Daily metals

Global equity indices were muted for a second session and uncertainty with the war in the Persian Gulf prevented markets from taking on more risk. The Israel-US conflict with Iran remains the dominant risk factor for global markets because of its potential impact on oil supply and inflation expectations. Crude oil fell following plans for the release of emergency supplies. A weaker USD helped boost investor appetite across the industrial and precious metals sectors. Yields on 10-year US Treasuries rose by 6bp to 4.23%, while the USD index was 0.4% weaker at 99.3. The International Energy Agency has launched the largest release of strategic oil reserves in its history, in an attempt to quell the turmoil in energy markets unleashed by the Middle East war. The agency said that it would release 400mn barrels, in a step that dwarfs the 182mn it released in two phases in 2022 following Russia’s full-scale invasion of Ukraine. Precious metals remained choppy but with a downward bias amid persistent geopolitical risks and shifting monetary policy expectations. The more industrial silver and the PGMs gave up more ground on concerns over weaker demand stemming from the adverse impact on global growth from the war in the Middle East. Poland's Central Bank noted they are ready to start 'active management' of its gold reserves with the purpose of selling some to realize profits to support defence spending, but with the plan to buy back the gold later. For now, the plan is on hold until there is further interest from the government. Most base metals ended weaker. Recent COT data on copper showed a sharp reduction in investment-fund net longs, highlighting how positioning has already been partially unwound. If the Strait of Hormuz disruption lasts another few weeks, roughly 6–7% of global aluminium supply could be offline for much of a year – at a time when inventories are already extremely tight and aluminium is critical for rebuilding structures, power infrastructure, aerospace, defence, autos, batteries and renewables. Global aluminium exchange inventories are at critical levels – about 4 days of consumption at the end of Jan versus a 10-year average of roughly 14 days. Copper exchange inventories, by contrast, are around 13 days of consumption, close to their long-term average, and have risen by more than 500kt since the start of the year to the highest in more than two decades.. Four Chinese-run nickel plants in Indonesia have shut down temporarily after a deadly landslide last month at a waste area used by one of the facilities. The four high-pressure acid leaching plants operated by China’s GEM Co. at the Indonesia Morowali Industrial Park, have halted production while the waste site is restored. The disruptions affect facilities that jointly account for 30% of Indonesia’s HPAL capacity. LME average daily volumes (ADV) -0.3% YoY in Feb, with tin ADV -14.7%, zinc -7.3% and copper -5.9%. But aluminium ADV +4.8%, nickel +3.6% and lead +4.2%. Iron ore prices were supported by China’s pledge to support the steel sector by curbing excess capacity. Economic planners at the National People’s Congress signalled plans for orderly cuts to steel output capacity, a move that could lift steel prices and improve profit margins. This, in turn, may strengthen demand for steelmaking raw materials such as iron ore.