London 15/05/2012 - Base metals were little changed on the LME on Tuesday morning, although mixed data releases and generally downbeat sentiment weighed on prices. The euro is clinging on in positive territory at 1.2846 against the dollar, while stocks have pared gains after an initial rally.
The eurozone officially avoided a technical recession in the first quarter, with GDP flat at 0.0 percent thanks to better-than-expected data from Germany, where GDP increased just enough at 0.5 percent to keep the eurozone level.
On the other hand, eurozone ZEW economic sentiment was at -2.4 - significantly down from the expected 11.7. Germany’s ZEW economic sentiment at 10.8 also undershot the forecast of 11.7.
Data from Italy this morning confirmed that the country is in a recession. Quarterly preliminary GDP came in at -0.8 percent against a forecast of -0.6 percent. Earlier today, French GDP also came in below expectations at 0.1 percent.
“For as long as sentiment among market players remains generally negative, metals can also be expected to remain under pressure,” Commerzbank said. “That said, we should see increased buying interest and opportunistic behaviour among market players as prices fall below or come close to psychologically important thresholds.”
Eurozone finance ministers rebuffed talks in Brussels on Monday evening that Greece will exit the eurozone. But there is increasing pressure for a resolution to the Greek crisis - the country could still be ousted from the single currency bloc if it fails to meet its bailout commitments, while Spain, Italy and Portugal would also be put in jeopardy.
This afternoon will see a slew of data releases from the US, including monthly CPI, core retail sales and retail sales and the Empire State manufacturing index.
The outlook for economic growth in China, the world's top metals consumer, has turned increasingly bearish. The country's reserve requirement ratio cut over the weekend failed to inspire optimism and was seen as confirmation of recent disappointing economic indicators.
"No matter how you slice it, the global economy looks to have stalled again in the face of slowing Chinese demand and the ripples of a European debacle," RBC Capital Markets said in a research note. "Base metal prices are quickly catching up to the lows seen during 2011, and without much good news seen on the horizon it would make sense for the bears to continue to apply pressure."
Copper earlier fell to the lowest since January 12 at $7,763.50. At $7,828 per tonne recently, it was still down $7 on the previous day’s close. Stock availability remained tight after inventories declined another net 1,950 tonnes to 216,350 tonnes, the lowest since October 28, 2008, and cancelled warrants were down 600 tonnes to 44,125 tonnes.
While most locations saw a decline in stocks, Busan inventories rose 575 tonnes to 21,700 tonnes and Vlissingen rose 275 tonnes to 2,450 tonnes.
The LME, acting on a recommendation from its copper committee, said in April it had delisted the Dutch city for delivery against its copper contract, effective July 25. Any remaining copper warrants there after this date will have to be delivered out by the end of December 2013.
Backwardations in LME copper have contracted, with 'TOM/Next' (tomorrow/next day) now at $1/2 contango as liquidity improves. Cash/threes is now at a backwardation of $47 after yesterday hitting $100 back.
But little has changed in the structure, with Chinese hedgers short and having to roll, cover or deliver back from internal warehouses.
Aluminium business at $2,023.75 was down $1.25. Stocks jumped ahead of May’s prompt date, with tomorrow the month’s “Third Wednesday”. Stocks increased 34,750 tonnes to 4,984,650 tonnes, with Detroit inventories up 42,225 tonnes at 1,448,025 tonnes. Cancelled warrants at 1,557,525 tonnes slipped 5,300 tonnes.
Lead business $2,034.50 was down $1, while stocks jumped 6,825 tonnes to 359,100 tonnes after an increase of 6,475 tonnes in Detroit, taking total stocks in this location to 45,250 tonnes. Cancelled warrants were down 100 tonnes to 81,375 tonnes.
Sister metal zinc rose a marginal $2 to $1,922. Inventories at 932,150 tonnes were up 1,225 tonnes and cancelled warrants fell 2,200 tonnes to 34,275 tonnes.
Nickel is just back above $17,000 at $17,010, up $135, while stocks fell slightly to 105,774 tonnes and cancelled warrants were at 5,400 tonnes.
Tin at $20,175 was up $125, with inventories down 120 tonnes at 14,305 tonnes and cancelled warrants at 3,760 tonnes.
Steel remains soft at $460/475, while in the minor metals cobalt was quoted at $30,950 and molybdenum at $30,500. Neither was bid.
(Editing by Mark Shaw)