LME MORNING - Base metals mostly higher, copper moves back above $7,100/t

By: Kathleen Retourne

London 29/04/2013 - Base metals were mostly higher on the LME on Monday morning, recovering from Friday's reverses, although zinc and tin remained in negative territory.

But volumes on Select were light while China is absent from the market due to holidays, with aluminium at 4,903 lots outpacing copper’s 4,536 lots.

Markets ran lower on Friday, with poor GDP numbers from the US weighing. The euro was last at 1.3096 against the dollar, which lost ground after first-quarter advance GDP came in at 2.5 percent, below the forecast 3.1 percent but above the upwardly revised 0.4 percent in the previous quarter.

“Aluminium prices were the hardest hit among the base metal complex, ending a prolonged period of outperformance, closing down 3.5 percent on the day, while copper prices finished down 2 percent,” Macquarie said in a note. “Price action for the week as a whole showed some signs of stabilisation after a turbulent few weeks.”

“Our economists nonetheless believe that this [GDP number] confirms the picture of a moderate economic recovery,” Commerzbank said. “What is more, the data do not point to any need in the near future for the US Federal Reserve to scale back its bond purchasing programme.”

The FOMC has said it remains committed to with its third quantitative easing (QE3) programme until the labour market had improved substantially. Although the flow of positive figures earlier this year had raised speculation that it might end the programme before 2014, subsequent downbeat data has made this less likely.

In data released earlier today, the eurozone retail PMI for April came in at 44.2 against a previous 43.7. Data scheduled for publication later includes the March US PCE price index and March US personal spending and personal income figures.

Copper was last at $7,107.75 per tonne, up $77.75 on Friday’s close. Inventories fell 1,950 tonnes to 617,650 tonnes but remain close to multi-year highs while cancelled warrants - metal booked for removal - dropped 2,450 tonnes at 163,500 tonnes.

SHFE copper stocks, meanwhile, have fallen 12 percent in the past month, which may hint at stronger seasonal demand. Better clarity should be gained from the country's preliminary import report, which is due for release on May 8, ANZ Research said.

“Copper is mainly being hit from two fronts - concerns over Chinese demand (which we think could be over warranted) and rising stockpiles,” it said. “LME copper stockpiles are breaching 10-year highs and showing no signs of abating. However, a declining trend in Shanghai copper stockpiles could be the catalyst for a potential price recovery.”

Aluminium edged $8 higher to $1,885, recovering after short selling hammered the metal before the weekend. In the forward spreads, June/July was last in a contango of $4.25 - lending in advance of the GSCI rolls next month hit the market.

“The tightness in that spread is far from over and will likely get bid again once the rolls are finished,” RBC Capital Markets said.

"For now, we think any further weakness in the Jun/July spread represents a borrowing opportunity as physical players are likely to start borrowing out of June along with the technical community who are running short once the index rolls are finished,” it added.

Stocks jumped 9,100 tonnes to 5,167,725 tonnes due to a 15,200-tonne increase in Vlissingen - total stocks here now stand at 1,753,050 tonnes. Cancelled warrants fell 8,900 tonnes to 2,037,350 tonnes.

But zinc was down $3 at $1,894 despite a 13,550-tonne jump in cancelled warrants to 648,675 tonnes, with the Detroit total rising 12,900 tonnes to 38,825 tonnes. Stocks fell 5,600 tonnes to 1,074,875 tonnes.

Sister metal lead at $2,039 was marginally higher, up $2. Stocks and cancelled warrants were both down 1,075 tonnes at 256,700 tonnes and 149,450 tonnes respectively.

Nickel rose $313 to $15,313 although stocks rose 270 tonnes to 175,836 tonnes and cancelled warrants at 149,450 tonnes were down 1,075 tonnes.

But tin has yet to climb back above $21,000 - it traded recently at $20,800, down $25 on the previous day’s close, while stocks and cancelled warrants both fell 150 tonnes to 13,935 tonnes and 2,380 tonnes.

Steel was bid at $150 but not offered, with no movement in stocks. The minor metals were neglected.

(Additional reporting by Gregory Holt, editing by Mark Shaw