LME MORNING - Metals spurred by sick dollar, near fresh multi-month highs

London 13/10/2010 - Base metals trimmed gains during LME premarket trading, pausing to consolidate after yet another rise in what has been a consistent bull run over the past two weeks.

But the background of a soft dollar and strong sentiment suggests that the bias remains to the upside - the fundamentally strong tin market has already hit a new all-time high today, copper a new 26-month peak, aluminium and zinc fresh highs for five months and lead its best since January.

The dollar, which has been the prime influence in the run-up, was struggling near last week’s eight-and-a-half month lows, testing 1.40 against the euro, while there were also gains in equity markets - European shares stood just more than one percent higher.

The broad weakness in the dollar this morning was triggered by the release of the minutes of the US Federal Reserve's last meeting, which suggested officials were ready to prop up the economy.

The Fed officials who gathered on September 21 focused both on the possibility of buying more longer-term US government debt to drive borrowing costs lower and ways to nudge the public into expecting higher levels of inflation in the future to spur spending.

Looser monetary policy will further weigh on the US currency. Although this broadly indicates a sickly picture for industrial materials consumption, the metals complex is so far shrugging this off.

“The markets are going up for perhaps the wrong reason - but the talk [at LME Week events] has been very bullish, so you can’t stand in the way,” a trader said.

Although all of the metals are reaching into overbought territory on the technical charts, there has not been the big downside correction that many had anticipated this week - price dips have been treated as buying opportunities.


Overnight, widely anticipated Chinese trade statistics for September showed that copper imports fell three percent and aluminium metal and product exports declined six percent but iron ore imports jumped 18 percent.

“Despite a slight dip, [China] again imported high amounts of copper in September,” broker Commerzbank noted. “This is primarily due to less attractive arbitrage opportunities between London and Shanghai exchanges in July - it can take up to two months to ship the metals to China.”

In the metals, copper hopped above the $8,400 per tonne level to trade at $8,415 at one stage before settling at $8,390, still up $40. LME warehouse inventories fell by net 475 tonnes to 371,275 tonnes.

Tin crept above $27,000 per tonne to set a new all-time high of $27,100 before settling back at $26,800, a $300 advance.

A mini-run of stock decreases came to an end - inventories rose a net 180 tonnes from what had been 18-month lows to 12,330 tonnes. Given fundamental tightness of supplies, the market seems set to hit $30,000 soon.

Aluminium settled back from fresh five-month highs of $2,447, trading up $3 at $2,440. Inventories declined a net 1,500 tonnes to 4,322,250 tonnes, the lowest again since mid-June 2099 - this is the 20th day in a row that stocks have fallen.

Elsewhere, lead cleared the $2,400 per tonne to reach new upside territory when buy-stops were triggered. Metal changed hands as high as $2,434 before the market settled at $2,424, up $49.

Zinc hit $2,419, the highest since late April, and then traded at $2,407, a $37 advance. Stocks were down for ninth day in a row - the 250-tonne fall saw inventories drop to 610,100 tonnes, a fresh 15-month low.

Nickel traded at $24,350, up $300 but off its highs after stocks climbed for the fourth successive day - rising 426 tonnes to 124,140 tonnes, the highest since late June.

Steel billet was indicated at $445/460 against a previous $455/465. Stocks fell for the 14th day in a row - down 1,495 tonnes at 64,285 tonnes, the lowest since mid-August.

In the minor metals, cobalt was quoted at a little-changed $36,800/38,900 per tonne while molybdenum held at $30,500/37,500.

(Editing by Mark Shaw)