Key Macroeconomic Indicators for Base Metal Prices (2017-3-22)

SHANGHAI, Mar. 22 (SMM) – Eyes should be on US’s EIA and API crude oil inventories from the week ending March 17 and US’s February existing home sales on Wednesday. Effect on commodities from US dollar weakened recently and base metals moved sharply both on SHFE and LME markets. Falling LME inventories sent base metals up briefly but then declined with longs taking profits. Base metals will remain divergent on Wednesday.

US’s existing home sales are expected to drop in February from previous data, but will not sway reality of US’s strong real estate industry. US’s existing home sales surged 3.3% in January and were 5.69 million after seasonally adjustment, the highest level from February 2007. So, there is no need to worry about a data decline in February due to high base, on a monthly basis. Moreover, US’s higher-than-expected NAHB housing market index in March also showed a strong real estate market.

SMM Price Outlook for Base Metals on SHFE (Mar. 22, 2017)

US’s Cleveland Fed Chair delivered a speech on Wednesday morning that he supported to raise rate in March and proposed to raise rate further. The Chair indicated that US Fed will not raise rate every month but will raise rate more than one time in 2017. He also expected inflation to rise to 2% in one year and economy growth to drop in this quarter.

US’s EIA and API crude oil inventories released in the week ending March 17 declined more than expected. But API crude oil inventory released Wednesday morning rallied, due largely to rising imports. Besides, gasoline inventory decline was more than expectation. COMEX 1705 oil thus surged briefly and then dropped. Saudi Arabia's energy Minister said on March 16 that if crude oil inventory continues higher than average level for a long time, oil output reduction agreement between OPEC and non-OPEC countries will be extended. However, market players worry that oversupply will cover up the positive news.