LME MORNING - Base metals consolidate as pessimism dominates sentiment

By: Kathleen Retourne

London 12/11/2012 - Base metals were little-changed from Friday’s closing levels during Monday LME pre-market trading as sentiment remains shaky. The session has been home to mostly sideways trading, as poor equities and negative data from China weigh.

“[Metals] sold out a bit towards the end of last week,” a trader said. “There has been some good consumer buying of copper and aluminium, but it got a little bit oversold and markets are correcting that at the moment.”

This nervousness surrounding economic growth prospects in the US, Europe and, to a certain extent, China, will keep the metals complex restrained, with little consistent directional inputs anticipated before the first quarter of 2013.

“Metal prices are unable to recover noticeably from last week’s losses and remain largely unchanged as the new week of trading gets underway. The high levels of pessimism displayed by speculative financial investors are still precluding any significant increase in prices at present,” said Commerzbank.

For now, the complex, led by a steadier copper market, is consolidating, aided by the euro, which was holding above Friday's two-month lows of 1.2688 against the dollar. The single currency was around 1.2714, amid weekend news Greece’s coalition gained enough votes in parliament to approve the 2013 budget law.

However, eurogroup finance ministers will meet in Brussels later today discuss whether to release a new tranche of funding to Greece - this is not an automatic development.

Otherwise, trade data released on Saturday showing China's surplus in October grew to its biggest in 45 months. But while China's exports outperformed, copper imports in October tumbled by 18.5 percent month-on-month and were down 16 percent from last year, an indication of weaker demand from the world's top metals consumer.

This slowing trend, against the background of China's leadership transition, suggests that there will be little in the medium-term to bolster market sentiment.

ALUMINIUM AND ZINC CANCELLED WARRANTS SOAR

Aluminium at $1,931 per tonne was up $10 on Friday’s close, while in spreads Nov/Dec was last at a contango of $14, but Dec/Jan is still tight at $7.00/8.00 backwardation.

In inventory data, cancelled warrants saw a 106,300-tonne jump, taking total metal booked for removal to 1,821,525 tonnes, close to five-month highs. The jump was due to 112,624 tonnes booked for removal in Detroit - at 801,200 tonnes, cancelled warrants now account for over 48 percent of material at this location.

Meanwhile, inventories were up a net 10,025 tonnes at 5,105,500 tonnes, as Vlissingen stocks continue to tick higher - warehouses here now hold 1,356,400 tonnes.

Zinc business at $1,896.25 was $6.25 higher. It was another metal to post large cancellations this morning, up 57,700 tonnes, to 562,600 tonnes – a fresh all-time high. Antwerp was responsible for the jump, metal booked for removal was up 60,700 tonnes at 120,300 tonnes, leaving just 36,100 tonnes available on warrant. Total stocks at 1,158,350 tonnes fell 2,650 tonnes.

Copper at $7,602 per tonne pared back early gains, when it peaked at $7,626.25, but was still up $42 on Friday’s close. A slight backwardation is in place for the Nov/Dec spreads, last at $0.25 premium. Stocks were little changed, with inventories falling 775 tonnes to 245,500 tonnes and cancelled warrants at 39,550 tonnes down 700 tonnes.

Lead at $2,142.75 lost $6.25 - it too is showing tightness. Cash/threes is at $26.50 backwardation, while Dec/Jan was last at a $2.50/2.75 premium. Both inventories and cancelled warrants were 2,975 tonnes lower, at 331,025 and 124,900 tonnes respectively. Nickel at $15,973 was up $23, as stocks fell 444 tonnes to 129,792 tonnes and cancelled warrants at 13,716 tonnes dipped $90.

Tin increased $75 to $20,375 and stocks were unchanged at 11,680 tonnes and cancelled warrants fell 105 tonnes to 4,850 tonnes. Steel was indicated at $338/345, despite Antwerp seeing a further drawdown in inventories – stocks here were down 1,560 tonnes at 71,890 tonnes. Total stocks are now at 93,925 tonnes, while cancelled warrants were 1,755 tonnes higher at 47,645 tonnes.

In minor metals, cobalt was offered but not bid at $29,000, while metal booked for removal increased two tonnes to 68 tonnes. Molybdenum was neglected and stocks unchanged.

(Editing by Martin Hayes)

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