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MEIR ON METALS: Metals take poor jobs report in stride as copper remains tight

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Analyst Ed Meir looks at what is moving the metal markets on Friday May 4.

Copper and General Commentary: We had a very strange day to say the least on Thursday, as practically everything was down. Even the dollar – traditionally a safe haven during market declines – did not do much, finishing pretty much unchanged against the euro. Although copper finished lower as well, turnover was light, with COMEX copper volume estimated at around 50,000 lots by Reuters, more than one third below the 30-day average.

Things are not much different right now, with base metals quietly mixed in the wake of the just-released non-farm payroll number. US employers decreased hiring for the second straight month, adding just 115,000 workers in April, well below forecasts calling for 170,000 jobs being created. The unemployment rate, however, ticked down to 8.1%.

Despite the disappointing report, investors may suspect that the Federal Reserve could entertain thoughts of putting through yet another easing programme in place, which may explain why base metals are holding up as well as they have.

However, other markets are down, with crude being particularly weak and off by another $2/barrel. A series of upcoming meetings with the Iranians this month is raising expectations that some sort of breakthrough could be in the cards. We will have to wait and see what happens, but certainly if there is going to be progress, it will be now rather than later given the unprecedented degree of pressure being brought to bear on the Iranian economy.

Of course, the French and Greek elections take place this weekend as well, and polls show Francois Hollande still retaining his lead. We should have an interesting day on Monday, as markets will have a chance to assess how exactly the European landscape will change in light of expected political changes.

We expect to see more pressure develop in most markets over the course of next week, as the US growth story becomes less compelling. Additionally, if copper – now arguably the one metal propping up the rest of the group – starts to buckle on reports of impending deliveries out of Chinese stockpiles, that could be a potential game-changer as well.

Technically, we are now at $8,225 on copper, down $4, but stuck in a very tight trading range. LME stocks continue to plunge, off another 4,575 tonnes overnight, with cancelled stocks up by 6,175 tonnes. Spreads have remained tight; although cash/May has come in to $35 back from $45 yesterday, May/June and June/July are holding, each at $13 and $8 back, respectively. The full cash to three’s spread is around $90, about $25 higher than Thursday’s levels.

Aluminium: Ali is now at $2,083, down $7, and about where we were at this time on Thursday.

Zinc: Zinc is at $1,990, up $6.

Lead: Lead is at $2,085, down $7 and having a very poor week thus far.

Nickel: Nickel is at $17,490, up $205, and about where we were at this time on Thursday; charts continue to look weak.

Tin: Tin is at $21,725, down $80.

Ed Meir
editorial@metalbulletin.com

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