By: Kathleen Retourne

London 05/10/2012 - Base metals were content to tread water on Friday morning, consolidating ahead of this afternoon's US jobs data. Turnover was once again muted due to China’s week-long absence for its national holiday.

Although metals are mixed - copper, lead and zinc are all down slightly on yesterday’s close - optimism is high for positive US non-farm payrolls after Wednesday’s non-manufacturing data came in better than expected. But a disappointing reading could trigger a sharp downturn in prices.

"Generally, the metals continue to hold up well but lack the conviction to press on with the early-September rally; still, given the speed and distance of the initial rallies, it is unsurprising that prices have paused while traders acclimatise to the higher price levels," FastMarkets analyst William Adams said.

The euro is steady around 1.3011 against the dollar, adding further support. ECB president Mario Draghi said on Thursday that the bank would utilise its bond purchasing scheme when the moment was right, while also dismissing talk of interest rate cuts, which boosted the single currency.

Still, concerns over Spain’s bailout continue to cast a shadow - Spanish Prime Minister Mariano Rajoy has yet to formally ask for EU aid despite market hopes for a request this week.

The return of Chinese market participants on Monday could trigger a correction to this week's uptick in metals prices. Demand on the ground in China remains gloomy and stimulus measures may not be enough to sustain prices amid sluggish growth in the world's top metal consuming country.

As well as the US non-farm payroll data, eurozone second-quarter final GDP growth, August German factory orders, September US average hourly earnings and August US consumer credit are also due.


COPPER, ALUMINIUM AND LEAD CANCELLED WARRANTS JUMP

Copper at $8,301 per tonne was down $4 on the previous day’s close, having earlier dipped to a session low of $8,274. Inventories were down a net 725 tonnes to 222,675 tonnes while cancelled warrants - metal booked for removal - jumped 12,175 tonnes to 54,750 tonnes, the highest since July 23.

The increase was due to a 10,300-tonne increase in Busan, where total cancelled warrants now stand at 15,875 tonnes and account for a third of all Busan inventories.

“Copper prices were slightly off following the ECB press conference yesterday as the focus remains on the troubled eurozone region and the IMF cut forecasts for global economic growth to 3.3 percent this year and 3.6 percent in 2013, down from earlier estimates of 3.4 percent and 3.9 percent respectively,” John Meyer of Fairfax said.

Japan's Pan Pacific Copper has offered to reduce 2013 annual premiums for Chinese buyers by $15 to $85 per tonne above the LME cash price but has yet to find any buyers, while Codelco is expected to fight to keep premiums above $100 although they should fall from last year's $110.

Aluminium at $2,113 was just $1 higher despite supportive stock movements - cancelled warrants leapt 44,425 tonnes to 1,632,925 tonnes, with Vlissingen's total up 52,180 tonnes to 822,400 tonnes. Cancelled warrants now account for 64 percent of the 1,274,700 tonnes of stocks there.

Total global inventories at 5,033,000 tonnes were down 7,325 tonnes, although Rotterdam continued its trend of daily 3,000-tonne increases.

Lead at $2,270 was down $20 despite a large increase in cancelled warrants of 33,950 tonnes to 106,625 tonnes. Johor's total increased 36,000 tonnes to 64,825 tonnes; around 85 percent of all Johor stocks are now cancelled. Inventories at 245,475 tonnes were down 3,200 tonnes.

Nickel at $18,710 was up $35 - technical buying is providing support after the break of its 200-day moving average.

“With longer-term technical players looking for dips to cover legacy shorts and short/medium term players getting long, we think nickel will continue to perform well in the near future,” RBC Capital Markets said.

Total stocks rose 1,746 tonnes to 124,860 tonnes, while cancelled warrants edged 72 tonnes lower to 15,366 tonnes.

Zinc at $2,061 was $4 lower, with inventories and cancelled warrants both falling 1,275 tonnes to 994,275 tonnes and 361,450 tonnes respectively.

Tin was up $100 to $22,600, a fresh five-month high, with prices supported by technical buying. Inventories at 12,175 tonnes were up 120 tonnes after a 125-tonne increase in Singapore. Cancelled warrants were down 25 tonnes at 6,110 tonnes.    

Steel at $345/360 was little changed, while in the minor metals cobalt was indicated at $27,300/29,800 and molybdenum was neglected.


(Editing by Mark Shaw)