies have been reduced, so we don't need such strong demand to put the metal in deficit," he said.
Could The 'China Puke' Signal The Lows In The Dollar? - Zerohedge
9th September, 2017
METALS-Nickel at 3-1/2 month high as investors shift from zinc – Reuters News
LONDON, July 28 (Reuters) - Nickel prices hit a 3-1/2 month peak on Friday as investors shifted from zinc after a build-up in zinc inventories indicated that shortages had eased. Rising physical demand from top consumer China also helped lift nickel. Both metals are mainly used in the steel sector with zinc needed for galvanising and nickel a key ingredient in stainless steel.
"Traders are seeing a weakening scenario for zinc because the market is not as tight as people expected while it's looking a bit more positive for nickel with Shanghai premiums rising," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan. "After the very good run that zinc had in June, there's probably some profit taking and nickel is benefiting from a combination of short covering and some new long exposure."
METALS-Zinc extends rally, hits fresh high on concerns about supply- Reuters News
LONDON, June 20 (Reuters) - Zinc prices gained for a fifth straight session on Tuesday, hitting the highest in over two weeks as investors bet that supplies were tightening.
A steady drumbeat of news has encouraged bulls recently, including news of a market deficit, an expected strike in major producer Peru and declining inventories.
Aluminium and nickel have also been lifted by news that could mean lower supplies of metal.
"You've got some news with a bullish tone, so that's supporting the market, but I don't know how sustainable all this will be," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
"We have a small long, but we're not married to this position because the general outlook is still not really bullish. Monetary tightening in China is still taking place."
METALS-Zinc drops to new low on weakness in steel and iron ore - Reuters News
LONDON, June 2 (Reuters) - Nickel bounced off its weakest level in nearly a year on Friday while zinc hit a two-week low, pressured by weaker iron ore and oil prices as well as concern about demand in top consumer China.
Zinc prices were also knocked by a jump in available inventories, showing that supplies were adequate despite the closure of major mines last year.
Both zinc and nickel are used in the steel industry so are sensitive to iron ore and steel prices while oil is a key input in mining.
"The steel-related metals such as nickel and zinc are among the worst performers, feeling the pinch from iron ore. Oil is not helping. It's crashing after the disappointment from the OPEC meeting," Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan, said.
Spot iron ore has tumbled about 40 percent from this year's peak, although it had a brief respite on Friday, and Shanghai rebar futures fell for a seventh session in a row. (Full Story) (Full Story)
"My view is that at this point the downside in all the base metals is not huge. We'll probably see the last leg down and I would take that as an opportunity to go long," Torlizzi said.
METALS-Lead hits four-month low on worries over China growth outlook - Reuters News
LONDON, May 16 (Reuters) - Lead hit a four-month low and zinc sank to its weakest in nearly a month on Tuesday as China's latest moves to curb shadow banking and risky investment dented the growth outlook in the world's top metals consumer.
Late on Monday, China's banking regulator tightened disclosure rules on lenders' wealth management products. Separately, the China Banking Regulatory Commission unveiled plans to publish a flurry of regulations later this year to control financial risks. [nL4N1II1DF]
"We are seeing a cautious approach by funds on the metals complex. The market continues to be in a consolidation phase," said Gianclaudio Torlizzi, partner at metals consultancy T-Commodity.
"The current weakness represents an opportunity to go long ... probably (in) two or three weeks (time)," he added.
"The April data from the (Chinese) credit market was better than expected. There is no chance of a hard landing in China."
METALS-Copper, zinc weaker on China worries, nickel bounces from low - Reuters News
LONDON, April 27 (Reuters) - Copper and zinc dipped on Thursday while nickel hit a fresh 10-month low on concern about demand in top metals market China and scepticism about proposed U.S. tax cuts.
"We are short on base metals currently. On the fundamental side I think that the market is getting worried about the tightening monetary process in China, which has just begun. There will be concrete evidence of an economic slowdown in the months ahead," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
"Also the Trump reflation trade is still unwinding because the market is not convinced that the tax package will be approved by Congress."
The pace of expansion in China's manufacturing sector likely slowed this month, a Reuters poll showed, as factory-gate price-growth slowed and authorities moved to tackle risks in the property market and credit growth. Data is due on Sunday, April 30. (Full Story)
METALS-Zinc hits three-month low as supply worries ease - Reuters News
LONDON, April 10 (Reuters) - Zinc hit a three-month low on Monday and copper also fell as supply concerns eased and demand remained weak in top metal consumers such as China.
Shortages of zinc concentrate - partly processed ore - are easing, according to a report by the Chinese state-supported research institute Antaike cited by Commerzbank.
Zinc prices touched a peak of $2,980.50 a tonne in mid-February on worries that major mine closures last year would lead to severe shortages.
"Smelters are apparently able to secure sufficient supply so long as they are prepared to pay the requested prices," the German bank said in a note.
"Globally speaking, zinc supply has already been rising again since September."
*ZINC: London Metal Exchange three-month zinc CMZN3 slid 2.7 percent to close at $2,618 a tonne, the weakest since Jan. 6. Also pressuring the market was weakness in Chinese steel prices and news that two flood-hit mines in Peru were ready to restart. (Full Story)
COPPER: LME copper CMCU3 dropped 1.5 percent to end at $5,747 a tonne, adding to small losses in the previous session, having broken support at its 100-day moving average at $5,800 a tonne.
COPPER SUPPLY: Prices have faltered since shipments resumed from the world's two biggest copper mines after being disrupted earlier this year.
"The supply disruptions that we have seen were short-term dynamics and did not create real tightness in the market. We wouldn't be too surprised if the copper market ends the year in a slight surplus," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"I think that the market is digesting the slowing down of the global picture ... which is not good for the state of demand in the second half of the year."
METALS-Zinc, copper climb on computer-driven buying - Reuters News
LONDON, Dec 5 (Reuters) - Buying from computer-driven speculative funds pushed zinc, copper and other base metals higher on Monday, but some investors saw this as a short-term move ahead of likely further losses.
"Technical dynamics are behind the moves. We are still seeing algos continuing to buy on the dips," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
He was referring to algorithmic funds which use computer programmes to make trading decisions, often based on technical factors such as momentum.
"But we don't see any real trigger for a sustainable move higher. We expect the market to continue to consolidate lower into year end, so every time the metals rally higher, we see it as an opportunity to sell."
Benchmark zinc on the London Metal Exchange had climbed 1.9 percent to $2,718 a tonne by 1102 GMT, recovering from a 2.2 percent loss on Friday.
Zinc is the best performing LME metal, surging nearly 70 percent this year, but has retreated 9 percent from a nine-year peak of $2,985 touched on Nov. 28.
Torlizzi says he has targeted zinc to fall to around $2,400.
METALS-Copper, zinc pushed lower by strong dollar, China worries - Reuters News
LONDON, Nov 16 (Reuters) - Copper, zinc and other base metals headed lower on Wednesday, pressured by a strong dollar, losses in steel-related products and the unwinding by speculators of very long positions after a blistering rally last week.
Benchmark copper on the London Metal Exchange fell for a second session, dropping 0.9 percent to $5,470 a tonne by 1125 GMT, after hitting their highest since June 2015 at $6,025.50 a tonne on Friday.
