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Market jitters weigh on base metals amid US impeachment inquiry, Brexit update

London Metal Exchange aluminum hit its lowest point since October 2016 on Sept. 27 amid fresh headwinds for macro market signals involving the leaders of the U.S. and Britain, though gold also fell on the U.S. dollar's overall strength.

Aluminum was the most pronounced fall among other base metals that lost ground, including copper and nickel. S&P Global Platts reported Sept. 27 that aluminum prices on the Shanghai Futures Exchange had fallen during the week for all contracts from October 2019 to September 2020.

Markets were rocked by the U.S. House of Representatives announcing an impeachment inquiry into President Donald Trump over alleged abuse of power and by the U.K. Supreme Court declaring that Prime Minister Boris Johnson's decision to suspend Parliament was unlawful.

The court's decision dimmed chances of a no-deal Brexit on Oct. 31.

Elsewhere, the EU is considering tariffs on more than US$4 billion of U.S. exports in retaliation against Trump's trade policies, people familiar with the strategy told Bloomberg News.

Price ring

Aluminum closed at US$1,712 per tonne Sept. 27, down from US$1,765/t a week prior and its lowest point since October 2016, though it also hit US$1,712/t on Aug. 30.

London broker SP Angel cited the Shanghai Metals Market as saying Chinese aluminum processing has been cut 50% to improve air quality ahead of the Oct. 1 Chinese National Day celebrations.

SP Angel said in a Sept. 26 note that aluminum processing output has been restricted in China's Henan, Tianjin, Shanxi and Shandong provinces.

Copper fell to US$5,713/t from US$5,777/t, and the International Copper Study group said the global copper supply deficit was 190,000 tonnes for the first five months of 2019.

Shanghai copper warehouse stocks were down by nearly 24,000 tonnes, and aluminum stocks were down by 19,000 tonnes, SP Angel wrote Sept. 27.

Nickel fell to US$17,405/t from US$17,955/t, lead fell to US$2,066/t from US$2,105/t, and tin fell to US$16,300/t from US$16,400/t. Zinc was the only base metal to buck the broader trend, rising to US$2,335/t, from US$2,309/t a week ago.

Gold fell to US$1,499 per ounce, from US$1,507/ounce a week prior, though it did spike to US$1,534 on Sept. 24 in the wake of the news out of the U.K. and U.S. Silver fell to US$17.53/oz from US$17.81/oz.

The S&P Global Platts IODEX 62% iron ore CFR North China price edged down to US$91.50/t, from US$91.60/t a week prior.

Talking points

Sales and trading personnel at Australia's Macquarie Group said in a Sept. 23 note that while commodity markets are often subdued in the fourth quarter with destocking and maintenance by downstream players preparing for the northern winter, broader economic activity in many major economies is also waning.

The group cited weak September purchasing managers' index data reported for Germany and France, "Level 2+" stimulus in China and a U.S. rate cut cycle underway amid global trade concerns as contributing to 2019's seasonal pullback in metals.

With the now year-old U.S.-China trade conflict also still stifling broader trade, investment and sentiment, Macquarie said a "bearish triple whammy" is in play, and while the rest of the year offers an entry point for a China-backed steel-related restock ahead of 2020, the firm is "very cautious" on its coverage's short-term outlook.

Financings

Vale SA upsized its previously announced debt buyback to about US$1.08 billion from US$1 billion.

Fortescue Metals Group Ltd. refinanced a portion of its US$1.4 billion syndicated term loan facility maturing in 2022.

China Hongqiao Group Ltd. agreed to issue senior unsecured notes worth US$200 million for refinancing debt and for general corporate purposes.

Steelmaker Stelco Holdings Inc. unit Stelco Inc. withdrew its proposed offering of about US$300 million of senior secured notes due to current bond market conditions.

Codelco issued 10-year and 30-year dollar-denominated bonds with yields of 3.02% and 3.71%, respectively, totaling US$2 billion to help fund its US$40 billion plan to overhaul aging mines through 2026, Reuters reported, citing IFR, Refinitiv's capital markets news service.

Russian aluminum producer United Co. Rusal PLC announced plans to enter into a five-year, US$750 million, sustainability-linked pre-export finance facility to refinance debt.

Xiamen Tungsten Co. Ltd. completed an offering for 600 million Chinese yuan of short-term bonds.

Southern Copper Corp. unit Minera México SA de CV priced its offering of US$1 billion of 4.500% senior notes due 2050.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.