LONDON (Scrap Register): INTL FCStone said that it sees a gradual grind lower in copper during September, with potential for other London Metal Exchange base metals to soften as well. 

 

The LME base metals group has been withstanding the weakening macro picture out of China quite impressively, but INTL FCStone is not sure how much longer it will be able to shrug off the poor numbers.

 

INTL FCStone thinks zinc and copper are likely the most vulnerable, and although aluminum looks very solid on the charts, it is also getting quite overextended in light of the fact that production growth, particularly from China, continues to outpace domestic demand.

 

A number of Chinese economic reports were softer in August including new credit and lower Purchasing Managers Index readings. Other data showed growth, but with the upward trajectory moderating, such as a 9% year-on-year rise in factory production that was down from 9.2% in June. 

 

INTL FCStone sees a copper range of $6,820 to $7,120 per metric ton during September. Meanwhile, with the zinc market widely expected to be in deficit both this year and next, prices eventually could work higher, but in the short term INTL FCStone thinks the complex has likely done too much and will likely continue to be a relative laggard in the group going into September.

 

The firm sees a $2,260-$2,430 range this month. Aluminum prices rose in August, but INTL FCStone points out that Chinese production has yet to decline meaningfully. Chinese product exports have been running at multi-year highs of 200,000 to 300,000 tons a month–not a huge amount considering the size of the Chinese market, but indicative of the fact that the country is still producing too much metal. Over the course of September, INTL FCStone sees prices trading between $1,900-$2,100.