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Daily Base Metals Report

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U.S. stocks declined once again as the market digested jobs data, non-farm payrolls increased by 428,000 jobs in the last month, and the unemployment rate remained at 3.6%. Average hourly earnings increased, and the rise in earnings in conjunction with the steady increase in payrolls suggests the labour market is still strong. Job openings and quits are still at record highs as companies look to keep up with consumer demand which, while weakening, is robust. The dollar continued to fluctuate, and the 10yr treasury yield increased again and stood at 3.0868%. The 2 yr is flattening but remains at 2.67%. In the U.K., the construction PMI was 58.2, marginally lower than the month prior at 59.1, and cable remains at the lows at 1.2346.
Prices on the LME continued to sell off again today, except for nickel which was bid this afternoon to $30,076/t. We continued to see protracted selling for zinc and aluminium as the funds liquidated longs and systems sold. Aluminium failed into the 200DMA and continued lower to close at $2,842/t, the cash to 3-month spread is on contango at -$32.01/t, The risks to aluminium and zinc supply remain elevated to consistently high energy and power costs, closures of European capacity would tighten the market further, despite the weak demand environment in China. Zinc prices failed into resistance at $3,900/t, which prompted a solid sell-off to close at $3,772/t. Tin prices continued to weaken and closed at $39,340/t with the cash to 3-month at $220.75/t, still in backwardation but less extreme. Lead prices also declined and closed at $2,231/t. Iron ore remains weak as Chinese demand is weak despite monetary loosening from the PBOC and stimulus promises. 
Energy rallied further as the supply side risks remain persistent, especially following OPEC's decision to increase output by 432,000 barrels a day in June; however, members are near full capacity so output increases will be tricky. President Biden is also reported to want to purchase oil to replenish reserves; this, in conjunction with Europe banning Russian oil, indicates oil prices have further to go on the upside towards and likely through $120/bl. Brent and WTI are trading at $113/bl and $110.56/bl, respectively. Silver prices were flat on the day, but gold was bid and traded at $1,888.72/oz.
For more in-depth analysis of base and precious metals, please see our Quarterly Metals report.
All price data is from 06.05.2022 as of 17:30


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