London 14/02/2017 - Key notes:
- Shorts still selling copper despite Friday's upside break.
- Shorts have built up their positions in nickel at a fast pace – there is now a risk of short-covering, given a tighter supply outlook.
- Money managers are getting more bullish on zinc again, with longs accumulating and shorts cutting.
Copper |
Total OI |
Shorts |
Longs |
Net |
03/02/2017 |
447,636 |
59,228 |
128,771 |
69,543 |
10/02/2017 |
440,387 |
61,081 |
133,491 |
72,410 |
Change |
-7,249 |
1,853 |
4,720 |
2,867 |
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Net impact: Bullish
Comment: The money managers' net long position grew 2,867 lots in the week ended February 10.
Both the longs and shorts added to their holdings last week, as they have done the two previous weeks too. The short position is climbing off an extreme low, while the long position is climbing again from mid-ground.
Up until three weeks ago, the falling trend in the gross short position suggested the shorts were becoming less bearish but it appears that – while prices were running into resistance around the $6,000 per tonne level – the bears are getting bolder. Now that prices have broken higher, shorts may have started to cover.
The net long money managers' position remains elevated at 72,410 lots. The reason for the net position holding up so well is the degree of short-covering seen since September. Despite the recent pick-up in the gross short position, overall it is relatively low, so for prices to climb it may mean the longs have to work hard.
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Aluminium |
Total OI |
Shorts |
Longs |
Net |
03/02/2017 |
919,506 |
159,278 |
305,023 |
145,745 |
10/02/2017 |
915,183 |
161,449 |
310,446 |
148,997 |
Change |
-4,323 |
2,171 |
5,423 |
3,252 |
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Net impact: Bullish
Comment: The longs and shorts are both accumulating positions; the break higher in prices may well mean there is a pick-up in short-covering now. This could help to drive prices.
The gross short position at 161,449 lots is well above the 2016 low of 114,689 lots seen in late-August. With the rally extending, the longs may feel bolder too. The gross long position at 310,446 lots is also well below the 384,861-lot peak seen in August 2015.
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Nickel |
Total OI |
Shorts |
Longs |
Net |
03/02/2017 |
329,307 |
60,531 |
95,494 |
34,963 |
10/02/2017 |
327,920 |
61,214 |
96,809 |
35,595 |
Change |
-1,387 |
683 |
1,315 |
632 |
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Net impact: Bullish
Comment: After seven weeks of seeing the net long money managers' position drop, during which time it fell 27,779 lots, it rebounded last week – although not by much.
Short selling has been the main driving force – from a low of 28,716 lots in September, the gross short position has climbed to 61,214 lots.
The rebound in nickel prices is being assisted by generally positive fundamental news, in that in addition to the closures in the Philippines, Indonesia is reported to be shortly imposing a 10% tax on low-grade nickel ore exports. As such, the nickel market is now vulnerable to a short-covering rally.
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Lead |
Total OI |
Shorts |
Longs |
Net |
03/02/2017 |
134,077 |
17,644 |
40,763 |
23,119 |
10/02/2017 |
134,515 |
17,158 |
41,228 |
24,070 |
Change |
438 |
-486 |
465 |
951 |
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Net impact: Bullish
Comment: The money managers' net long position is the highest it has been since September last year.
The trends show longs continue to accumulate and the shorts continue to reduce exposure.
The relatively low level of the gross long position means there is potentially room for further buying, which could help push prices into new high ground. But, if prices fail on the upside, then shorts may well get bolder – the current level of short exposure is very low.
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Zinc |
Total OI |
Shorts |
Longs |
Net |
03/02/2017 |
372,954 |
53,853 |
142,182 |
88,329 |
10/02/2017 |
378,987 |
52,878 |
144,286 |
91,408 |
Change |
6,033 |
-975 |
2,104 |
3,079 |
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Net impact: Doubly bullish
Comment: The downward sloping red and green lines of late suggest money managers' interest has been waning, even though the net money managers zinc position was holding up at a high level.
While the shorts continue to cut exposure, more money managers are returning as buyers again.
Given the market fundamentals, we are not surprised to see further buying and short-covering by money managers, which should continue to support prices.
The pick-up in downward momentum in LME zinc stocks may also help to stoke money managers' interest again. So far in 2017 stocks have fallen at a rate of 1,552 tonnes per day (tpd); in the fourth quarter, the fall in stocks averaged 172 tpd.
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Tin |
Total OI |
Shorts |
Longs |
Net |
03/02/2017 |
17,176 |
2,123 |
3,975 |
1,852 |
10/02/2017 |
17,187 |
2,312 |
3,907 |
1,595 |
Change |
11 |
189 |
-68 |
-257 |
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Net impact: Short selling outpaced long liquidation
Comment: Money manager longs reduced their exposure to tin again last week. This was the ninth week of cuts, as the green line on the chart highlights.
The break lower in prices was likely to accelerate long liquidation, but it is interesting that the price fall had not prompted a pick-up in short selling by money managers – that is until last week.
The gross long position is now at a low level, and we are surprised that the sell-off has not attracted bargain hunting.
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