LME MORNING - Base metals slide on softer euro, debt contagion fears stoked and US stimulus hopes dashed

By: Kathleen Retourne

London 05/04/2012 - Base metals gave up the slight gains they made earlier on Thursday morning, drifting into negative territory as the euro lost further ground.

The euro, now at 1.3063 against the dollar, has been struggling since Tuesday, when the FOMC dampened hopes of a more monetary stimulus in the US, alongside growing eurozone debt fears.

Reports that the sell-off of the previous few days had been overdone briefly lifted sentiment this morning but eurozone concerns came back into focus, in particular fears that the economic crisis in Spain is deepening after yesterday's poor bond auction.

Madrid managed to sell just 2.59 billion euros of debt, far less than the maximum of 3.5 billion euros. The average yield on bonds maturing in 2020 also rose to around 5.34 percent from 5.16 percent at the previous auction, highlighting investor caution on the risk associated with buying Spanish bonds.

Although China has returned to the market today after a three-day break, volumes remain light - investors prefer to wait on the sidelines due to the short week in Europe and the US for Easter, which could result in further market volatility and short-covering, and ahead of a spate of key data.

“Market players are now likely to focus their attention on a series of economic data set to be published in China over the next week,” Commerzbank said.

The country will publish the latest inflation rate reading at the start of the week, followed by first-quarter GDP towards the end of the week.

"Both sets of data should provide information about the extent to which the Chinese central bank could implement further measures to loosen monetary policy," the broker added.

Data releases scheduled for Thursday include February German industrial production figures, March US Challenger job cuts and weekly US unemployment claims.

Despite the US being absent on Friday for Easter, the country will still release its non-farm payroll data for March, with the general consensus being that it will show strong growth for the fourth consecutive month.


Copper at $8,315 per tonne was down $35 on the previous day’s close. The latest stock move offers little to support prices - these rose a net 5,100 tonnes to 264,775 tonnes, the highest since March 15. Cancelled warrants were also unsupportive, dropping 925 tonnes to 77,725 tonnes.

 Aluminium was back below $2,100 at $2,096 but was still up $3. Inventories were down 5,525 tonnes at 5,059,075 tonnes - Vlissingen met the new LME load-out rate of 3,000 tonnes per day and Singapore inventories dropped 1,575 tonnes.

Detroit also met its 3,000-tonne load-out rate by mixing aluminium, NASAAC and lead to total 3,505 tonnes; of this total, 1,950 tonnes were aluminium.

Cancelled warrants for aluminium fell 7,400 tonnes to 1,642,100 tonnes. Vlissingen now holds 898,325 tonnes while stocks in Detroit were down at 600,200 tonnes.

Lead is back below $2,000 - at $1,980.50 it is one of the weaker metals this morning, dropping $31.50 or more than 1.5 percent on Wednesday’s close.

Aside from copper, it was the only other metal to post a rise in stocks today - these rose 275 tonnes to 374,575 tonnes despite a 500-tonne drawdown in Detroit and 575 tonnes taken out of Singapore.

The increase was attributed to Port Klang, Malaysia, where stocks rose 1,100 tonnes to 87,150 tonnes. Cancelled warrants at 16,800 tonnes were down 1,600 tonnes.

Zinc at $1,970.25 fell $11.75 despite inventories dropping 550 tonnes to 895,150 tonnes, while cancelled warrants at 21,475 tonnes jumped 11,125 tonnes to their highest since January 27. The rise in cancelled warrants was due to Chicago booking 17,475 tonnes of metal for removal.

Nickel at $17,705 declined $150. Stocks fell 468 tonnes to 100,146 tonnes and cancelled warrants at 7,296 tonnes dropped 540 tonnes.

Tin inventories were down 215 tonnes to 13,070 tonnes and cancelled warrants at 855 tonnes were down 255 tonnes. Recent business at $22,450 was down $150.

Steel stocks declined for the 19th consecutive day, dropping 1,560 tonnes to 36,140 tonnes - the lowest since June 14. But cancelled warrants have remained in their recent downtrend, falling another 1,560 tonnes today to 9,360 tonnes, with prices at $500/520.

With Black Sea billet currently offered above $600, the wide price differential makes it more attractive to remove steel from warehouses and sell on the physical market.

In minor metals, cobalt was quoted at $30,500/32,500 and molybdenum was neglected.

(Editing by Mark Shaw)