LME MORNING - Metals trawl lower, fluctuate routinely with currency shifts

By: Martin Hayes

London 10/07/2012 - Base metals generally traded at lower levels during Tuesday's LME premarket session, hampered by soft macroeconomic inputs such as China's sub-par June data today, with price gyrations influenced by currency trends.

For the metals, today's sessions looks set to be low-key, with prices largely constrained to tight ranges - the euro this morning was flitting either side of 1.2300 against the dollar, holding above last Friday's two-year lows of 1.2258.

The market's sluggish trend was kicked off by China's soft June trade data, traders said - copper imports fell 17.5 percent. Added to weekend Chinese inflation data and Friday's flat US June employment report, as well as the continued eurozone struggles, this underlines the fundamental pressures building up over the slow summer period.

"Softening data from all corners of the world shows there is little hope for moves on the upside, apart from intermittent policy action that results in short-lived spikes," a trader said.

Separately, US second-quarter earnings season kicked off with a better-than-expected report from Alcoa - its revenue for the period quarter was $6.0 billion, steady sequentially although down nine percent compared with second quarter 2011.

"A lot is already factored in - earnings should give the market its next cue but rallies are there to be sold," the trader said.

On the data side, French industrial production dropped 1.9 percent against a forecast fall of 0.9 percent, but this was offset by Italy's IP rising 0.8 percent against a predicted 0.3-percent decline. Later today, the July US IBD/TIPP Economic Optimism index is due.


Copper was holding above $7,500, trading at $7,550 per tonne, down $10 from Monday's kerb close. Inventories registered a modest three-lot or 75-tonne fall to 253,275 tonnes.

China's copper imports in June fell to 346,223 tonnes last month - many had been anticipating an increase.

"The decline in imports, despite lower copper prices in June is due on the one hand to the lack of attractive opportunities for arbitrage between the exchanges in London and Shanghai. At the same time, demand in China was also relatively muted last month, as evidenced for example by rising inventory levels on the SHFE," broker Commerzbank said in a report.

Aluminium was $4 lower at $1,921, with the short-covering late on Monday having faded. Stocks dropped 6,000 tonnes to 4,822,850 tonnes. According to the Chinese data, aluminium imports fell 4.9 percent in June to 86,576 tonnes from the previous month.

Alcoa, meanwhile, sees a small global deficit and expects demand to grow seven percent this year on top of the 10-percent growth seen in 2011.

In other metals, nickel was $61 lower at $16,339 - there was a 54-tonne inventory decline to 105,006 tonnes, while cancelled warrants, the metal booked for removal, rose 13 percent to 9,342 tonnes. Lead traded at $1,877, down $1, with stocks dropping 500 tonnes to 346,825 tonnes.

Tin traded at $18,690, a $105 loss, while inventories fell 365 tonnes to 12,220 tonnes. Steel billet was neglected at a steady $400/420. In the minors cobalt was quoted at $27,000/30,000, while molybdenum was unquoted.

(Editing by Mark Shaw)