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Daily Base Metals Report

Daily Base Metals Report

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Authors
Daria Efanova

Daria Efanova Head of Research

Contact research Contact Industrial Commodities

US stocks opened lower today as investors reduced their expectations of the start of monetary easing in March after the ECB gave a statement yesterday reiterating the need to keep high interest rates for longer. Currently, forward swaps are pricing in a 70% chance of a Fed rate cut by early spring. The 10-year US Treasury yield rose above 4% again, while the dollar index jumped to a one-month high, standing at 103.25.

While the conflict at the Red Sea is not directly translating into higher base metals prices, the indirect impacts are mounting, possibly delaying shipments and increasing freight costs. The Drewry Container Index from Shanghai to the rest of the world jumped by at least 14% week-on-week, with European importers feeling the brunt of this increase. Further escalation of the conflict could add some upside to metals' price performance. However, in the meantime, the impact on commodities seems marginal. Aluminium and copper remained unchanged at $2,214/t and $8,354.50/t, respectively. Zinc erased most of yesterday's gains, closing at $2,547/t. Lead settled at $2,104/t. Iron ore extended its most recent drop to $128/mt on the back of growing concerns surrounding China's economic outlook. The Chinese government has provided additional support for the construction segment in Q4 2023, prompting prices to test the $140/mt level. However, yesterday's reluctance by the PBOC to cut interest rates has posed a question as to whether the Chinese economy might be able to grow at 5% this year without ample fiscal and monetary policy support. Moreover, cyclical accumulation of steel and iron ore in domestic inventories also weighed on the performance.

Higher Treasury yields have reduced the attractiveness of precious metals, causing gold's price to dip slightly to $2,039.70/oz and silver's price to trade at $22.96/oz. Despite ongoing uncertainty regarding the future developments of the conflict in the Red Sea, oil prices do not appear to be affected. WTI and Brent remain mostly unchanged at $72.05 per barrel and $77.96 per barrel, respectively.

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All price data is from 16.01.2024 as of 17:30

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