Metals Update – 19 June

The week before

LME copper prices continued a three-week rally last week, as risk-on sentiment started to roll back into markets on the back of increasing odds of rate hike pauses by the US Federal Reserve and some Chinese Monetary Stimulus news.

The previous weeks’ gains were predominantly supported by investor speculation that China would implement additional stimulus measures to revive its economy, which has been severely affected by the COVID-19 pandemic.

According to data from the National Bureau of Statistics, China, the largest producer of refined metal globally, witnessed a year-on-year rise of 13% in refined copper production in May, reaching a record monthly high of 1.1 million tons.

While the US Federal Reserve finally paused its rate hiking cycle, some hawkish commentary was seen from Fed members, who still believe that inflation is still not coming down fast enough.

The Federal reserve in their notes acknowledged the intensifying tightening of Credit conditions and the unknown impact they will have to the banking sector, as previously seen by SVB.

The week ahead  

This week, it could be argued that the case for risk on Sentiment could continue in Global Industrial Metals markets, given the lessening risks of Inflation on the US economy and the potential for further Chinese Stimulus.

The LME Index, which measures the performance of a basket of key LME Metals, is currently up around 8% from last month.

In early morning trading in LME on Monday 19th June 2023, LME aluminum dropped 0.5% to $2,260 per tonne, Zinc was down roughly 0.3% to $2,472, lead decreased by 0.7% to $2,126, and nickel fell 2.1% to $22,555.

The validity and confidence in LME Nickel prices continues to be debated by traders, having seen some disconnect from Physicals markets in the past year due to controversies surrounding the cancellation of trades during the start of the Russia/Ukraine War.

Further indications from the US Federal Reserve might be seen to give forward guidance on interest rate expectations, which could give some hints as to the movements of other Global Central Banks, including the Bank of England, which is due continue to report its next rate hike decision in the coming days.

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