Great look at commoditiesStocked out
This is currently happening in the LME zinc market. The cash premium over three-month metal flexed out to $218 per tonne last month. After loosening over the end of June it expanded again to more than $100 per tonne on Tuesday.
Available live stocks shrunk to a depleted 14,975 tonnes at one stage in June and are still a meagre 22,475 tonnes.
The rest of the headline zinc inventory of 82,200 tonnes is scheduled to depart.
It also happened to sister metal lead last year, when the cash premium spiked to over $200 per tonne in August as LME on-warrant stocks fell to less than 40,000 tonnes.
Time-spread tightness has been a recurring feature of the LME lead contract ever since and the cash premium is once again edging wider, ending Tuesday valued at $33 per tonne.
That’s because lead stocks haven’t rebuilt in any meaningful way, currently totalling 39,250 tonnes with available tonnage at 34,850.
The LME tin market has been living with depleted stocks since the start of 2021 and backwardation appears to be now hard-wired into short-dated spreads.
Physical tightness
Low LME stocks of all three metals reflect extreme physical supply-chain tightness.
All three have seen significant supply disruption over the last year with tin smelters hit by coronarivus lockdowns, zinc smelters in Europe powering down due to high energy prices and the Stolberg lead plant in Germany out of action since July 2021 due to flooding.
Physical premiums for all three metals have hit record highs in Europe and the United States and remain close to those levels even as outright prices have dropped like a stone.
The LME has acted as market of last resort for physical buyers and stocks will only rebuild once the supply-chain pressures pass.
Chinese exports are helping rebalance both lead and zinc markets but the process is a slow one as freight and logistics bottlenecks brake arbitrage flows.
Copper’s muted rebuild
Copper was stocked out last October, when live LME tonnage fell to 14,150 tonnes and the cash premium exploded to an eye-watering $1,000 per tonne.
The LME intervened with lending caps and deferred delivery options, a tool-kit now extended to all its physically-deliverable contracts after the March nickel debacle.
LME registered copper inventory recovered to a May peak of 180,925 tonnes but the trend has since reversed. Headline stocks have fallen back to 130,975 tonnes with fresh deliveries being offset by a string of cancellations as metal is turned around for the exit door.
Indeed, combined inventory across all three major copper trading venues – LME, CME and the Shanghai Futures Exchange (ShFE)- totalled 261,000 tonnes at the end of June, up 71,000 tonnes on the start of January but down by 150,000 tonnes on June 2021.
It’s a muted rebuild considering the world’s largest buyer – China – spent much of the first half of the year constrained by rolling lockdowns.
Stocked out
This is currently happening in the LME zinc market. The cash premium over three-month metal flexed out to $218 per tonne last month. After loosening over the end of June it expanded again to more than $100 per tonne on Tuesday.
Available live stocks shrunk to a depleted 14,975 tonnes at one stage in June and are still a meagre 22,475 tonnes.
The rest of the headline zinc inventory of 82,200 tonnes is scheduled to depart.
It also happened to sister metal lead last year, when the cash premium spiked to over $200 per tonne in August as LME on-warrant stocks fell to less than 40,000 tonnes.
Time-spread tightness has been a recurring feature of the LME lead contract ever since and the cash premium is once again edging wider, ending Tuesday valued at $33 per tonne.
That’s because lead stocks haven’t rebuilt in any meaningful way, currently totalling 39,250 tonnes with available tonnage at 34,850.
The LME tin market has been living with depleted stocks since the start of 2021 and backwardation appears to be now hard-wired into short-dated spreads.
Physical tightness
Low LME stocks of all three metals reflect extreme physical supply-chain tightness.
All three have seen significant supply disruption over the last year with tin smelters hit by coronarivus lockdowns, zinc smelters in Europe powering down due to high energy prices and the Stolberg lead plant in Germany out of action since July 2021 due to flooding.
Physical premiums for all three metals have hit record highs in Europe and the United States and remain close to those levels even as outright prices have dropped like a stone.
The LME has acted as market of last resort for physical buyers and stocks will only rebuild once the supply-chain pressures pass.
Chinese exports are helping rebalance both lead and zinc markets but the process is a slow one as freight and logistics bottlenecks brake arbitrage flows.
Copper’s muted rebuild
Copper was stocked out last October, when live LME tonnage fell to 14,150 tonnes and the cash premium exploded to an eye-watering $1,000 per tonne.
The LME intervened with lending caps and deferred delivery options, a tool-kit now extended to all its physically-deliverable contracts after the March nickel debacle.
LME registered copper inventory recovered to a May peak of 180,925 tonnes but the trend has since reversed. Headline stocks have fallen back to 130,975 tonnes with fresh deliveries being offset by a string of cancellations as metal is turned around for the exit door.
Indeed, combined inventory across all three major copper trading venues – LME, CME and the Shanghai Futures Exchange (ShFE)- totalled 261,000 tonnes at the end of June, up 71,000 tonnes on the start of January but down by 150,000 tonnes on June 2021.
It’s a muted rebuild considering the world’s largest buyer – China – spent much of the first half of the year constrained by rolling lockdowns.
https://www.mining.com/web/collapsing-metal-inventories-clash-with-plunging-prices-andy-home/
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