"The dollar is a big driver, pushing down the complex, but there are also growing fears in China about what the new stance of the Trump administration will be towards China," said Gianclaudio Torlizzi, partner at Milan consultancy T-Commodity.
The dollar index hit the highest in 11 months, making commodities priced in the greenback more expensive for buyers using other currencies.
During his campaign, U.S. President-elect Donald Trump threatened to impose tariffs on Chinese goods and also regards China as a currency manipulator.
In addition, LME copper has flipped to a premium instead of a discount to copper on the Shanghai Futures Exchange, dampening down arbitrage trade, Torlizzi said.
"LME copper has failed below resistance of $5,750 and as long as it stays below there, every bounce is a sell," he added, saying he was short with a target of $5,100.
METALS-Aluminium slides on oversupply fears - Reuters News
LONDON, Oct 20 (Reuters) - Aluminium slid to its lowest in nearly a month on Thursday on worries about oversupply after a rise in output from top producer China and heavy flows into LME warehouses in Asia.
Total Chinese production in September rose to 2.75 million tonnes, the highest in 15 months, while global average daily output touched a record, data from the International Aluminium Institute (IAI) showed.
The London Metal Exchange also reported that 77,075 tonnes of aluminium had arrived at Asian warehouses over two days, largely in South Korea.
Benchmark aluminium on the LME shed 1.2 percent to close at $1,612 a tonne, its weakest since Sept. 22.
"That (output) data from China ... is fuelling some new fears about oversupply in China," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"Higher prices, especially in Shanghai, have been giving good incentives for smelters to restart production."
Copper Goes Quiet as Market Torn Between Oil and China Demand - Bloomberg News
September 8, 2016
The copper market is going quiet. Prices in London moved by less than 0.4 percent in nine of the last 10 days and a 30-day measure of the metal’s price swings is at the lowest in two years, data compiled by Bloomberg show.
Copper has held above a two-month low since the end of August amid a mixed outlook for demand. While expectations that the Federal Reserve will hold off raising interest rates this month has weakened the dollar and made metals cheaper, a rebound in oil has increased production costs. There have also been signs of ample supply and China, the top user, cut imports of unwrought copper to a one-year low last month.
"On the one hand, copper is supported by a weakening dollar," Gianclaudio Torlizzi, the managing director of T-Commodity srl, a Milan-based consultant, said by phone. "On the other hand, fundamentals are neutral because this morning import data is negative, the private consumption is still pretty weak.”
Copper for delivery in three months added 0.3 percent to settle at $4,664 a metric ton by 5:50 p.m. on the London Metal Exchange. Prices are down 0.9 percent this year, the worst performance among the bourse’s six main metals.
Inventories in warehouses tracked by the LME have jumped 67 percent since mid-August as metal stacked up in Asian depots. Stockpiles fell for the first time in 13 days on Thursday, bourse data show.
While China’s imports dropped a fifth month, the Yangshan copper premium, a barometer of supply and demand in bonded warehouses in Shanghai, has risen from near a record low in recent days. That may suggest stronger demand ahead of a seasonal pick-up, Dee Perera, an analyst at Marex Spectron Group in London, said in an e-mailed note.
It’s now again profitable to import copper to China, Torlizzi said.
METALS/Zinc lifts to 15-month high - Reuters News
August 28, 2016
REUTERS - Zinc has hit its highest in 15 months as bearish speculators scrambled to close out positions, though some investors doubt that the hefty gains are entirely justified.
Volumes were huge, with zinc turnover on the London Metal Exchange (LME) of more than 17,000 lots, more than double the activity in aluminium, one of the most active contracts.
"Shorts had been building up recently because people were expecting a setback lower, but when stops were triggered, that forced the shorts to cover," said Gianclaudio Torlizzi, Partner at the T-Commodity consultancy in Milan.
LME zinc rallied to its highest since May 2015 at $US2,333 a tonne before retreating. Zinc, used to rust-proof steel, failed to trade in closing open outcry activity but was bid up 0.7 per cent to $US2,314, taking this year's gains to 44 per cent.
Torlizzi said the surge might be the last gasp before the market turns lower, which could send prices sliding to about $US2,000.
"We're sceptical about the sustainability of this move because the current price of zinc is not justified. We haven't seen any tightening in the refined market, only in concentrates."
Koen Straetmans, senior strategist at NN Investment Partners in the Netherlands, was also wary.
"Zinc has been a star performer and I had a position, but closed it. I think that, obviously, there is still an inventory overhang and, given where it trades, it might fall back."
LME zinc inventories are still relatively high at 454,175 tonnes.
The jump in zinc occurred during Asian trading after state media said that China plans to cut steel production by 2.91 million tonnes in inner Mongolia this year.
As China steel mills wind down, steel prices lift, meaning the remaining mills can pay more for ingredients such as zinc.
Other metals ended mixed after US Federal Reserve chair Janet Yellen said the case for raising US interest rates had strengthened.
LME copper ended down 0.2 per cent at $US4,615 a tonne, having closed little changed in the previous session when it fell to its weakest since June 24 at $US4,620 a tonne.
Copper seemed to shrug off another rise in LME inventories, which climbed 7,700 tonnes on Friday, bringing the increase over the past two weeks to nearly 70,000 tonnes.
LME nickel dipped 0.5 per cent to $US9,800 a tonne, bringing it down by about five per cent over the week for its biggest weekly drop since March.
Lower Chinese imports and an absence of fresh mine suspensions in the Philippines have eroded risk premiums that drove prices to their highest in a year this month.
Aluminium closed 0.1 per cent down at $US1,642.50.
Lead finished 0.7 per cent up at $US1,875 while tin firmed 0.8 per cent to $US18,890, its highest since February 2015
FAST MARKETS/Base metals flounder as real consumption fails to materialise, lead bucks trend
April 28, 2016
Base metals other than lead continued to ease in Thursday’s LME premarket, with faith in last week’s rally running low.
“Real consumption has not improved and we are cautious of the stability… Steel and oil are driving sentiment and this rally will out of stream,” Gianclaudio Torlizzi at T-Commodity told FastMarkets.
The SHFE is looking to cool frantic speculation in its steel contracts, particularly rebar, after investors – betting on an improving domestic steel sector alongside a better Chinese economy – sent its rebar trading volume and prices spiking to hit trading limits on consecutive days last week.
Meanwhile, the oil price has popped higher, with Brent crude last at $47.22 per barrel.
As well, the lack of change in global central banks’ monetary stance has meant there is little to drive sentiment. The statement from the US FOMC yesterday was much as expected, with interest rates unchanged and no hints as to if it will increase rates in June.
Meanwhile, the Bank of Japan (BoJ) defied expectations by declining to ease monetary policy further.
“Central banks do not want a stronger dollar, it seems. This makes it difficult for commodities as there is financial support but the fundamentals are still bearish,” Torlizzi said.
In today’s data, US unemployment claims and advance GDP are of note. Tomorrow, a run of CPIs from the EU and the US are due alongside other numbers including the Chicago PMI.
The focus will then switch to Chinese manufacturing data set for release over the weekend – with both the LME and SHFE closed for national holidays on Monday, trading on Tuesday could prove feisty.
Copper at $4,896 per tonne was down $7 on Wednesday’s close even after stocks fell a net 1,465 tonnes and cancelled warrants rose 1,575 tonnes to 32,000 tonnes, with 3,050 tonnes of fresh cancellations in Singapore.
