Yesterday, copper paused in its current climb, falling to a session low of US$10,142/tonne. China’s slower GDP growth weighed on the market. The record contraction in LME copper spreads resulted in 6,900 tonnes of gains in Asian warrants. Spreads, on the other hand, continue to show persistent nearby tightness, with the Oct 21-Nov 21 spread jumping to more beyond US$1,010/tonne. Zinc prices fell in London as well, but they are still near a 14-year high. However, LME 3M aluminium prices rose further. Prices reached an intraday high of US$3,230/tonne before reversing some of their gains at the close.
China’s aluminium production prices are expected to climb dramatically due to the prolonged power crisis, particularly following the recently proposed power market reform. The ‘base + floating’ formula now allows the on-grid pricing to fluctuate by more than 20% over the base price for the country’s energy-intensive sectors. Guangxi province, one of China’s key aluminium production centres, plans to impose a 50% premium on electricity costs for those energy-intensive businesses.
CE Brent briefly surpassed $86/bbl Wednesday, reaching its highest level since 2018. However, the market was unable to maintain this surge, and Brent fell back to around US$84/bbl. Today’s early morning trading has seen a continuation of this downturn. In September, a drop in US industrial production, combined with worse Chinese GDP figures, would not have boosted morale.
According to the latest Drilling Productivity Report, the EIA predicts US shale oil output to climb by an estimated 77Mbbls/d in November to 8.22MMbbls/d. The Permian region is projected to bear the brunt of this growth. Production in the Permian is expected to average 4.89MMbbls/d in November, the highest level since March 2020. The EIA also announced that the number of drilled but uncompleted wells (DUCs) had decreased by 241 to 5,385. Since peaking at 8,934 in June of last year, the number of DUCs has declined by a considerable 3,549. The decrease in DUC inventories has aided in the maintenance of US manufacturing.
According to trade data from China’s Customs, corn imports remained exceptionally high last month, jumping 227 per cent year on year to 3.53 million tons in September, with year-to-date imports standing at 24.93 million tons, up 275 per cent year on year. In recent months, corn’s relative underperformance compared to wheat has boosted corn demand from the domestic animal feeding business as farmers convert back to corn. Excessive rain in recent weeks has also affected domestic supply sentiment and has remained supportive of corn imports. Wheat imports were lacklustre last month, down 40% yearly to 640kt; nevertheless, YTD wheat imports are still up roughly 25% year on year to 7.59mt.
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