London 13/06/2013 - Base metals were under pressure on Thursday morning, with uncertainty a key factor in growing risk-off sentiment.
Although the return of China to the market after a three-day absence for Dragon Boat Festival has lifted volumes, prices are anything but upbeat - all were in negative territory.
Earlier, the World Bank downgraded its global growth forecast to 2.2 percent from 2.4 percent in January, citing a deeper-than-expected recession in Europe and a slowdown in China and India. Subsequently, stocks markets have slumped and metal prices have fallen.
“Prices are revisiting and retesting range lows as concerns over global growth come to the fore,” a trader said, highlighting largely negative data from China over the weekend despite showing signs of stability in the West.
"A convincing break on copper below the psychological $7,000 could prove damaging, whilst nickel trades at multi-year lows and aluminium and zinc fall back to familiar territory,” he added.
The is growing speculation that the US will end its monetary easing after Friday's forecast-beating non-farm payrolls number, while Chinese growth looks set to shrink into the second half.
“Until clearer signals are received, we feel choppy, wide range-trading may continue, with a downside bias given the threat to equities and the likely knock-on effect on metals as margin commitments are required,” FastMarkets analyst James Moore said.
Elsewhere, dollar-denominated commodities became more attractive after the euro climbed to a four-month high against the US currency at 1.3390, although it has since dropped back to yesterday’s closing levels of 1.3330.
Credit Suisse attributed the strength in the single currency to covering of short positions but does not see the euro gaining much ground from here.
Datawise, the German WPI disappointed at -0.4 percent against the forecast of -0.2 percent. The ECB monthly bulletin is due later day, as are core retail sales, retail sales, import sales and unemployment claims from the US.
COPPER SHRUGS OFF SUPPLY ISSUES
Copper was last at $7,070 per tonne, down $50 on the previous day’s close. The low prices and the return of China have boosted activity levels, with around 14,750 lots changing hands on Select by 10:40 GMT.
Stocks fell a net 1,250 tonnes to 608,300 tonnes and cancelled warrants at 221,075 tonnes were down 2,025 tonnes.
In supply-side news, the planned start of copper exports from the new Oyu Tolgoi mine had to be postponed at short notice.
“[This is] evidently because the mine’s operator Rio Tinto and the Mongolian government have as yet failed to resolve their differences,” Commerzbank said in a note. “So far, Rio Tinto has not been granted any export permit by Mongolia. The company is keen to start exporting by the end of the month.”
Elsewhere, Freeport Indonesia declared force majeure on copper concentrate shipments from its Grasberg mine yesterday due to a suspension of operations there pending an investigation into a tunnel collapse of May 14 that killed 28 workers and injured 10 others.
The estimated production impact of the outage at the world's second-largest copper mine between May 15 and June 11 is approximately 36,300 tonnes of copper and 80,000 ounces of gold, Freeport said.
“[The] force majeure on Grasberg shipments was mildly supportive for copper but the announcement was not entirely surprising,” Sucden in a note said, although it could underpin prices further forward.
“Though a short-term issue, it could be enough to see copper through, what is likely to be, pretty tough trading conditions this month,” ANZ said.
Zinc at $1,845 was $20 lower. Cancelled warrants in Antwerp jumped this morning, up 27,375 tonnes to 203,475 tonnes. Of the 210,500 tonnes of metal at this location, just 7,025 tonnes are on warrant and available. Total inventories fell 4,625 tonnes to 1,091,625 tonnes.
Aluminium, which closed at its weakest since May 30 on Wednesday after a late-afternoon sell-off, is steadier this morning - it was last $4 lower at $1,860, while 6,500 lots have changed hands on Select.
After yesterday's large stock rise in Vlissingen, inventories fell across several locations today, dropping a net 7,800 tonnes to 5,206,350 tonnes, while cancelled warrants at 2,065,800 tonnes were down 7,375 tonnes.
Lead at $2,095 was down $23, although stocks fell 350 tonnes to 199,975 tonnes and cancelled warrants at 141,825 tonnes were down 2,500 tonnes.
Nickel, which also sold off heavily yesterday, has slipped further today, dropping to a session and three-year low of $14,130. It was last at $14,182, down $93. Stocks fell 48 tonnes to 183,672 tonnes and cancelled warrants fell 72 tonnes to 24,315 tonnes.
Tin at $20,300 tonnes was $100 lower, with no change in stocks and a marginal 10-tonne decrease in cancelled warrants to 3,605 tonnes.
Steel was last at $140/180 while stocks were stagnant. In the minor metals, cobalt was indicated at $28,500/30,250 and molybdenum was neglected.
(Editing by Mark Shaw)