Darren – Weekly Market Report 47 (Period from 16 August 2023 to 22 August 2023)

16/08

- “The metals complex came under pressure yesterday following the weak set of Chinese
data,” analysts at ING said in an emailed note. “Chinese new home price data released this
morning will also do very little to help sentiment.” There are also growing worries about how
troubles in the property sector, and China’s weakening economy, are now spreading deeper
into the financial sector. Zhongrong International Trust Co. missed payments on dozens of
products and has no immediate plan to make clients whole, indicating troubles at the
embattled Chinese shadow bank are deeper than previously known.

17/08

- While futures prices in London and Shanghai have fallen to multi-week lows, some investors
have been building long positions, based on LME data, in anticipation that prices will turn
higher in coming months because China's inventories are so low, and on hopes the Chinese
government will roll out more aggressive economic stimulus measures. The total net long
position in LME copper rose to 9,488 contracts on Aug. 11, the highest since Feb. 10, data
provided in the Commitments of Traders Report showed.
- India's copper imports are expected to stay elevated for at least the next two years, fuelled
by strong demand from the green-energy and infrastructure sectors and restraints on
domestic production, according to researcher and ratings agency ICRA Ltd. Consumption of
the key industrial metal is expected to increase about 10% in India for both the current
financial year and next, said Jayanta Roy, senior vice president at ICRA, which is the local arm
of Moody’s. Domestic output has dropped by a third after Vedanta Ltd.’s copper smelter
was forced to shut in 2018 and constraints will remain until extra production — including a 1
million ton a year plant planned by billionaire Gautam Adani — comes online, he said.

18/08

- Codelco expects copper production to recover in coming years after slumping amid project
delays that exposed it to even lower ore quality, outgoing CEO Andre Sougarret says in
presentation. This year probably will be the low point for production, Sougarret says, while
showing a slide that has output rising to about 1.5 million tons next year. While projects are
taking longer and costing more than planned, Codelco would become an “irrelevant” player
without them, he says in an event organized by Chile’s association of engineers. Codelco has
to replace 50% of its output over the next decade as the State-owned company is playing
catch-up after past underinvestment. After reviewing projects, management determined
that they’ve reached a point of no return. The company will focus on ways to improve
execution and streamlining decision making. Brownfield projects are technically challenging
and large, while switching to underground mining at Chuquicamata will require investments
until 2040, Sougarret said. The Company is looking at ways to access new parts of El
Teniente as a stopgap as it completes the project. CEO vowed to stabilize debt that has
reached $19b

21/08

- Citigroup Inc. has bought about $160 million of Russian aluminium from the London Metal
Exchange, something many banks have refused to touch since the invasion of Ukraine. The
 US bank was behind requests to deliver about 75,000 tons of aluminium out of warehouses
in Gwangyang, South Korea, that were reported by the LME on Friday, according to people
familiar with the matter

22/08

- A Luxembourg-based firm that’s harnessing microwave technology to recover metals is

looking to build a $440 million refinery in Texas to help quench demand for a key ingredient
in electric-vehicle batteries. Wave Nickel seeks to tap US government incentives including
those from President Joe Biden’s landmark Inflation Reduction Act to build a refinery that’ll
produce nickel sulfate for EV batteries, Chief Executive Officer Gustavo Emina said in an
interview.

LME Copper warehouse stocks grew moderately by 4550mt over the week to 95425mt. The
consistent strong contango could indicate near time supply, however this is slowly tapering down.
The forward curve has retreated slightly this week from last weeks high. Volatility was moderate this
week, with players continuing to react to data release from China, and the seemingly worsening
global economic conditions. Copper’s Settlement price volatility at 0.69%

 Price Cash-3s spread

 Warehouse stock 60

50

40

30

20

10

0
7/5 023
7/ 7 023
7/1 3

8/4 23
8/ 8 023
8/ 1 3
7/ 1 ...
7/ 2 ...
7/ 2 ...
7/ 2 ...
7/3 ...

8/1 ..

8/ 1 ...
8/ 2 ...
..
7/1 ..
7/ 1 ...

8/2 /...

8/ 1 ...
2

2
0/ .

2/ .
1/ .
3/
7/
9/
1/
5/
7/

4/
6/
8/
/ 20

/ 20
/ 20
1
/2
/2

/2
7/3
Options:

Copper notable options trade data

Sep23 : call volume of 400 lots vs put volume of 950 lots
Oct23 : call volume of 1100 lots vs put volume of 100 lots

- Sep23 $7500 put traded 700 lots

- Sep23 $8300 put traded 250 lots
- Oct23 $8900 call traded 500 lots
- Oct23 $9500 call traded 500 lots

IV and Premiums for Copper options stabilise this week, take up of option contracts are growing.
Technicals (Copper):

Past week expectations and results (09 Aug – 15 Aug):

The $8301 level was tested again this week, but the overall weakness in the market has cause a
marked difference in the strength of the support, with prices eventually breaking lower. The market
looks to be trending slightly lower after a slight pause below this $8301 level.

This week analysis and expectations (16 Aug – 22 Aug):

The $8301 level has indeed acted as a resistance level this week, with it being tested multiple time
each day. However towards the end of the week we see some additional demand coming in,
allowing prices to break above $8301. Prices are expected to hover around this prices level at this
time, with a slight bias on upward movement.
Technicals (Aluminium):

Past week expectations and results (09 Aug – 15 Aug):

Aluminium looks to be on a dangerous path lower as big factors continue to plague the metal.
However the lme warehouse to prices chart show an interesting picture, whereby the lower prices
are encouraging warrant cancellations. This hints to me that the baseline demand is still there. The
prices will likely touch the $2130 long-term support.

This week analysis and expectations (16 Aug – 22 Aug):

The $2130 level proved to be strong even in this market as prices were not able to succefully break
below it. There seems to be a bottoming out for prices this week, however I would be catious of a
reversal. More likely a rest at this level while the market consolidates from heavy declines.
Technicals (Nickel):

Past week expectations and results (09 Aug – 15 Aug):

Nickel has also had a tough week with a single direction down. The fall off ended at 6% lower than
when it started. The $20040 support level has been clearly broker this week, and there is a chance
this will become a resistance line in the coming week.

This week analysis and expectations (16 Aug – 22 Aug):

This week marks a slowdown in the downward momentum of Nickel over the past few weeks. Prices
have managed to prop itself back above $20000, a promising sign of a support level.