The base metals markets are characterized by a great deal of uncertainty regarding the implications of the US-China trade agreement.
The US-China trade agreement has had a mixed reaction on the base metals prices. Prices of aluminium initially rose, but nickel and copper fell.
The three-month contract for copper on the London Metal Exchange, at the time this article was written, had fallen by 1.3% to $9,574 a tonne. Nickel rose 0.2% to $15,136 per ton.
Commerzbank AG says that the agreement benefits base metals by reducing the threat of escalation.
Tariffs on the other hand are still much higher, especially those levied against China.
The German bank stated in a recent report that this elevated tariff climate is likely to reduce demand on the metals markets, which are of vital importance.
Aluminium prices
In a report, Thu Lan Nguyen said that the increase in aluminum prices may be due to concerns about supply.
Since last spring, LME inventory has consistently decreased.
Nguyen stated that there are also whispers of a significant concentration of the market, where a few companies hold substantial positions, which allows them to purchase vast quantities of aluminum.
She also added:
It could lead to difficulties in the future for counterparties due to low inventories and a’short-squeeze’.
Metal prices have increased dramatically in recent years, reflecting current market conditions. The dramatic increase in nickel prices in 2022 is one notable example.
The three-month contract for aluminium on the London Metal Exchange closed at $2.485 an ounce as of the date this article was written, down by 1.5% from its previous closing price.
The iron ore industry is still under stress
The price of iron ore continued to fall, falling below $95 per tonne in Singapore last Friday. The decline in prices occurred before China’s industrial output figures are released on Monday.
On Monday, China’s imports of iron ore in May showed a decrease by 4% on an annual basis to 98.1 millions tons.
Imports averaged 97.3 millions tons in the first five month of 2018. The imports have fallen by approximately 5% compared with the same time last year.
Based on data collected at high frequency, China’s figures for steel production in May suggest that the year-over-year comparison is likely to be lower.
Nguyen stated that “While official numbers will not be released until Monday, the figures from the association indicate a decrease of 2%.”
China sales figures
The daily sales figures for the Chinese real-estate market show that there is no improvement expected in this area in the near term.
Commerzbank predicts a decline of real estate sales in May. This trend has continued into June.
Nguyen, in his report, added that “weak sales of property will continue to impact construction and steel demand.”
We continue to believe that iron ore’s price recovery is limited, given the current difficulties on the Chinese real estate market.
As new information becomes available, this post Uncertainty persists in the base metals markets regarding US-China Trade Deal may be updated.