Lead was $7 higher at $1,741; stocks and cancelled warrants both slipped 375 tonnes to 174,950 tonnes and 79,325 tonnes respectively. Following a recent run of cancellations, a backwardation has emerged in nearby dates – cash/May was last at $1 and cash/July at $0.60 while cash/threes was in a small contango of $1.
Aluminium gained $5 to $1,647. Stocks fell 4,250 tonnes to 2,652,475 tonnes and cancelled warrants slipped 2,175 tonnes to 1,219,350 tonnes.
Spreads have started to tighten – cash/threes was last at a small contango of $1, having been more than $6 earlier this week. The June and July dates are now backwardated.
Nickel dropped $20 to $9,180; stocks were down 600 tonnes at 415,752 tonnes. Cancelled warrants reversed the recent trend of increases, falling 2,064 tonnes to 125,130 tonnes. Still, nearby dates have started to tighten – the cash/May date was in a small contango of $6.
Zinc edged $1 lower to $1,885. Stocks and cancelled warrants both declined 1,175 tonnes to 406,800 tonnes and 40,175 tonnes respectively.
Tin is now the softest since April 12 at $16,860, down $215. Stocks nudged five tonnes higher to 4,885 tonnes and cancelled warrants fell five tonnes to 650 tonnes. Steel, cobalt and molybdenum were neglected.
A Life Expectancy Under 4 Hours Shows China Commodity Frenzy - Bloomberg News
April 26, 2016
The intensity of futures trading on Chinese commodities exchanges is making some of the world’s most liquid markets look leisurely.
Trade in everything from steel reinforcement bars to cotton has soared in the world’s biggest consumer of raw materials, echoing how speculators drove a stock market rally last year before a rout that erased $5 trillion. It’s prompted exchanges in Shanghai, Dalian and Zhengzhou to boost fees or issue warnings to investors.
Goldman Sachs Group Inc. has expressed concern about the surge in speculative trading in iron ore futures in China, saying that daily volumes are now so large that they sometimes exceed annual imports. Wu Zhili, an analyst from Shenhua Futures Co. estimates that as much as 70 percent of trading in Chinese iron ore and steel futures is retail investors speculating on price movements, as opposed to producers or consumers using contracts to hedge.
Analysis of aggregate open interest, volumes and trading hours give a further clue as to the nature of the investors driving the frenzy.
“The fact that duration of trade is shorter than usual confirms our fear that a big role in this current rally of prices has been fueled by private, short-term traders chasing momentum,” Gianclaudio Torlizzi, managing director of Milan-based consultancy T-Commodity srl, said by e-mail. “This dynamic increases the risk of an overshooting of the commodities market compared to fundamentals.”
Dividing the average aggregate open interest at the end of each day by the aggregate volume shows the number of futures traded for every outstanding contract. Multiply that ratio by the number of hours in each trading day and you get an estimate for the average tenure of each contract.
For iron ore and steel rebar on the Shanghai Futures Exchange, it’s under four hours; for West Texas Intermediate crude on the New York Mercantile Exchange it’s almost 40. Natural gas is nearly 70 hours.
“Trading volumes on Chinese exchanges are already enormous,” Wu, an analyst at Shenhua Futures, said by phone. “Activity in the iron and steel markets has also been very active after the rally, and this has attracted more participants, including retail investors.”
Rebar in Shanghai surged almost 20 percent in the first four days of last week, peaking on Thursday at 2,750 yuan a metric ton, its highest since September 2014. Prices fell back 4.8 percent on Friday after the exchange raised trading fees. It closed at 2,554 yuan in Shanghai on Tuesday. Total volumes surged to a record of almost 24 million lots last week.
Volumes are exaggerated because exchanges count both sides of the trade, long and short, said Han Yun, a spokesman for the Shanghai Futures Exchange. Some investors traded multiple times, opening and closing positions repeatedly within the day, Han said.
For iron ore, futures have rallied 40 percent on the Dalian exchange this year after gaining 16 percent last week. The most-active contract dropped as much as 4.4 percent on Tuesday. The benchmarkspot price for ore with 62 percent content delivered to Qingdao fell 5 percent to $62.78 a dry ton on Tuesday, according to Metal Bulletin Ltd.
“Commodities in China, especially the ferrous products experienced big volatility and active trading these days, showing heated sentiment,” Wang Weijun, a spokesman for the Dalian exchange, said in an e-mail. “The Dalian Commodity Exchange has raised trading costs, adjusted maximum moves allowed in a day and other measures to preempt risks brought by overheated trading. The bourse will continue to strengthen monitoring and ensure smooth trading in the future.”
REUTERS/Aluminium hits lowest in nearly a week on oversupply concern - Reuters News
April 16, 2016
LONDON, April 6 (Reuters) - Aluminium prices dropped to the lowest in nearly a week on Wednesday as worries grew that Chinese smelters are restarting output, adding to a global supply glut, while a stronger dollar weighed on copper and other metals.
Three-month aluminium on the London Metal Exchange CMAL3 fell 0.9 percent to $1,509 a tonne by 1100 GMT, the weakest since March 31.
"The recent spike in prices in the first quarter has been welcomed by producers to reactivate their production. That is the reason why we cannot be bullish in the medium term," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
Torlizzi said he had advised his clients to go short in aluminium at $1,520, targeting the previous March support at $1,480, with the potential for a push lower to $1,400.
Also weighing on metals was mixed economic data on Wednesday on China, the world's biggest metals consumer.
Activity in China's service sector strengthened in March, but employment fell for the first time in over 2-1/2 years, sending mixed signals on a sector that Beijing is counting on to offset prolonged weakness in manufacturing. (Full Story)
A stronger dollar .DXY also dampened the metals sector, making products priced in the U.S. currency more expensive for buyers using other currencies.
LME copper CMCU3 fell 0.3 percent to $4,761 a tonne. The metal hit a one-month low of $4,751 on Tuesday before closing the session up 0.3 percent.
The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 closed flat at 36,730 yuan ($5,671.10) a tonne.
Copper rallied in the beginning of the year along with other commodities, but has fallen nearly 7 percent since hitting a four-month peak in mid-March.
Analysts say the price rally was overdone and that physical demand has not risen.
"We are forecasting the price to go down mainly because the demand growth is weaker this year," said Chunlan Li of consultancy CRU in Beijing.
"Demand has picked up month-on-month, but is still low as compared with the same period last year," she said.
Li expects Chinese copper demand to grow by 0.6 percent this year, lower than the 3.8 percent growth seen last year.
Copper prices are expected to slide below January's 6-1/2-year lows, hit by a lack of production cutbacks and weak demand in China, GFMS analysts at Thomson Reuters said. (Full Story)
METALS/Copper, nickel rise on China stimulus hopes - Reuters News
February 15, 2016
LONDON, Feb 15 (Reuters) - Copper and nickel rose on Monday as hopes for more stimulus measures resurfaced after Chinese traders, returning from a week-long holiday, digested worse-than-expected trade data.
Also helping the metals, oil held on to recent gains, while China's central bank fixed the yuan at a much stronger rate. A stronger yuan reduces the risk that China will export deflation to the world.
"There's a sense of calm. The (China) trade stats ... may be ... fuelling hopes for more stimulus that will bolster demand," said Societe Generale analyst Robin Bhar.
