Daily Metals

THIS MORNING Base metals opened higher on Wednesday compared with Tuesday’s official close. Zinc led the advance, rising 1.5%, closely followed by copper at 1.4%. Aluminium gained 0.9% and nickel added 0.5%, while lead rose 0.2%. Tin was almost unchanged, edging up 0.1%, suggesting that buying interest was strongest in copper and zinc despite pressure from a firmer dollar. MACRO & GEOPOLITICS US inflation was stronger than expected in October, with headline prices rising 0.4% during the month and core inflation increasing 0.3%. Markets now fully expect a Federal Reserve rate rise in December, with a small chance of a larger half-point move. Bond yields and the dollar jumped, creating a tougher background for dollar-priced metals and raising purchasing costs for European buyers. However, Asian shares and European futures advanced after strong technology-sector results improved investor confidence. Oil also recovered from two-month lows, although hopes of reduced US-Iran tensions continued to limit fears about supply disruption. BASE METALS Copper and zinc recorded the strongest early gains, overcoming the negative effect of the stronger dollar. Copper received support from weak Chilean mine figures: September production fell 21% year on year at Escondida, 14.1% at Codelco and 19.2% at Collahuasi. Aluminium recovered above Tuesday’s official close in London, although Shanghai prices touched an 11-month low after Chinese aluminium exports rose 18% in January-October. Recovering Middle Eastern production, along with new Indonesian capacity, points to greater supply next year. Low available LME inventories are limiting immediate aluminium availability. Nickel moved moderately higher, while lead and tin showed little change. PRECIOUS METALS Gold recovered to around $4,045 an ounce early Wednesday after losing almost 3% on Tuesday. The rebound mainly reflected traders taking profits on earlier selling, while the stronger dollar and expectations of further US rate rises continued to limit demand. Silver climbed back above $53 an ounce and palladium rose to around $1,057, both gaining close to 3%. Platinum also edged higher, but the broader interest-rate outlook remains an obstacle for precious metals because they do not pay interest. STEEL High electricity and gas costs are forcing major Italian steelmakers to halt or progressively reduce production, according to the country’s industry association. Lower mill activity could weaken nearby demand for ferrous scrap, although production cuts may eventually tighten finished-steel supply. The pressure in Europe contrasts with stronger Asian output: India’s JSW Steel produced 2.6 million tonnes of crude steel in October, up 19% from a year earlier. Austrian steelmaker Voestalpine reported first-half revenue of €7.7 billion and EBITDA of €846 million. FOREX The dollar remained close to a two-week high after Tuesday’s inflation figures pushed US bond yields sharply higher. The euro fell about 0.5% to around $1.116 on Tuesday, reversing part of Monday’s rise, while the dollar index held near 102.3 early Wednesday. For European scrap and refined-metal buyers, a weaker euro makes contracts priced in dollars more expensive even when the underlying metal price is stable. Expectations of further US rate increases may keep the dollar supported unless European economic figures or central-bank comments provide the euro with fresh momentum.