Zinc warehouse stocks jump 7.8% as tightness begins to fade

Thursday, May 21, 2015

LME warehouse stockpiles of zinc shot up 7.8% yesterday alleviating some of the upward price pressure which has seen three month LME zinc prices rally over 20% since bottoming out at a year-to-date low of $1,981/tonne in mid-March, rising to a fresh year-to-date high just above $2,400/tonne earlier this month. LME registered warehouse stocks saw a substantial increase, rising to just over 467K tonnes as stocks added 34,000 tonnes yesterday in its largest increase in over two years, ending 29 consecutive days of steady outflows. Concern among market participants had been growing in recent weeks as stocks hit their lowest levels since 2009, however, the substantial jump in inventories suggests there is a significant amount of metal not held in LME approved warehouses, and accordingly prices have declined over 8% month-to-date to reflect this, with prices closing lower for the sixth straight session yesterday at $2,200/tonne.

Yesterday’s release of Aprils FOMC meeting minutes indicated that policymakers were increasingly expressing doubts regarding the strength of the US recovery as unimpressive economic data saw the prospects of an interest rates rise this summer diminish. FOMC members were split on whether the target fed funds rate should be lifted, with fewer members vocalising their support for a June rise this time round. After rebounding strongly at the start of the week the dollar index failed to hold onto intraday moves above the 100 day MA as it ended the session at 95.448, a modest gain of 0.2% against a basket of major currencies.

A busy day for economic data today with the release of eurozone manufacturing and services PMI reading expected shortly. Chinese mainland stock indices were given a boost by a recovering manufacturing PMI reading, with the preliminary result for May showing some improvement to 49.1 from 48.9 the previous month, however, this was still below the 49.3 expected by market participants and also below the 50 point mark which separates expansion from contraction. Over in the US, following on from yesterday’s FOMC minutes investors are hoping the release of initial weekly jobless claims, the Philly Fed index, the Chicago Fed index and existing home sales will offer some support to risk assets and see the camp in favour of a rates rise in the near term swell in ranks once more.   

Prices drop as warehouse stocks jumped yesterday

NLSZS Index LME CLS Zinc 2015 05 21 07 32 39

China's flash manufacturing PMI reading shows signs of recovery

MPMICNMA Index HSBC China Manuf 2015 05 21 07 50 58

Events for today

0245

CN

May

HSBC Manufacturing PMI

0830

DE

May

Markit Composite PMI

0900

EZ

May

Markit Composite PMI

0930

UK

Apr

Retail Sales

1330

US

Apr

Chicago Fed

1330

US

w/e

Jobless Claims

1500

US

May

Philadelphia Fed

1500

US

Apr

Existing Homes Sales

1500

US

Apr

Leading Index

1500

EZ

May

Consumer Confidence

All times UK Local Time

 

Topics: US Fed, PMI, DXY, LME, Zinc
More from: Kash Kamal