LME MORNING - Base metals largely stuck in current ranges, aluminium star performer

By: Kathleen Retourne

London 05/06/2013 - Base metals were treading water on Wednesday morning ahead of frontline data from the US that might provide further clarity on the Federal Reserve's course of action.

In other markets, there was little significant early impetus, with the euro trading at a little-changed 1.3070 against the dollar.

Earlier PMI data for May this morning was mixed - the Spanish reading of 47.3 beat the expected 45.3 but Italy disappointed at 46.5. The reading for the eurozone as a whole at 47.2 undershot the expected at 47.5. Retail sales for the eurozone at -0.5 percent were down on the expected -0.2 percent but revised GDP came in on forecast at -0.2 percent.  

"[But] the main focus for the data-watchers this week is the US non-farm payrolls report, which is released on Friday," LME RDM Sucden said. It is expected to show that some 163,000 jobs were added in May.

There is some uncertainty about the Fed’s quantitative easing (QE) programme and whether and when it will be reduced.

The US central bank has said that it will maintain its monetary stimulus campaign of regular bond purchases until economic indicators show continued strengthening.

US indicators to be made available later today include the May ADP non-farm employment change, revised first-quarter non-farm productivity and unit labour costs, the May ISM non-manufacturing PMI, April factory orders, weekly crude oil inventories and the latest Federal Reserve FOMC Beige Book.

In option-related business, the copper key strike is $7,450 and open interest is small there and at adjacent strikes so all looks rather routine. But for aluminium, the June date is ranging between $1,925 and $1,950 strikes and there is sizeable open interest - at $1,925 there are 1,096 calls and 827 puts, while at $1,950 there are 2,124 calls and 1,327 puts.

Nickel is vulnerable on a dip under $15,000 - there are 560 puts open that could be triggered.


Copper at $7,454 per tonne was down $1 on the previous day’s close, having earlier peaked at $7,480. Inventory moves were mildly supportive - stocks declined 1,775 tonnes to 612,300 tonnes and cancelled warrants increased 954 tonnes to 226,050 tonnes.

Aluminium came close to three-month highs on technical buying, reaching $1,979.25 - it was last at $1,975, still up $29. Business has been swift, with around 9,900 lots changing hands on Select by 10:45 GMT.

In stocks, Vlissingen saw a 13,425 jump to 1,877,675 tonnes but falls in several other locations equated to an overall net rise of 8,150 tonnes to 5,204,550 tonnes. Cancelled warrants at 2,086,275 tonnes were down 8,075 tonnes.

Lead at $2,249 was $9 higher after inventories fell for the 15th consecutive day, down 3,150 tonnes to 210,400 tonnes. But cancelled warrants dropped 3,200 tonnes to 157,950 tonnes.

Zinc was up just $0.50 at $1,962.50. The metal continues to enjoy two-way business, with around 6,100 lots changing hands on Select so far. Both stocks and cancelled warrants were down a net 5,275 tonnes at 1,077,050 tonnes and 731,425 tonnes respectively.

Recent nickel business at $15,396 was $106 higher, taking support form news that China’s State Reserve Bureau has purchased around 30,000 tonnes of the metal. Also supportive were stock movements - inventories declined 534 tonnes to 179,898 tonnes and cancelled warrants at 24,336 tonnes were 954 tonnes higher.

“In the short run, the nickel price could thus be well-supported, though we do not expect to see any sharp increase in price in the medium term due to the commissioning of numerous mining projects,” Commerzbank said.

Tin was unchanged at $21,025 - stocks were static but cancelled warrants climbed 580 tonnes to 3,195 to tonnes. Steel was last at $155/180, with stocks and cancelled warrants both 130 tonnes lower at 76,505 tonnes and 57,460 tonnes respectively.

In the minor metals, cobalt stocks and cancelled warrants both fell one tonne. Both it and molybdenum were neglected.

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