"There's more scope for risk fears to come back ... and metals are still well supplied ... but we're building a floor, the bad news is in the price."
Three-month copper on the London Metal Exchange CMCU3 rose 1.6 percent to $4,573 a tonne, after ending last week down more than 2 percent.
China's January exports fell for a seventh straight month while imports tumbled for a 15th straight month. Exports declined even though China allowed the yuan CNY=CFXS to weaken sharply, underlining the weakness in global growth.
"It's all up to how the yuan will perform in the days ahead. The financial community is still very sceptical but ... some metals (are) already rebalancing (on the supply side)," said Gianclaudio Torlizzi, partner at Italy-based metals consultancy T-Commodity.
REUTERS/Copper retreats on China qualms, tin hits high - Reuters News
March 7, 2016
LONDON, March 7 (Reuters) - Copper and zinc pulled back from their highest levels in more than four months on Monday, weighed down by a firmer dollar and as misgivings surfaced over China's ability to shore up economic growth.
Three-month copper on the London Metal Exchange CMCU3 slipped 0.5 percent to close at $5,000 a tonne, handing back some of last week's rally, but off an earlier low of $4,940.
Chinese authorities gave assurances at the weekend that the top metals-consuming country would not experience a hard landing. (Full Story) (Full Story)
"Even in the metals (like aluminium and zinc) where the supply reaction was fairly aggressive, fundamentals have not improved sufficiently to justify higher prices," JPMorgan analyst Natasha Kaneva said in a note.
Speculators have switched to a net-long position in copper futures, the latest U.S. data showed, while fresh longs have also appeared on the LME with rising prices and open interest at its highest since June. (Full Story)
"People are fixing the profit on their long positions and then after today's smallish pullback, I think people will be positioning themselves for a rebound this week," said Sergey Raevskiy, analyst at investment bank SP Angel.
Weighing on the metals markets was a firmer dollar as the likelihood of a U.S. recession diminished .DXY, making commodities priced in the U.S. currency more expensive for buyers outside the United States. FRX/
Zinc CMZN3 slid 2.5 percent to close at $1,811 a tonne after LME inventories MZNSTX-TOTAL rose 5,200 tonnes to 470,700 tonnes, highlighting an overhang of stocks on the market.
The galvanising metal is the second-best performer on the LME this year as bullish investors expect shortages after the closure of major mines, but some are wary about high inventories.
Tin CMSN3 was the standout performer, rising 2.1 percent to $17,350 a tonne, its best level in a year as investors worried about lower exports from major producer Indonesia and reduced inventories.
Gianclaudio Torlizzi, partner at Milan-based metals consultancy T-Commodity, said that tin's rise was driven by strong fundamentals and technical signals, and could reach $20,000 a tonne by the end of the year.
Aluminium CMAL3 finished up 0.8 percent at $1,599.50, lead CMPB3 lead added 0.2 percent to end at $1,870 and nickel CMNI3 rose 0.4 percent to $9,380.
Copper's Crowd of Bears Punished by Trader Squeezing the Market - Bloomberg News
January 21, 2016
There were so many people shorting the copper market that one or two traders made them pay for it.
One company is hoarding as much as half the copper available in warehouses tracked by the London Metal Exchange. With that much metal under control, the trader can help drive up the fees associated with rolling forward a short position, making it tougher for speculators to keep their bearish bets. This week, the cost jumped to the highest in three years.
The episode, which caught traders by surprise this week, is one example of the perils of trading on the London Metal Exchange, where contracts are physically settled and speculators can end up paying dearly if they leave their bets without an offsetting position. Money managers are holding a net-short position on the LME, with prices down 23 percent in the past year and no sign of a recovery in Chinese demand.
“A big trader is probably trying to squeeze the market," said Gianclaudio Torlizzi, the managing director of T-Commodity srl, a Milan-based consultancy.“It’s an indication the supply side in copper is tightening."
Yesterday was the third Wednesday of the month, when many traders settle their commitments.
To renew a short position, traders have to buy back metal while selling it forward. The tom-next spread, a measure of how much the process costs over one day, jumped as high as $30 a metric ton on Tuesday, the highest since May 2012. The spread switched to a discount on Wednesday.
One problem for bears is that the amount of metal available in warehouses has dropped more than 40 percent since August. An unidentified company is controlling a large portion of that. Traders moved metal outside LME depots after a gap between London and Shanghai prices encouraged shipments to China.
Two firms held 40 to 49 percent of copper inventories and short-dated positions, according to Jan. 19 exchange data that shows holdings as a proportion of available stockpiles. While the LME provides data on the approximate size of large positions, it doesn’t disclose who is behind them.
Copper for delivery in three months has declined 7.3 percent this month to $4,360 a ton on the LME. It touched the lowest since 2009 last week.
METALS-Copper falls in cautious trade ahead of Fed meeting - Reuters News
December 15, 2015
LONDON, Dec 15 (Reuters) - Copper fell on Tuesday as caution prevailed ahead of the Federal Reserve's policy meeting, though signs that China's economy is stabilising put a floor under prices.
Investors have mostly priced in a Fed rate hike on Wednesday. However, there are concerns that a rate rise could hurt highly leveraged companies, including some miners.
Almost $2 trillion of debt sold by energy and mining companies since 2010 is facing a wave of credit rating downgrades, and defaults are rising.
"Investors are worried that a big miner might default ... this is impacting metals, it's a sentiment thing," said Gianclaudio Torlizzi, partner at T-Commodity.
But he added: "The fundamentals are getting better ... China is stabilising."
China's factory output growth reached a five-month high in November, signalling a flurry of stimulus measures by Beijing may have put a floor under the economy.
China consumes nearly half of the world's copper.
Three-month copper on the London Metal Exchange traded down 1.9 percent in official midday rings to $4,582 a tonne at 1511 GMT, extending 0.6 percent losses from the previous session.
Prices appear to have found a near-term floor around $4,500, just above November's six-and-a-half-year lows, with traders expected to close short positions into the year end.
"I'm encouraged by the resilience in the base metals sector, unlike in precious or oil," said a trader in Mumbai.
China's top smelter Jiangxi Copper and Chilean miner Antofagasta Minerals have agreed 2016 treatment and refining charges 9 percent lower than this year's fees, a signal that concentrate supply is tightening.
Other metals remained dogged by oversupply even though producers have cut back output.
The global nickel market moved to a deficit of 400 tonnes in October from a surplus of 8,500 tonnes the previous month, revised figures from the International Nickel Study Group showed on Tuesday.
"There needs to be consensus about cutbacks, we hear stories in China that some are cutting back but some are overproducing," said a metals broker.
Nickel traded down 0.9 percent at $8,675, zinc was down 2.4 percent in rings at $1,517, while aluminium was 0.8 percent lower at $1,480.
Century Aluminium began shutting one of the two potlines at its South Carolina smelter on Monday, even as a potential deal to keep the plant operating at reduced capacity gathered steam.
Lead was last down 1.2 percent at $1,718, while tin traded down 0.5 percent at $14,650.
METALS-Copper firm, focus on China trade data - Reuters News
December 8, 2015
LONDON, Dec 8 (Reuters) - Copper prices rose on Tuesday as the dollar slipped, but gains were capped by trade data from top consumer China, which fuelled worries about demand growth in the top consumer of the metal.
