Tin soared to another record on the LME on Tuesday morning but the other metals were little changed as traders began to take profits and questioned whether prices are justified at these heights.
Fund buying has been the engine behind the latest price rally but market participants are starting to feel that further rate rises in China are inevitable in the coming months.
“The base metals are ripe for a correction on numerous counts - they are seeing some weakness as trading gets underway this morning so we would not be surprised by further weakness but, with so much data out today, sentiment could swing either way or indeed both ways,” FastMarkets analyst William Adams said.
Sentiment was boosted on Tuesday by news that Chinese inflation last month - at 4.9 percent - was not nearly as severe as feared previously, defying forecasts for a 5.3-percent rise in the world’s leading metals consumer.
Though the figures provided some relief, there is still a need for measures to tackle inflation and the overheated local economy, which could ultimately result in lower demand for commodities, according to analysts.
Indeed, some argue the latest CPI figures are not completely reliable - the measurement was recently amended to lighten the influence of food, a component that previously accounted for a third of the index and was the main inflationary driver last year.
The dollar remained firm against the euro at 1.3525; the base metals complex still appears to be decoupling from currency movements - a phenomenon that is “not a bad thing”, according to Dennis Gartman, author of the Gartman Letter.
“It signals the fact that the commodities markets are turning to their own distinct fundamentals divorced from mere dollar considerations,” he argued.
Retail sales, empire manufacturing and business inventories are due from the US this afternoon after this morning’s swathe of data.
ZINC DEFIES RISING STOCKS BUT COULD NOW UNDERPERFORMZinc stocks have gradually increased over the past few quarter but the metal has rallied alongside the other base metals.
Although mine closures are set to strengthen the zinc market somewhat, Bank of America Merrill Lynch predicts that large deficits are unlikely.
“We do not expect any acute concentrate shortages in the near-term,” BoA-ML metals analyst Michael Widmer said. “We therefore maintain our price forecast at $2,725 per tonne and believe that zinc will underperform other metals like copper.”
Zinc rose $2 to $2,523 while sister metal lead was unchanged at $2,640. Stocks of the latter rose 1,925 tonnes to 297,500 tonnes, the highest since March 20, 1995.
Copper was $44 lower at $10,116. Stocks rose to 402,425 tonnes, again at their highest level since August 25, 2010. Although LME inventories have climbed 6.4 percent this year, prices have continued to rise.
Aluminium was little changed, just $3 lower at $2,511. Stocks rose a net 5,500 tonnes to 4,600,225 tonnes, the highest since March 30, 2010. Inventories reached their highest level ever on January 21 last year at 4,640,750 tonnes.
The metal hit a two-year high of $2,575.25 on February 9 but is still far below its all-time record of $3,380 from July 2008.
Nickel was effectively unchanged at $28,900, up $5. The alloying metal hit $29,000 earlier on Tuesday, the highest since May 2008.
Tin traded at $32,700, up $250. The metal hit an all-time high of $32,799 earlier on Tuesday.
Steel billet traded at $565. In the minors, cobalt was indicated at $38,000/39,700 and molybdenum was indicated at $38,000/41,300. Source: Fxstreet
Fund buying has been the engine behind the latest price rally but market participants are starting to feel that further rate rises in China are inevitable in the coming months.
“The base metals are ripe for a correction on numerous counts - they are seeing some weakness as trading gets underway this morning so we would not be surprised by further weakness but, with so much data out today, sentiment could swing either way or indeed both ways,” FastMarkets analyst William Adams said.
Sentiment was boosted on Tuesday by news that Chinese inflation last month - at 4.9 percent - was not nearly as severe as feared previously, defying forecasts for a 5.3-percent rise in the world’s leading metals consumer.
Though the figures provided some relief, there is still a need for measures to tackle inflation and the overheated local economy, which could ultimately result in lower demand for commodities, according to analysts.
Indeed, some argue the latest CPI figures are not completely reliable - the measurement was recently amended to lighten the influence of food, a component that previously accounted for a third of the index and was the main inflationary driver last year.
The dollar remained firm against the euro at 1.3525; the base metals complex still appears to be decoupling from currency movements - a phenomenon that is “not a bad thing”, according to Dennis Gartman, author of the Gartman Letter.
“It signals the fact that the commodities markets are turning to their own distinct fundamentals divorced from mere dollar considerations,” he argued.
Retail sales, empire manufacturing and business inventories are due from the US this afternoon after this morning’s swathe of data.
ZINC DEFIES RISING STOCKS BUT COULD NOW UNDERPERFORMZinc stocks have gradually increased over the past few quarter but the metal has rallied alongside the other base metals.
Although mine closures are set to strengthen the zinc market somewhat, Bank of America Merrill Lynch predicts that large deficits are unlikely.
“We do not expect any acute concentrate shortages in the near-term,” BoA-ML metals analyst Michael Widmer said. “We therefore maintain our price forecast at $2,725 per tonne and believe that zinc will underperform other metals like copper.”
Zinc rose $2 to $2,523 while sister metal lead was unchanged at $2,640. Stocks of the latter rose 1,925 tonnes to 297,500 tonnes, the highest since March 20, 1995.
Copper was $44 lower at $10,116. Stocks rose to 402,425 tonnes, again at their highest level since August 25, 2010. Although LME inventories have climbed 6.4 percent this year, prices have continued to rise.
Aluminium was little changed, just $3 lower at $2,511. Stocks rose a net 5,500 tonnes to 4,600,225 tonnes, the highest since March 30, 2010. Inventories reached their highest level ever on January 21 last year at 4,640,750 tonnes.
The metal hit a two-year high of $2,575.25 on February 9 but is still far below its all-time record of $3,380 from July 2008.
Nickel was effectively unchanged at $28,900, up $5. The alloying metal hit $29,000 earlier on Tuesday, the highest since May 2008.
Tin traded at $32,700, up $250. The metal hit an all-time high of $32,799 earlier on Tuesday.
Steel billet traded at $565. In the minors, cobalt was indicated at $38,000/39,700 and molybdenum was indicated at $38,000/41,300. Source: Fxstreet
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