Base metal prices inched lower in a thinly traded pre-market session on the London Metal Exchange on Tuesday May 1, while shifts in metal inventories and forward spreads continued to attract attention.
Three-month copper prices were $8,401.50 per tonne at 10:30 BST, down moderately from an opening price of $8,420 per tonne and near the mid-point of its intraday trading range.
With prices trading sideways, the market’s attention was focused on stock movements and changes in nearby spreads, sources said.
There were large deliveries of zinc into LME warehouses overnight, while a further 6,800 tonnes of copper left the LME system, primarily due to a large withdrawal from Singapore. LME copper inventories stood at 241,550 tonnes on Tuesday, down 38% from the start of the year.
Last week, Jiangxi Copper announced that it will deliver material into LME warehouses to alleviate the tight supply of copper and ease pressure on nearby spreads, which remained heavily backwardated on Tuesday.
The cash-to-three-month copper spread was offered in a $125 backwardation on LMESelect in Tuesday’s pre-market, after being evaluated in a $134.50 backwardation at the close of trading on Monday.
“We’ve just been managing the spreads this week. We’re very aware that material is starting to move from Shanghai to Busan,” a category I broker said.
The extent of the backwardation will be dictated by the size of deliveries into LME warehouses and the strategy of shorts in rolling positions forward, a physical trader said.
“Everyone has been rolling a week or two forward at a time, hoping the situation will improve. But as I understand it there are another load of rolls coming up this month, and maybe the time has come for the shorts to take a hit and roll three months out,” the trader told Metal Bulletin.
Three-month aluminium was trading at $2,111.50 per tonne at 10:22 BST, down from an opening price of $2,119.75 per tonne.
Aluminium stocks dropped by 10,400 tonnes after withdrawals from Vlissingen, Detroit, New Orleans, Johor and other locations, taking total stocks to 5,014,500 tonnes.
Three-month lead traded at $2,159 per tonne at 10:26 GMT, down from $2,145 per tonne at the opening bell.
Lead stocks stood at 359,500 tonnes, down by 1,600 tonnes after withdrawals from Port Klang, Detroit and Barcelona.