Metals Update

The market was buoyed early last week by the prospect of tougher US sanctions on Russia which created a short covering rally on LME Copper, Aluminium and Nickel. There was limited follow through post announcements which were not commodity specific, with Aluminium regressing back to recent lows sub $2200.

On both Zinc and Lead, the persistent daily stock deliveries have now stopped.  Despite those deliveries, Mar May Lead remains in a healthy backwardation (circa 26.5b) with Mar for a week being valued at 35b on Friday.

Turning to Copper, global stocks have been accelerating (LME and SHFE) post the Lunar New Year holiday. On the basis of price action, this looks to be interpreted that Chinese Economic recovery remains a long way off.

Since the start of the year, the market has been gravitating towards any signs of improved demand outlook / industrial recovery. However, across all asset classes, it feels we are yet to see a shift in the bearish narrative.

For Cobalt, global production is expected to rise for a fourth consecutive year, whilst low prices are expected to remain the trend for the market.

In terms of delivery and transportation, efforts are continuing to develop the Lobito corridor with the rail improvements linking Angola, Zambia and the Democratic Republic of Congo. This will upgrade current infrastructure and transportation routes and allow quicker access to the Atlantic Ocean via the Lobito Port in Angola.

With the Cobalt Metal FM spot assessment currently $13.50, the market has continued to see decent buying interest within the 2H25-1H26 months. On Friday, SSY traded Q424 at $17.50, representing a $4.00 contango across the 20-month period. With this current dynamic/shape, the demand for spread borrowing has also increased, with traders looking to lock in as close to spot and sell into the current contango.

Over the last few trading sessions, both the GFEX and the CME Lithium Hydroxide contracts remained strong. CME Lithium Hydroxide OI has now exceeded the 22,000 contract mark and continues to grow month on month.

With current FM spot ($13.25) and current physical prices remaining low, a number of issues are arising for producers – for example, Piedmont Lithium have reported a 27% cut in workforce. This may be providing a floor to prices as they stand, with potential for others to follow.

Finally, turning to Molybdenum, in the CME open interest for Molybdenum Oxide continues to develop well with the use of futures contract to ¬ 1,100 contracts. This has been complemented with trades out to August 2025. The contract is now open to trade for the current year as well as the following two years, therefore allowing all participants from consumers to producers to hedge their future exposure.



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