Benchmark three month copper on the London Metal Exchange closed up 0.7 percent at $4,587 a tonne.
China's overall exports fell a worse than expected 6.8 percent in November from a year earlier, their fifth straight month of decline, while imports tumbled 8.7 percent, their 13th consecutive drop.
However, its copper imports last month jumped 10 percent to 460,000 tonnes compared with November last year, as the price plummeted to 6-1/2 year lows of $4,443.50 a tonne and spurred opportunistic buying even as demand growth slows.
"The latest trade data is disappointing as far as exports and imports are concerned, it's another weak growth signal for China and it's negative for miners," said Gianclaudio Torlizzi, managing director at consultancy T-Commodity.
"People needed to restock. It won't change the medium-term picture, which is still bearish because infrastructure spending is still weak."
Clues to Chinese demand for industrial metals will come with investment and industrial production data on Saturday.
A weaker U.S. currency makes commodities cheaper for non-U.S. firms.
Traders expect to see a subdued market until after the U.S. Federal Reserve's monetary meeting next week.
Expectations are for it to raise interest rates, which would boost the U.S. currency and make commodities more expensive for non-U.S. firms, a relationship used by funds to trade metals.
"From a fundamental perspective, we see limited reason for a sustained rally into year-end," Standard Chartered said in a note. "Demand trends have shifted little, suggesting only a gradual slowdown in activity ahead of the Lunar New Year period in China."
China's trade data also showed that its aluminium exports in November rose to 450,000 tonnes, equal to the second highest on record, which weighed on prices. (Full Story)
"Structural oversupply in the global aluminium market has persisted for several years," Societe Generale said in a note
"(It) shows little sign of reversing anytime soon, especially because of oversupply in China and the continued export of semi-manufactured products from China."
Three-month aluminium ended down 0.5 percent at $1,477 a tonne, zinc finished unchanged at $1,531, lead gained 0.6 percent to close at $1,697, tin dropped 1.4 percent to $14,400 and nickel shed 0.6 percent to $8,700.
"It is only a matter of time before the industry is forced into large scale production cuts in order to restore supply and demand balance and to bring down the level of inventory that exists on world markets," Investec said in a note.
Deepening Metals Rout Sends Copper Below $4,500 as Nickel Slumps - Bloomberg News
November 25, 2015
Copper fell below $4,500 a metric ton for the first time in six years and nickel touched the lowest in more than a decade on concern producers aren’t doing enough to trim a glut of metal.
The retreat in commodities helped send a gauge of mining companies to near the lowest in almost seven years. The London Metal Exchange’s index of six main contracts has slumped 28 percent this year, the most since the global financial crisis in 2008, as a slowdown in top user China cut demand.
Expectations that the Federal Reserve will soon raise U.S. interest rates have boosted the dollar and made metals more expensive for buyers holding other currencies. At the same time, that’s lowering production costs of companies outside the U.S. and encouraging them to maintain output, according to T-Commodity, a Milan-based consultancy.
“Chinese demand is still weak,” Gianclaudio Torlizzi, a partner at T-Commodity, said by phone. “The bearish action is to force the local producers to cut production. What’s making people negative is the fact that the production costs of many metals has been holding pretty well.”
Copper for delivery in three months fell 2 percent to settle at $4,490 a ton at 5:50 p.m. on the LME, after touching $4,443.50, the lowest since May 2009. Copper futures also dropped on the Comex in New York.
Nickel slid as much as 6.4 percent to $8,175 a ton on the LME, the lowest since 2003. Zinc lost as much as 4.3 percent, reversing its advance on Friday after Chinese smelters announced they planned to cut production next year. The metal has extended its retreat this year even after Glencore Plc cut production by a third and Nyrstar NV said it may curtail as much as 400,000 tons if prices stay low.
Goldman Sachs Group Inc. this month said recent output cuts aren’t large enough to rescue prices, and that will require a substantial increase in Chinese demand. Bank of America Corp. estimates about 500,000 tons of copper production cuts are needed to bring an end to the supply surplus.
The Bloomberg World Mining Index fell as much as 1.6 percent, trading near a seven-year low reached in September. Freeport-McMoRan Inc., the world’s biggest publicly traded copper producer, declined as much as 3.8 percent.
Money managers were the most bearish on copper since August in the week to Nov. 17, according to the U.S. Commodity Futures Trading Commission data. In a Bloomberg copper survey last week, traders and analysts were bearish for a third week.
Zinc Reaches Six-Year Low, Leading Metal Losses on China View - Bloomberg News
November 10, 2015
Zinc dropped to the lowest since 2009, leading declines in industrial metals after weaker-than-expected inflation in China added to concern about slowing growth.
Chinese equities fell the most in a week after the inflation figures, the latest data to show monetary easing is failing to arrest a deepening economic slowdown. The country is the world’s biggest metals consumer. All six main contracts on the London Metal Exchange declined.
China’s slowest economic growth in more than two decades has cut demand and added to an oversupply of metal. Zinc dropped for a fifth day, the longest run since July. Nyrstar NV on Monday said it may suspend up to 400,000 metric tons of mined output if prices stay depressed. Shares of the company, Europe’s largest refined-zinc producer, have fallen 46 percent this year in Brussels trading.
"It’s very hard to be bullish now," Gianclaudio Torlizzi, a partner at T-Commodity, a Milan-based consultancy, said by phone from Shanghai. "There isn’t enough demand yet to push prices up. The sentiment in China is still weak."
Zinc for delivery in three months fell 2.3 percent to settle at $1,607 a metric ton at 5:50 p.m. local time on the LME. Prices touched $1,576, the lowest since July 2009 and are down 26 percent this year.
Copper futures traded on the Comex in New York declined for a fifth session, the longest streak since July.
Anglo American slipped more than 6 percent to the lowest since at least 1999 in London, the fourth-biggest decline in the Bloomberg World Mining Index. Shares of Freeport-McMoRan Inc., the top publicly traded copper producer, fell for a fifth day, the longest slump since August.
METALS/Copper hits 3-week low after U.S. growth brakes, Fed meeting - Reuters News
October 29, 2015
Copper hit a three-week low on Thursday, hit by concern about global demand after data showed weaker U.S. economic growth and as investors weighed the prospect of higher U.S. interest rates.
Data showed U.S. economic growth slowed sharply in the third quarter as businesses cut back on restocking while contracts to buy previously owned U.S. homes fell unexpectedly in September.
Three-month copper on the London Metal Exchange had shed 1.1 percent to $5,148 a tonne by 1555 GMT after touching $5,128, its weakest since Oct. 8, adding to small losses in the previous session.
Base metals were already down when the U.S. data was released because the Federal Reserve signalled late on Wednesday that an rate rise was possible in December.
