Base metals prices firm on LME as lead, copper consolidate gains

Base metals prices on the London Metal Exchange (LME) were for the most part firmer Wednesday July 25, with lead advancing by 1 percent while copper rose by 0.4 percent to $6,290 per tonne. Tin was the only metal that suffered a loss of 0.2 percent.

However, volume was average with some 5,259 lots had traded across the complex early London time.

The combination of some fresh stimulus from China with improved manufacturing purchasing managers’ index (PMI) data out of Europe and the United States boosted sentiment on Tuesday, leading to a rebound that saw the complex close up by an average of 1.4 percent, led by a 2.2 percent rebound in copper that had at certain point been up by 3.3 percent.

The precious metals prices were also firmer on Wednesday with bullion prices up by 0.2 percent and the platinum group metal prices up by 0.6 percent. This follows gains in silver and platinum prices of 0.6 percent and 0.2 percent respectively on Tuesday.

In China, base metals prices on the Shanghai Futures Exchange were up across the board with gains averaging 0.9 percent. As on the LME, lead was the outperformer with a 1.6 percent gain, while the most-actively traded September copper contract price increased by 1.4 percent to 49,880 Yuan ($7,348) per tonne.

Spot copper prices in Changjiang were up by 1.3 percent at 49,740-49,880 Yuan per tonne while the LME/Shanghai copper arbitrage ratio has eased to 7.94, from 8.03 on Tuesday.

In other metals in China, the September iron ore contract on the Dalian Commodity Exchange was up by 0.4 percent at 477 yuan per tonne. On the SHFE, the October steel rebar contract was up by 0.3 percent, the December gold was down by 0.1percent and the December silver was up by 0.3 percent.

In wider markets, spot Brent crude oil prices were up by 0.29 percent at $73.93 per barrel on Wednesday with the yield on US 10-year treasuries weaker at 2.9383 percent, while the German 10-year bund yield was also weaker at 0.3947 percent.

Base metals prices have been trading sideways in recent days, often within the previous day’s range, which suggests consolidation. This pause is often a precursor to a bigger move. However, the big question is whether there will be follow-through buying or not.

Given the extent of the sell-off since the June highs, analysts feel the metals are looking oversold and the better flash PMI data, combined with China’s move to support its economy in the trade war environment, seats well.

Silver is following gold’s lead, while platinum and palladium seem to be catching the same tailwind pushing the base metals.