Metals: The easy part is over – TDS

CTA buying activity in base metals is grinding to a halt, with our estimates suggesting that algos are already likely back on the offer in Aluminium this session, TDS Senior Commodity Strategist Daniel Ghali notes.

Shanghai traders are still adding to their net length in Aluminium

“Under the hood, however, a recovery in demand sentiment embedded within the commodities complex is simultaneously occurring alongside a rise in supply risk premia embedded within the base metals complex.”

“These tailwinds are still supportive of higher prices, particularly given signs that macro funds have already capitulated on their length, but metals markets will need to find support from these cohorts for prices to continue rising now that CTA buying activity has wound down.”

“For the time being, Shanghai traders are still adding to their net length in Aluminium, and the scope for CTAs to sell has diminished with the sharp rally in prices, but the set-up for flows is now significantly less asymmetric.”