LME MORNING - Base metals drop back, confidence wanes

By: Kathleen Retourne

London 21/05/2012 - Base metals were mixed on the LME on Monday morning, with several paring earlier gains when initial confidence waned.

Copper, though, continues to benefit from short-covering and bargain-hunting, which is keeping the red metal off its lows.

The euro also came off four-month low and is now at 1.2768 against the dollar. The increase, however, is said to be due to short-covering and does not reflect a genuine or sustainable return in confidence.

Although global leaders at the weekend's G8 summit reiterated their commitment to keeping Greece in the eurozone, investors remain nervous about eurozone stability.

But Alexis Tsipras, leader the leftist Syriza party in Greece, said he wants to keep the country in the euro if his party comes to power in next month's election, calming some fears about an imminent break-up of the eurozone.

“The political deadlock that has followed the recent elections in Greece has significantly increased pressures in financial markets. The eurozone is once again at an important crossroad. Substantive policy responses are needed to stabilize the situation,” Credit Suisse said.

Investors were also focused on economic growth in China after last week's data proved disappointing. The market is now looking ahead to the Thursday morning release of China's May HSBC Flash Manufacturing PMI for an updated reading of industrial activity.

"After reassurances by China that it would promote growth policies, we could see a quick burst to the upside after the 10-percent drop over the last month," ANZ Bank said in a research note. "That said, we may have to wait for the HSBC Flash PMI read later this week before the market decides to move one way or the other."

In data, there are no major releases today. Due later this week are consumer confidence figures from the eurozone, Italy, France and Germany, plus business confidence and PMI for France and Germany.  US durable goods figures will also be released, as will existing home sales and the Richmond manufacturing index.


Copper was just shy of moving above $7,800 earlier, peaking at $7,799 before dropping back to $7,735 per tonne still up $85 on Friday’s close.

“Copper's sell-off seems to have found support at $7,625 per tonne. After two days of consolidation, prices are trying to rebound,” FastMarkets analyst William Adams said. “Expect some consolidation and a pause in the downward trend but for the upside to be capped. Expect lower prices further down the road.”

Inventories rose a net 3,200 tonnes to 224,375 tonnes, with Gwangyang stocks up 2,650 tonnes at 11,975 tonnes, Busan up 1,825 tonnes at 31,050 tonnes and New Orleans up 925 tonnes at 58,300 tonnes. Cancelled warrants at 35,225 tonnes were down 625 tonnes.

“Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 7.3 percent or 13,635 tonnes on the week,” Kedia Commodity said. “Traders have said this partly reflects an inventory shift back to LME sheds in South Korea, where stocks rose by more than 4,000 tonnes on Thursday.”

Aluminium business at $2,059.75 was down $8.25 even after stocks declined 10,325 tonnes to 4,964,850 tonnes. Only Busan saw an increase in aluminium stocks, rising 1,350 tonnes to 50,050 tonnes. Cancelled warrants at 1,651,500 tonnes were down 7,850 tonnes.

Nickel prices have scraped back over $17,000 to $17,030, up $195. Inventories at 16,825 were down 60 tonnes and cancelled warrants are now at 7,110 tonnes.

Zinc was up $9 at $1,909. Stocks rose a further 2,050 tonnes to 946,075 tonnes, a fresh high since May 4, 1995. Cancelled warrants slipped 300 tonnes to 30,050 tonnes.

Lead at $1,963.75 was down $2.25. Stocks were marginally up at 358,000 tonnes, while cancelled warrants were down 800 tonnes at 79,400 tonnes.

Tin is moving off intraday lows - it was last at $19,600, down just $45 now. Stocks increased 40 tonnes to 14,470 tonnes and cancelled warrants are at 5,690 tonnes.

Steel stocks are unchanged at 28,145 tonnes, while prices still weak at $420/470, down $50.

In the minor metals, cobalt was offered at $30,950 and molybdenum at $31,500.

(Editing by Mark Shaw)