"Yesterday's Fed meeting outcome was bearish for metals. The market is positioning for a new leg lower in metals," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
APINDUSTRIA/Tempo di acquisti di materie prime per le aziende bresciane
28 Ottobre 2015
«Per l’acquisto degli acciai ha senso sfruttare il prezzo attuale, oramai ai minimi. Per i metalli non ferrosi si consigliano acquisti in base alle necessità. Bisogna restare pazienti e fare fissazioni più importanti nel caso il prezzo inizi a risalire». E’ questo il suggerimento che arriva da Gianclaudio Torlizzi, direttore di T-Commodity, società di consulenza specializzata proprio nel mercato delle materie prime, ospite della trasmissione di Apindustria Brescia “Diamo voce all’imprenditoria bresciana” (che si può vedere in forma integrale sul canale Youtube di Apindustria Brescia)
È tempo di acquisti di materie prime per le aziende bresciane, che proprio in queste settimane stanno definendo i loro budget. Per Torlizzi nel 2015 il mercato delle materie prime ha proseguito il trend ribassista in corso da tempo. «I vantaggi sono stati però scarsi – ha osservato il consulente -, perché è vero che da un lato c’è stato il ribasso di prezzo delle materie prime, ma la svalutazione euro/dollaro lo ha spesso vanificato. Anzi, in alcuni casi ci sono stati addirittura dei rincari». Come devono comportarsi le aziende bresciane nel 2016? «Essere pazienti, e definire gli acquisti in base alle esigenze di breve periodo», spiega Torlizzi. «L’eccessiva finanziarizzazione del mercato ha portato gli operatori a subire molto le oscillazioni di prezzo – sottolinea Marco Mariotti, vicepresidente vicario di Apindustria Brescia -. Per questo avere dei suggerimenti su come gestire gli acquisti è un buon modo per trovare la bussola e orientarci in una situazione sempre molto mutevole».
Nickel needs a scare to force production cuts - METAL BULLETIN
October 21, 2015
The physical market is still weak, which means that London Metal Exchange prices are vulnerable to further downside, according to the founder of consultancy and fund T-Commodity.
"I don't know if the bottom has been touched - talking to physical players I'd say 'no'," Torlizzi told Metal Bulletin.
"The market probably needs more production cuts for the price to rebound. I think we will see a sell-off in metals that will break the lows; nickel could go below $8,000. I fear the worst is not over yet. We will need a scare to force producers to cut - and that would be the bottom," he said.
"Deflation fears are still in the market and they're coming from east to west," he added.
Torlizzi joins a number of nickel market experts in calling for producers to cut production.
But producers want to avoid cutting production and handing market share to competitors, he pointed out.
"Western producers fear that, if they cut production, Chinese consumers still won't buy. They ask 'why should I give my share to my competitor?'" he said.
And there is no guarantee that production cuts will boost prices anyway.
"It will be hard for nickel to break the $11,000 resistance level. We're still going to have a general sideways market for the next month and potential upside now is pretty capped; $9,000-11,000 is the short-term trading range," he added.
T-Commodity had a good year, following the trend of other agile traders who are not exposed to loss-making production assets.
"It's been a good year for trading [for some]. It was a good year for us, but we know others in the general trading sector are struggling," Torlizzi added.
"You make money when the market is moving and you lose money when the market is going sideways," he said.
"The metals are still in a macro bearish trend leading back to 2001; whoever shorted the metals will have managed to make money," he said.
BLOOMBERG VIEW/Overreacting catches up to Glencore
September 29, 2015
Copper Near Five-Year Low Defies Forecasts for Better Economy - Bloomberg News
January 12, 2015
Economists say the world economy will do better this year. The copper market is saying that won’t be enough to eliminate a supply glut that’s lasted at least two years.
Prices of the metal traded near the lowest since October 2009 after falling 1.2 percent yesterday on concern that output is outpacing demand. China’s copper consumption will grow at the slowest pace since at least 2010, Deutsche Bank AG predicts. At the same time, global economic growth will be the best in four years, economist estimates compiled by Bloomberg show.
Copper’s plunge mirrors losses across commodities as a decade-long bull market led companies to boost production and the Federal Reserve debates when to raise interest rates. Investors last week doubled bets on more losses in copper, already the worst-performing industrial metal in the past year after plunging 18 percent.
“Copper has been historically fairly decent envisioning what’s to come in the economy,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “It doesn’t like what it sees.”
On the London Metal Exchange, copper for delivery in three months was at $6,025 a metric ton by 9:45 a.m. in Hong Kong. The metal settled at $6,017 a metric ton yesterday, touching $5,966 at one point, the lowest since October 2009. The commodity hasn’t posted a gain since Dec. 30.
The $6,000 price is “a psychologically and technically important level,” said Gianclaudio Torlizzi, a partner at T-Commodity in Milan, who predicted a drop to $5,800.
More traders and analysts are negative on copper than any time since August. A Bloomberg News survey on the direction of prices this week showed that among 18 respondents, 10 were bearish, six were bullish and two were neutral.
Refined production will exceed demand this year by 380,000 tons, more than double the level last year, Societe Generale SA estimates. Macquarie Group Ltd. pegs the glut at 98,000 tons.
“Slowing demand principally out of China and less financing appetite using copper could mean that demand is weak,” said Robin Bhar, an analyst at Societe Generale in London. “Copper can spend some time clearly below the $6,000 level.”
Gross domestic product globally will probably increase 2.77 percent in 2015 and top 3 percent the following year, economist estimates compiled by Bloomberg show. That compares with 2.43 percent growth in 2014.
Investors increased the net-short position in copper to 10,881 Comex contracts in the week ended Jan. 6, compared with 4,455 a week earlier, according to government data on Jan. 9.
Stockpiles monitored by the LME were little changed at 187,400 tons after rising 5.9 percent last week, the most since June 2013. Inventories in China tracked by the Shanghai Futures Exchange are at the highest since April.
China will use 4.9 percent more copper than last year, half the growth rate from 2013, according to Deutsche Bank.
Data this month showed China’s official manufacturing gauge fell to the lowest in 18 months as weakness in the housing market hurt growth. Financing deals using metal as collateral stalled last year after an investigation into loan fraud surfaced around Qingdao, the country’s third-largest port.
“As these headwinds from around the world and emerging markets and China hit the copper market, traders will be reluctant to get too happy about the metal,” Melek of TD Securities said. “The risk is demand may actually get worse.”
On the Comex in New York, copper futures for March delivery dropped 0.1 percent to $2.723 a pound after settling yesterday 1.1 percent lower at $2.7255. Aggregate trading yesterday was 27 percent more than the average in the past 100 days, according to data compiled by Bloomberg.
In Shanghai, the March copper contract dropped 0.8 percent to 43,610 yuan ($7,029) a ton after earlier reaching 43,240 yuan, the lowest for a most-active contract since July 2009.
Also on the LME, zinc and aluminum rose, while nickel and tin were little changed. A gauge of the six main industrial metals has declined 9.3 percent in the past 12 months to the lowest since June 7, 2010
Zinc Near 1-Month High on Signs of Demand Is Outstripping Supply - Bloomberg News
July 16, 2015
Zinc traded near the highest in a month after data showed global usage exceeded production in May and European car sales jumped the most in more than five years. Zinc rose as much as 1 percent to $2,098 a metric ton before paring gains on the London Metal Exchange. The metal, used to galvanize steel in autos, climbed for the previous six
days on tighter global supplies and better-than-expected economic growth in China. “Zinc is starting to show tightening conditions in the physical market,” Gianclaudio Torlizzi, a partner at T-Commodity in Milan, said by phone.
