Records tumble at the LME but China expansion on hold
The London Metal Exchange saw record electronic trading volumes after Glencore's decision to cut a third of its annual zinc production on Friday. The exchange is also planning to launch mini-futures contracts in nickel, tin and lead in Hong Kong but has abandoned plans to set up a warehousing network in China for the time being, according to Charles Li, the head of Hong Kong Exchange, the parent company of the LME.
Everyone is pessimistic on base metals.
At the LME Seminar in Westminster there was hardly a positive word from its panellists on aluminium, copper, nickel, lead or zinc.
There would need to be "deep pain" and production cuts in the market outside China before stockpiles of aluminium fall said one consultant, while copper could take another lurch lower because of weak demand in China and emerging markets. As for zinc the positive impact from Glencore's big production cut could be offset by increased Chinese production. Electric vehicles were seen threatening the future of lead while large warehouse stocks will continue to weigh on the price of nickel.
Who is next (for production cuts)?
First it was thermal coal, then copper and most recently zinc. Delegates at the LME Seminar said nickel could be the next base metal where the pain of lower prices forces mines to close or be put under care and maintenance. Alternatively, attendees speculated one option might be for Glencore to look to merge its Canadian nickel operations with neighbouring assets controlled by Vale and lower output that way along with significant cost savings.