Strong dollar putting pressure on base metals

Overall, the metals remain nervy, with the general uncertainty being exacerbated by fairly lacklustre turnover. The lack of direction has again been in evidence this morning, with an initial rally across the complex being eroded by dollar strength heading into the afternoon. Volumes remain pretty disappointing, with the market holding back ahead of what will likely be a hectic afternoon. This afternoon sees Goldman Sachs and Citigroup report their Q3 results, quickly followed by a raft of US economic data at 13.30 UK time, including the September CPI figures (expected +0.2% m-o-m) and Initial Jobless Claims (expected at 520K). The Philadelphia Fed index (expected at 12) and the DOE Crude Oil Inventory data are also due out later in the day. The confluence of all these numbers may result in a busy and volatile afternoon trading session. Meanwhile, a damage assessment at BHP Billiton’s Olympic Dam mine is now expected to be announced on October 21st. Damage to the haulage system at the main shaft, on October 5th, has reduced throughput by 80%. The mine produces ~200 ktpy of copper and ~4 ktpy of uranium, so all eyes will be on how extensive the damage is, and more importantly, how long it will take to repair. After an initial rally in Asian trade, copper has since come under pressure this morning from a stronger dollar. Stops were also triggered on the downside, seeing the price trade below $6,200. Another increase in available LME stocks, up 1,200 mt, has also weighed on prices. The main locations for the increase were Busan and Singapore. Aluminium has also come under heavy pressure heading into the afternoon, falling below $1,900. Volumes have been pretty thin so far however. In other news, Rio Tinto has reportedly scrapped plans to build its Coega aluminium smelter project in South Africa, due to electricity shortages and a plan by Eskom to raise electricity tariffs. The proposed 588 ktpy project, acquired via the takeover of Alcan, had previously been put on hold until 2015. The other metals are also softer, primarily taking direction from copper and aluminium.