The metal for delivery in three months was little changed at $2,076.50 as of 12:21 p.m. in London. Demand for refined zinc totaled 1.22 million tons in May, exceeding production of 1.18
million tons, according to International Lead and Zinc Study Group data. European car sales expanded 15 percent in June from a year earlier, the fastest pace since December 2009, as monetary stimulus helped economic revival in euro-zone countries. Copper added 0.5 percent to $5,560 a ton in London. The Comex contract in New York rose 0.2 percent to $2.526 a pound. In London, tin and nickel climbed, while lead fell. Aluminum was little changed.
European manufacturers see copper cheap, euro strong; buy forward - Reuters News
Susan Thomas and Harpreet Bhal
March 13, 2015
European metal products manufacturers are seeing the most favourable conditions for buying copper in over two years as prices drop and the euro strengthens, and some are buying forwards to lock in cheap supply.
Copper had been in freefall for three straight sessions, touching its lowest level in more than three years on worries that financing deals that have locked up vast quantities of metal in China could unravel.
At the same time the euro is near a 2-1/2 year high against the dollar, the currency used to price metals.
"For European consumers, they have a double whammy in their favour. This is the first time copper has been at these lows at the same time the euro is at its highs," Societe Generale analyst Robin Bhar said.
"Some of the car manufacturers are buying, because it is so attractive in euro terms."
Companies that use copper to make electrical wiring, roofing, plumbing fixtures and industrial machinery have been using the forwards market to lock in supplies for 2016, 2017 and even 2018 at prices below 5,000 euros ($6,900) a tonne, according to Bhar and some consumers.
In euro terms, three-month copper futures were trading at around 4,645 euros per tonne on Thursday, after hitting their lowest since early 2010 at around 4,600 euros on Wednesday.
The March 2017 copper contract dropped to 4,800 euros on Thursday, compared with around 5,338 euros in early January. "It's just too attractive to pass up," one European trader at a large manufacturing company said.
Business is looking even better after data on Wednesday showed euro zone industrial output had risen faster than expected year on an annual basis in January, pointing to continued economic recovery. Exports have risen and investment is improving.
Strong car sales figures from Germany, Italy and Spain have added to the growing optimism. Sales in Germany, Europe's biggest autos market, climbed 4 percent.
"We are advising our clients to take this opportunity ... to hedge for the medium and long term," Gianclaudio Torlizzi, a partner at Italian metals consultancy T-Commodity, said.
"Maybe this will be the last such opportunity in two years. Maybe never again." Benchmark three-month copper contracts have been falling steadily since January.
The drop accelerated late last week following China's first domestic bond default, which raised concerns that financiers who had bought copper and deposited it as collateral for loans could be forced to pull out of their deals and dump the copper on the market.
Such of that copper is being sold already. "We are seeing liquidation of positions by Chinese players, who are in a panic selling mode," Torlizzi said. The LME contract slid to a session low of $6,376.25 a tonne on Wednesday, its weakest since July 2010. It was trading at around $6,440 a tonne on Thursday, down nearly 9 percent from a week ago.
The most-traded June copper contract on the Shanghai Futures Exchange <SCFcv1 fell by 5 percent on Wednesday to 43,660 yuan ($7,100) a tonne, its lowest since July 2009, before recovering to around 45,000 yuan on Thursday.
Torlizzi is advising his clients to move quickly, saying the fundamentals do not justify the current lows.
"We are quite close to the bottom, between $6,200-$6,350. Going lower would mean the Chinese economy is in a hard landing scenario, which my data is not confirming at all," he said.
Commerzbank described the fall as "excessive" in a research note. "There is no fundamental justification for its low level. What is more, the price does not reflect the current supply-demand situation on the global copper market. It is very tight."
Analysts polled by Reuters in January expected surplus stocks of copper to tighten significantly this year and next as new mine output fails to translate into refined metal.
"The fact that prices are now almost 10 percent lower may actually stimulate some demand, whereas higher prices would have maybe kept some of that demand away from the market," Bhar said.
"Fundamentally the market has come around to a much fairer value."
The metals industry in Europe is traditionally conservative, and some firms are unable to take advantage of the current situation to hedge prices years ahead. One fabricator said his firm was "happy to sit back and watch for now ... We will get excited if more orders come in".
Industrial companies must embrace short-term trading trends - METAL BULLETIN
October 23, 2014
Nickel and copper producers and consumers must react faster to volatile markets and better understand hedge fund influence if they are to survive, Gianclaudio Torlizzi, founder of Milan-based consultancy and trader T-Commodity, told Metal Bulletin. Volatility returned to the nickel market dramatically this year, after years of stagnation in both prices and premiums. Nickel prices gained more than 40% to trade above $21,000 per tonne between January and May as market participants braced themselves for tighter supply due to Indonesia's ban on raw materials exports.
But few predicted the rout that followed.
The challenge for consultants and brokers is to guide their industrial-user clients, such as steel mills and metals producers, towards a shorter-term view, so they can take advantage of choppy conditions, rather than be caught out, Torlizzi said.
"We need to make industrial companies see that it's not a ten-year trend they need to look at; it's positions they need to close in two to three months," Torlizzi said.
"These companies take a conservative approach; they see a $25,000 forecast for nickel and want to keep their long position in place. But they must embrace a short-term approach, it's the only way to survive," he added.
Sentiment among hedge funds, including major funds in China, is one of the main factors that has changed nickel trading conditions in recent years.
Failure to react to the conditions of the market this year has led to multiple casualties. Many holding long positions lost out when $2,500 was wiped off nickel prices in one painful Asian trading session in May.
Then, in September, prices dropped sharply again and nickel is hovering at about $15,300 per tonne today.
Hedge fund tactics
"Hedge funds trace a theme as a tactical trade and when they think the price has gone so far, they leave it. Volatility increases because you have to follow the trend and a mini-bubble is continuously being created," Torlizzi said.
"The downside in nickel since September started when two large Chinese funds closed their longs in nickel. It was a huge call option. They reached the conclusion that the physical market was not as tight as expected," he said.
Market analysis from banks and research firms looks at the fundamentals of supply and demand but cannot predict the behaviour of speculative players.
"The mainstream views at the banks added to the confusion this year. No bank in the first half said the physical nickel market wasn't ready for such a move [upwards] on the price, due to the market being oversupplied. So everyone jumped into nickel. The opposite was copper; everyone was bearish from January about the surplus and, so far, there's no concrete signal of a surplus coming," Torlizzi said.
Copper has also had a volatile year, trading above $7,400 per tonne in January, before crashing as low as $6,300 in March, then recovering back above $6,900 by May and $7,100 by July.
The red metal has traded well below $6,600 this month.
T-Commodity made a $2 million margin call on one client in March as copper traded as low as $6,300 per tonne, down from $6,800 per tonne and $7,000 previously.
Impact of speculation "The impact of Chinese funds speculating was evident in March when copper crashed. No one in London was expecting that," Torlizzi said.
"The biggest casualties came not when the price went from $7,000 to $6,600 per tonne, but when it crashed again from $6,600 to $6,300; that's when the real margin call came. We had a margin call of $2 million on the second day for one client," he said.
Torlizzi expects nickel prices to improve steadily over the next few months, and predicts a level of $17,000 per tonne by the end of this year, rising to $20,000 per tonne in the first quarter of 2015.
Still, nickel producers are already locking in prices at today's levels, preferring to break even and forego the rewards of any potential rally, rather than risk further downside.
