LME MORNING - Base metals downbeat around multi-month lows, sentiment deteriorating

By: Martin Hayes

London 03/04/2013 - Base metals prices were not far off fresh multi-month lows in most cases during Wednesday LME premarket trading, struggling in the face of continued bearish fundamental and technical sentiment, traders said.

There is little sign that the current downswing will be reversed in the short term either, given the overall economic outlook and directional flows from the investment community.

"The market has got itself in that frame of mind now - the trend is down. The CTAs and the funds are short and happy to sell," a trader said.

Among the metals, copper, aluminium, lead and nickel all sagged to fresh lows for several months. Elsewhere, equities tracked lower, while the euro, which had lost ground at one stage, was around a stable 1.2825 against the dollar.

"With the LME complex trading well below its longer-term moving averages and sentiment decidedly bearish we expect more weakness to follow. Any short-covering rallies should be met with eager sellers," broker RBC said.

The truncated week is expected to see spells of price volatility, with direction geared to the downside. The Easter closures in Europe flow into holidays in Asia towards the end of the week - Chinese markets are closed on Thursday and Friday. The market paid little heed to China's non-manufacturing PMI, which came in at 55.6 for March against a previous 54.5.

"The problem is that that there is a consistent patchy economic backdrop now. For the metals, the only change will be if everyone starts to talk them down and then they get caught out by a snap rally," the trader said.

On the data side, the US jobs-linked data flow starts early this afternoon with private-sector employment figures - this is the run-up to Friday's key non-farm payrolls report for March. As well as today's US ADP Non-Farm Employment Change, the country's ISM non-manufacturing PMI will be released.


Copper briefly threatened to test the $7,400 level, trading as low as $7,404.50 per tonne, a level last seen seven-and-a-half months ago, before holding at $7,443, a $22 loss from the Tuesday close.

Inventories continue to rise, with the 33rd successive daily increase seen - stocks were up a net 1,200 tonnes at 572,325 tonnes, a fresh high since October 2003. Cancelled warrants also rose and at 120,975 tonnes now stand at all-time highs.

Aluminium, after touching $1,869.50, its lowest also since late-August 2012, traded at $1,875, still $9 lower. Stocks were down 16,350 tonnes at 5,212,075 tonnes due to hefty outflows of 7,500 and 6,000 tonnes respectively from the bloated stockpiles of Detroit and Vlissingen.

Lead initially matched the trend, hitting $2,034 - its weakest for just over five months - but clawed back to $2,052, up $2. Stocks fell 600 tonnes to 261,425 tonnes, the lowest since October 2012. Sister metal zinc was trading at $1,860, up $6, with inventories also falling - down 9,075 tonnes at 1,162,025 tonnes.

In others, nickel fell to $16,160, the cheapest since mid-November 2012 and a $220 loss, although inventories were down 678 tonnes at 166,038 tonnes. Tin traded at $22,670, a $330 decline, while inventories rose 475 tonnes to 14,500 tonnes, the highest for 11 months.

Steel billet was indicated at $205/240 but the 55-day run of static inventories ended - stocks fell 520 tonnes to 82,550 tonnes, a three-month low. In the minors, cobalt was indicated at $25,000/25,750, while stocks were down nine tonnes at 442 tonnes. Molybdenum was neglected.

(Editing by Mark Shaw)