LME MORNING - Base metals rise after Chinese data but rally seen as short-lived

By: Kathleen Retourne

London 13/07/2012 - Base metals rose in Friday morning trading after Chinese data released overnight boosted the chances of further monetary easing measures.

“Despite slightly weaker GDP data out of China, metals have been given a lift on the prospect that further stimulus measures are needed. Fundamentally the rally should be short lived as the longer-term economic outlook still has negative bias overall,” a trader said.

In the figures released earlier in Asia, Chinese second-quarter GDP at 7.6 percent came in just below the 7.7-percent forecast and was down on the previous quarter's reading of 8.1 percent, underlining the downside shift in growth momentum.

“Bar the first quarter of 2011, this was the ninth consecutive quarter of contraction. The annualised quarterly growth rate has dropped to 7.6 percent from 11.9 percent in this time span,” FastMarkets analyst Jono Remington-Hobbs said.

“The question now is whether the economy will look to stabilise at this current growth rate or whether there is further downside potential in the coming quarters,” he added.

In other data, June industrial production came in at 9.5 percent, below the forecast of 9.8 percent and a slight drop from 9.6 percent in May.

Many analysts expect China's growth to rebound in the second half of the year once Beijing's stimulus policies begin to take effect, which will be positive for industrial metals demand.

Markets are now likely to return their attention to the eurozone, where the euro is still struggling against a strong dollar at 1.2206.

On the data side today, US releases scheduled include the June PPI and the July Preliminary UoM Consumer Sentiment index and Inflation Expectations.


Copper prices extended advances during Friday morning trading, with an end-week technical bounce taking place in active business against a background of an uptick in nearby tightness.

Prices at $7,655 per tonne were up $100 on Thursday’s close. Warehouse stocks, however, rose a net 300 tonnes to 251,675 tonnes due to a 1,100-tonne warranting in Busan.

In the spreads, the focus was on July/August, which traded at $15 backwardation compared with $11 premium on Thursday and a $3 contango at the start of the week.

Aluminium was struggling to regain $1,900, with recent business at $1,897.50, up $15.50. Stocks rose 3,075 tonnes to 4,803,475 tonnes due to a 12,800-tonne warranting in Vlissingen.

Steel billet was steady at $400/410, although the focus was on inventories, which had been static since mid-May. Today, they rose 34 percent or 14,560 tonnes to 42,705 tonnes, the highest since March 30. All the material was warranted in Antwerp.

Nickel climbed back over $16,000 - it was last at $16,110, up $325 - after inventories fell 150 tonnes decline to 105,762 tonnes.

Lead at $1,884 increased $27, with stocks down 1,175 tonnes at 344,575 tonnes, and sister metal zinc was up a similar $29.50 at $1,872.50. Zinc inventories dropped 4,225 tonnes to 976,775 tonnes.

Tin at $18,700 jumped $200 after a 110-tonne drop in stocks. Total inventories now stand at 12,100 tonnes.

In minor metals, cobalt was indicated at $27,300/28,250 while molybdenum was unquoted.  

(Additional reporting by Martin Hayes, editing by Mark Shaw)