"Some producers are thinking 'if the price goes to $13,000, my whole year will be ruined'. In order to change their view on nickel prices, industrial users need to see a good recovery in the physical market. If you're really scared about the price you start selling nickel on the London Metal Exchange to protect your warehouse and I think this contributed to the current weakness," he said.
But Torlizzi sees today's prices as a buying opportunity due to limited downside, saying that the nickel market will clearly tighten, but not as quickly or as significantly as initially anticipated.
"We saw the opening of some shorts over the past week, when the price went below $15,800, but between $14,800 and $15,300 you have a very strong support area. This is the last barrier in order to avoid a big sell-off, which I think is unlikely," he said.
"In the long-term, the current price is a good buying opportunity. There are still some shorts out there which need to be closed, and I think they will close as the price gets back above $16,100."
T-Commodity provides market intelligence, hedging advisory, brokerage introduction and analysis on commodities and foreign exchange markets.
METALS/Copper up on speculation of looser China monetary policy - Reuters News
September 8, 2014
Copper rose on Monday as weak Chinese import data prompted speculation about looser monetary policy from Beijing, while nickel hit a two-month high on worries over potential supply constraints from the Philippines.
The lower chamber of Philippines' Congress has approved at the committee stage a bill seeking to halt exports of unprocessed mineral ores, one of two bills aimed at squeezing more value from the country's mineral resources.
The bills, which would require domestic processing of all minerals extracted in the country prior to export, have raised concern at the possibility of a halt to exports of nickel ore from the Philippines, in line with similar action by Indonesia.
London Metal Exchange nickel has risen more than 7 percent since news last week of the potential Philippines ban. It hit a two-month top earlier of $19,940 a tonne, and ended at $19,930 a tonne, up 1.9 percent.
"Sure (nickel's price spike) is all based on future impact rather than the immediate well-supplied market conditions but consumers are now having to chase the market again," said broker Triland in a note.
LME copper meanwhile rose 0.2 percent to end at $6,990 a tonne, having closed flat last week and shed 1.9 percent in August.
China data released earlier showed August import growth posted its worst performance in over a year, stoking speculation about whether authorities should loosen monetary policy further to revive domestic demand.
China's imports of copper were flat from a month ago at 340,000 tonnes in August, data showed. Analysts said the numbers would be taken as positive, given many were expecting imports to drop in the wake of a financing scandal at China's Qingdao port.
China consumes about 40 percent of the world's copper and its moderating economic growth has weighed on the metal this year, as have expectations that the copper market will move into a surplus by the end of this year.
A Reuters poll in July pegged the 2014 surplus at 226,000 tonnes.
"After the summer break we are going to see better (copper) demand, which in a tight market might have a positive impact on prices ... (but) it probably won't last long because the surplus will be felt by the fourth quarter," said Gianclaudio Torlizzi, a partner at metals consultancy T-Commodity.
Indicating tight spot market conditions, cash copper cost $16.75 a tonne more than three-month copper on Friday, and has traded at a premium to the benchmark future since late July.
Elsewhere, data last week showed U.S. employers hired the fewest workers in eight months in August and more Americans gave up the hunt for jobs, providing a cautious Federal Reserve with more reasons to wait longer before raising interest rates.
Investors began losing confidence in copper last week. Hedge funds and money managers cut their copper net long or buy positions to their lowest since June as metal prices broadly fell in the week to Sept. 2, the latest CFTC Commitments of Traders report showed.
In other metals, a broad-based revival in demand from auto and packaging sectors has driven aluminium consumption at a time when much of the world's surplus stock is tied up in delivery backlogs in global exchange warehouses, supporting prices.
Two Japanese aluminium buyers have agreed to pay a producer a record premium of $420 per tonne for metal to be shipped in the October-December quarter, two sources directly involved in the quarterly pricing talks said on Friday.
Aluminium ended 0.2 percent higher at $2,097, zinc ended 0.2 percent lower at $2,390, led slipped 0.2 percent to end at $2,199 and tin dropped 0.5 percent to close at $21,350.
Hermes Betting Against Zinc as Smelters Boosting Output - Bloomberg News
Aug 8, 2014
Hermes Fund Managers Ltd., the pension fund manager with $1.6 billion in commodities, is betting against zinc as smelters in China will be encouraged to boost output to take advantage of higher prices.
Stockpiles in bonded warehouses in China are rising, Joseph Murphy, an analyst at Hermes, said in an interview in London this week. Money managers were the most bullish on zinc out of six main industrial metals on the London Metal Exchange as of Aug. 1 with stockpiles in bourse-approved depots falling 26 percent this year.
“The market is seeing LME stocks drawing but is not appreciating that bonded are rising at the same time,” Murphy said. “There is a huge incentive for smelters to produce more. In the next few months, the fizzle will come off zinc.”
Zinc for delivery in three months declined 1.7 percent today to $2,290.25 a metric ton on the LME, trimming this year’s advance to 12 percent. Prices climbed the past four months, the longest streak since October 2010 amid expectations supplies will fall short of demand.
The metal will average $2,205 a ton this quarter and $2,270 a ton in the fourth quarter, BNP Paribas SA said in a report e-mailed July 31. Refined zinc demand will exceed supply by 250,000 tons in 2014 and 200,000 tons next year, according to the bank.
LME stockpiles climbed 36,350 tons, or 5.5 percent, this week to 691,625 tons, the biggest weekly advance since April, exchange data today showed. Inventories in bonded warehouses in China rose to over 240,000 tons at the end of May from less than 50,000 tons at the end of 2013, according to Macquarie Group Ltd.
Speculative money is moving out of zinc and into aluminum, nickel and probably even lead, Xconnect Trading Ltd. said in a report yesterday. Money managers had 39,367 short positions in zinc as of Aug. 1, down from 40,332 on July 28, according to LME commitment of traders data on its website. Their long position came to 135,849 futures and options, or 30 percent of total open interest, the data show. That position was 31 percent at the start of last week.
Ample supplies of concentrate and rising charges to treat it in addition to higher domestic metal prices should encourage smelters in China to boost output, according to Murphy.
With recent scrutiny by Chinese officials into the use of copper as a financing tool, zinc is becoming increasingly popular, according to Murphy. Imports of refined zinc by China climbed 41 percent to 68,476 tons in June, the highest since January, according to customs data. That compares with a 10 percent drop in copper imports.
Authorities are investigating whether metals stored at China’s northern port of Qingdao were pledged multiple times as collateral for loans.
Zinc has benefited as hedge funds in China took speculative long positions on the Shanghai Futures Exchange, according T-Commodity srl, a Milan-based consultancy. Zinc for October delivery in Shanghai has climbed 10 percent this year.
“It’s another proof of how powerful Chinese hedge funds are now on metals,” Gianclaudio Torlizzi, partner at T-Commodity, said by phone yesterday. “We are not seeing any kind of real supply tightness in the market now. The recent run was really excessive. We are advising clients to wait for a consolidation.”
Some people decided to step back from zinc after the release of the LME data, which pointed to the role of funds and money managers in driving up the price, according to Vivienne Lloyd, an analyst at Macquarie in London.
“That has caused people’s bullish sentiment on nickel and people decided to step back from zinc,” Lloyd said by phone yesterday. “We have and other people have been saying for some time that the fundamentals don’t support the bullishness in the zinc price rally.”