LME MORNING - Base metals consolidate slightly lower, relief rally peters out ahead of Asian holiday

By: Kathleen Retourne

London 26/04/2013 - Base metals were down across the board in Friday’s premarket, slipping into consolidation mode after the relief rally petered out.

“The run-up from the lows has been quite swift so it’s not a surprise to see some drift to consolidate,” a trader said. “Tonight’s close is very important in terms of where we go now. A move below $7,000 again will prove damaging psychologically.”

Adding to market pressure is next week's Labor Day holiday in China, which should drain liquidity from the market and after many participants have squared their books and locked in profits from the recent price recovery. Markets in Shanghai will be closed from April 29 to May 1; trading on the SHFE will resume on May 2.

Short-covering lifted the market yesterday, pushing aluminium and zinc above their 30-day moving averages, while copper moved through its 10-day moving average.

Traders attributed the rebound to the oversold conditions and did not expect the rally to last.

“Given weak economic data as of late it seems questionable whether  [the cross-commodity rally] will extend for long,” Credit Suisse said in a note.

“After yesterday’s strong rallies, it is not surprising that there is some consolidation and pullback in prices. How long and how deep the consolidation/pullbacks are should say a lot about how much sentiment has changed,” FastMarkets analyst William Adams said.

Investors are also taking a more risk-averse stance ahead of the first-quarter US GDP growth number, which is due for release later today and is seen at 3.1 percent. The rebound in commodity prices come under further pressure if the data come in below expectations and further darken the outlook on the fragile US economic recovery.

“The recent decline in copper and aluminium prices should have encouraged some buying activity in the market, particularly from China but sentiment still remains relatively cautious ahead of the key official [Chinese] PMI reading next Wednesday and preliminary trade data the following week,” ANZ Research also said.

Earlier, German import prices for March came in at -0.1 percent against the expected 0.0 percent, while eurozone M3 money supply for the same month also undershot at 2.6 percent but private loans at -0.8 percent was as expected and better than the previous month's 0.9 percent.


CONSOLIDATION MODE

Copper was down $67 on the previous day’s close at $7,113 per tonne. Inventories rose 1,125 tonnes to 619,600 tonnes and cancelled warrants fell 2,250 tonnes at 165,950 tonnes.

Aluminium fell $9 to $1,933. Stocks edged 375 tonnes lower to 5,158,625 tonnes while cancelled warrants fell 6,825 tonnes to 2,046,250 tonnes.

Nickel had been holding in positive territory but it could not withstand the downward drift and at $15,389 last was down $51. Stocks and cancelled warrants both fell 198 tonnes to 175,566 tonnes and 26,100 tonnes respectively.

Lead dropped $12.50 to $2,064 although stocks fell 675 tonnes to 257,775 tonnes, while cancelled warrants declined 375 tonnes to 150,525 tonnes. Zinc fell $14 to $1,922 after both stocks and cancelled warrants fell 6,075 tonnes to 1,080,475 tonnes and 635,125 tonnes respectively.

Tin at $20,900 was down $210 even though stocks fell 35 tonnes to 14,085 tonnes. Steel was last indicated at $150/210, with stocks stagnant at 77,480 tonnes and cancelled warrants rising 455 tonnes to 53,040 tonnes.

In the minor metals, cobalt was indicated at $27,000/28,000 and molybdenum at $24,500/26,500.


(Additional reporting by Gregory Holt, editing by Mark Shaw)

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