LME MORNING - Copper speeds above $8,100/t, others consolidate advances

By: Martin Hayes

London 13/01/2012 - Copper prices nipped above $8,100 during Friday LME premarket trading when a welter of technical buy-stops lifted the market to its highest since late October.

Copper touched $8,117 before settling back at $8,050, a $45 advance from the previous close, bolstered also by falling inventories.

Others in the complex held beneath the previous day's multi-week highs, trading sideways and taking stock of the week's investment fund rally, aided by trends elsewhere. Equities were higher and the euro around a steady 1.2830 against the dollar, recovering from a midweek 16-month low of 1.2660.

"If you are a bull you will have been pleased with the movements this week. But you would expect some sort of a pause now," a trader said.

Business flows have been swollen this week by the increased investment interest that the annual index fund reweighting triggers.

"The rally has been more powerful than we thought it would and it may still have further to run, especially since these gains could attract more short-covering," William Adams of FastMarkets said

The metals complex is likely to slacken during the imminent Chinese New Year holiday period - the reweighting exercise, which has injected upward momentum into prices, ends today.

Next week, on Monday, there is a US holiday as well - Martin Luther King Day. So the complex is expected to refocus on broader fundamental trends.

"After the advances, it is looking overdone, so we should get a pullback but the technicals are better now, so it is likely to be bought - the first reaction is often to buy the dip," the trader said

"But when all is said and done, the world is in a bit of a state, particularly Europe," he added.

Yesterday's positive debt auctions by Spain and Italy have temporarily defused eurozone tensions but the overriding unresolved problem of sovereign debt remains.

Also, tentative signs that the US economy was picking up were hampered by below-par weekly jobless claims and retail sales figures on Thursday. Later today, the week's data events conclude with the January Preliminary UoM Consumer Sentiment Index, December import prices and the November trade balance.


COPPER INVENTORIES DWINDLING

Copper warehouse inventories fell for the eighth day in a row - down a net 1,425 tonnes at 356,825 tonnes, a fresh 13-month low. Cancelled warrants, the metal booked for removal, jumped 34 percent to 66,025 tonnes due to 17,025-tonne cancellation in New Orleans.

This location now holds 70 percent of the LME's cancelled warrants and a queue is now developing to remove metal - some 10 weeks on current load-out rates.

Aluminium business at $2,156 was down $6 - prices have stalled after hitting two-month highs of $2,197 on Thursday. Stocks resumed their downward trend following yesterday's increase when more metal was warranted in Vlissingen. Today, inventories fell 3,175 tonnes to 4,970,550 tonnes.

Tin climbed to the highest since late November, trading at $21,250 before settling at $21,150, a $30 advance. Stocks fell 45 tonnes to 11,205 tonnes, a fresh low since April 2009.

Zinc, which rose to a one-month best of $1,984.75 on Thursday, was trading at $1,960, a $7 loss, amid active two-way investment interest. Stocks fell 1,000 tonnes.

Lead was unchanged at $2,035 after a 150-tonne inventory decline. Nickel rose to $19,808, up $108, although stocks climbed 126 tonnes to 92,460 tonnes.

Steel billet was quoted at $525/540, while inventories fell 1,690 tonnes to 70,720 tonnes, the lowest since December 19. In the minors, cobalt was indicated at $32,000/32,500.


(Editing by Mark Shaw)

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