LME MORNING - Base metals fall on weaker Chinese copper imports, soft euro

London, 12 July 2010 - Base metals started the week under downward pressure on Monday on the LME, with copper leading the pullback following disappointing Chinese imports data over the weekend and as the euro softened.

Copper eased back below $6,700 per tonne in light trading volumes, dragging the rest of the industrial complex lower and paying little heed to warehouse data showing stock declines for all metals bar lead, steel and cobalt.

Instead, attention was on China's trade data released on Saturday, which disappointed on the copper side - imports including anode, refined, alloy and semi-finished products unexpectedly fell for a third straight month in June, down 17.3 percent on the previous month to 328,231 tonnes.

An increase to around 430,000 tonnes had been expected amid a favourable LME-Shanghai arbitrage and strong spot premiums in Asia.

But broker Credit Suisse said played down the importance of the slowdown in copper imports.

"We have entered the seasonally weaker summer period, while a pick-up in copper scrap imports suggests strong industrial activity," it said.

Chinese copper imports should remain high "at least through July", according to Macquarie, with levels in the 250,000-300,000 tonne range for refined products alone.

But imports are likely to decline in August and September amid seasonally low demand, which should see copper prices bottoming out before recovering in the fourth quarter, the broker said.

Still, the rest of the Chinese data published so far was mostly positive. Its exports rose 44 percent in June compared with the same month of last year, topping expectations and suggesting the global economic recovery has remained on track despite worries about a fresh slowdown.

A report on Monday that Chinese property prices in June recorded their first monthly fall since February 2009 provided further evidence that recent government efforts to cool down this inflated market have been successful.

"On the other hand, the implemented measures to cool down the local economy should cause future [metals] demand to weaken," Commerzbank noted.

Wider markets were largely unimpressed, with European shares a touch weaker, easing 0.2 percent after a slightly firmer opening. The euro fell to 1.2575 against the dollar, retreating from a two-month high of 1.2721 hit on Friday, as jitters grew ahead of the results of European bank stress tests due later this month.

Investors were reasonably upbeat ahead of a string of US corporate earnings out this week although, on the mining side, results from US aluminium major Alcoa, which kicks off the earnings season later today, could disappoint.

Results from major companies including JPMorgan Chase, Google, Bank of America and Citigroup are also expected later this week, as well as further Chinese data including foreign direct investments and industrial production, which should keep base metals nervous, Will Adams of FastMarkets said.

"Overall, the economic outlook has deteriorated and, with that in mind, we feel there is room for the metals to pull back further," he said. "Currently, they are consolidating the April-to-early-June sell-off so further sideways trading may be seen but overall we expect the downtrend to dominate."

COPPER IGNORES STOCKS DATA

Copper fell $114 to $6,655 per tonne, retreating from a 10-day high of $6,775 hit on Friday. LME stocks fell for the 17th day in a row - down a net 1,650 tonnes at 435,250 tonnes, the lowest since November 27, 2009. This was offset by a net decrease of 2,200 tonnes in cancelled warrants, the metal booked for removal.

Stocks usually reverse higher at this time of year when factories close for their annual summer break but this year could be different if manufacturers stay open for longer to benefit from the current economic recovery, analysts said.

Elsewhere, aluminium dropped $20 to $1,984 even though stocks registered a net decline of 8,075 tonnes, sending the total to a new low since July 2009 at 4.39 million tonnes. Chinese imports fell 79 percent in June to 74,582 tonnes from the same month of last year, with China increasingly a net exporter of the light metal.

Nickel edged $187 lower to $19,313, having also moved off from a 10-day high of $19,545 reached in the prior session, even as inventories fell for the 24th successive day. Stocks fell a net 420 tonnes to 120,240 tonnes, a fresh low since the end of September last year, with recent news of a strike resolution at Vale's Sudbury operations yet to have an impact on inventories.

"We expect this deal will pave the way for a resolution of the ongoing strike at Voisey's Bay and that, within 3-4 months, an additional 100,000 tonnes per annum of nickel supply could be back online from these operations," Macquarie said in a report.

Tin was flat at $17,650 after stocks fell a net 125 tonnes to 16,350 tonnes, the lowest since June 2009, but cancelled warrants fell 17 percent.

Zinc was $54 softer at $1,850 after nearing a five-week high on Friday at $1,905, while lead dropped $27 to $1,818.

In steel, Mediterranean billet slipped $10 to $420/440 after stocks rose a net 585 tonnes to a two-month high of 31,070 tonnes, while cancelled warrants dropped 27 percent.

In the minor metals, cobalt stocks climbed a net 20 tonnes to a new record of 194 tonnes but the market was neglected at a wide quotation of $37,100/43,500 per tonne compared with Friday's $37,400/37,900. Molybdenum was down $500 at $29,500/31,100.

(Editing by Mark Shaw)

RELATED TOPICS