After a 10.03% decline in 2023, the LME metals composite rallied 11.24% in Q2 and was 11.51% higher than the 2023 closing level. Steady interest rates, a U.S. and U.K. ban on Russian metals on the LME, and the prospects for economic recovery in China lifted metal prices. Copper did not post the most significant rally, but the leading nonferrous metal rallied to a new record high at nearly $5.20 per pound before correcting lower.
New highs in copper- The target remains much higher
COMEX copper futures rose 9.57% in Q2 and were 12.85% higher over the first six months of 2024.
The long-term chart shows copper’s rise to a record $5.1985 per pound in Q2. The nearby COMEX contract settled at $4.3905 at the end of Q2 and was higher in early Q3.
Three-month LME copper forwards moved 8.26% higher in Q2, up 12.15% over the first half of 2024.
The chart illustrates the LME copper forwards reached a new record $11,104.50 high in Q2 and settled at $9,599 per ton at the end of June. The LME forwards were higher in July. The upside target for many analysts is at the $15,000 per ton level, which could take the COMEX futures to over $6.80 per pound. The long-term bullish copper trend remains firmly intact in early Q3.
Zinc and tin lead on the upside
Zinc, a critical nonferrous metal that galvanizes steel, rose 20.44% in Q2 and was 10.52% higher over the first six months of 2024. The Q2 rally turned a loss into a gain. Three-month zinc forwards settled at $2,937.50 per ton at the end of June and were slightly lower in mid-July.
Tin, the most thinly traded LME metal, rose 19.26% in Q2 and was 28.82% higher over the first half of 2024. The Q2 rally added to the Q1 gains. Three-month tin forwards settled at $32,739 per ton at the end of June and were higher in mid-July.
Zinc and tin led the base metals sector with the most significant percentage gains. While zinc was up over 10% over the first two quarters, the illiquid tin forwards were the best-performing nonferrous metal over the period.
Over 8% gains in aluminum and lead
Three-month high-grade aluminum forwards gained 8.02% in Q2 and were 5.89% higher over the first six months of this year. The aluminum forwards settled at $2,524.50 at the end of June and were marginally lower in mid-July.
Three-month LME lead forwards moved 8.22% higher in Q2 and 7.52% over the first half of 2024. The lead forwards settled Q2 at $2,224 per ton and were slightly lower in mid-July.
Nickel lags, but the price moved higher
Nickel, the second most volatile and least liquid LME metal, rose only 3.24% in Q2 and was 4.14% higher at the end of June. Nickel forwards settled Q2 at $17,291 per ton, which, like the other base metals, was lower than the Q2 closing level in mid-July.
Inventories could be a warning sign- China is critical for the path of prices
While base metals posted gains across the board in Q2 and over the first six months of 2024, inventory changes are a reason to exercise caution.
The chart highlights the significant inventory increases in all base metals except tin from the end of 2023. Aluminum stocks rose over 87% over the first six months of 2024, while lead stocks increased by over 65%. Nickel warehouse stocks moved over 48% higher over the six-months, while zinc stocks were up over 16.5%. While copper stockpiles only increased 7.67% from the end of Q4 2023 through Q2 2024, they moved over 60% higher in Q2.
The inventory increases are likely due to economic weakness in China, the world’s leading base metals consumer. As we move into the second half of 2024, financial conditions in China are critical for the path of least resistance of base metals prices. The bullish price action in Q2 and the first half of 2024 will likely need a Chinese economic recovery to continue to the pattern of higher lows and higher highs.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
