LME MORNING - Most base metals prices higher but nickel and tin struggle

By: Kathleen Retourne

London 20/02/2013 - Base metals were mixed in Wednesday’s pre-market although most were slightly higher.

“Prices are consolidating their recent gains and are trading around the bottom of current ranges,” a trader said. "The euro has gained traction again, which should see support hold. Barring sudden negative news or data, we should see recent highs approached again."

Nickel and tin were struggling in negative territory, however - both dropped below their 30-day moving average at the start of the week and technical selling triggered stops, pulling down prices.

“Speculation that China will take new measures to cool its property market and poor US Homebuilder Confidence weighed on the market, but technical selling featured heavily in all the metals,” RBC Capital Markets said.

For the rest of the complex, a stronger euro provided some support - it was back above 1.34 against the dollar after positive German PPI and CPI data lifted sentiment.

The German PPI at 0.8 percent beat the expected 0.4 percent, while final CPI came in as expected at -0.5 percent. The French CPI at -0.5 percent undershot the expected -0.2 percent, however.

“We have been expecting pullbacks from the top of multi-month highs on the industrial metals - these gathered momentum yesterday. There is a bit of a tug-of-war on between the effervescent equities and downward-facing commodities - we would not be surprised if they both influence each other, albeit with time lags,” FastMarkets analyst William Adams said.

The market will also be looking to see if January data on US building permits and housing starts align with yesterday's February NAHB Housing Market Index, which dropped for the first time since May 2012 and sparked worries that the US housing market recovery might be faltering.


CHINESE DEMAND EYED

Copper was last at $8,075 per tonne, up $25 on the previous day’s close and holding above the psychologically important $8,000 level and its 100-day moving average.

“The market was geared up for a more positive response from China [after the end of the day Lunar New Year holiday] but they might have see what happens next week,” ANZ senior commodities strategist Nick Trevethan said. “Copper prices could grind lower without support from positive macro data, but sub-$8,000 levels would see buying from China.”

Stocks were up for the fifth consecutive day, rising a net 1,700 tonnes to 412,950 tonnes after a 2,600-tonne increase in Johor. Cancelled warrants continued to decline, dropping 375 tonnes to 27,100 tonnes.

Aluminium was up $2 at $2,113 after inventories slipped 5,500 tonnes to 5,151,950 tonnes. The only location to post an increase was Detroit at 1,925 tonnes to 1,411,050 tonnes. Cancelled warrants fell 5,825 tonnes to 1,959,175 tonnes.

Aluminium tightness remains a feature of the market. The June/July spread is in a backwardation of $18/20.00, while Sept/Oct was last at $2.00 and Dec/Jan at $6/10.

According to China's Ministry of Industry and Information Technology, profits at local aluminium smelters collapsed 93 percent in 2012 to 930 million yuan from the previous year.

“The ministry blames difficult market conditions for this development and believes the greatest challenge this year will be to eliminate outdated production capacities and tighten market entry barriers,” Commerzbank said. “Capacity and production cuts are urgently needed in China in particular - the country accounts for 45 percent of global production.”

Lead at $2,388 was $13 higher despite a 250-tonne stock rise to 288,575 tonnes while cancelled warrants were stagnant at 151,500 tonnes.

Zinc gained $7 to $2,162, with stocks up 2,200 tonnes at 1,193,250 tonnes. Antwerp and Vlissingen were responsible for the increases, up 3,700 tonnes and 1,000 tonnes respectively. Cancelled warrants at 642,150 tonnes fell 2,500 tonnes.

Nickel was last at $17,305, a loss of $85 - earlier it had dropped to just $17,233. Inventories slipped 78 tonnes to 153,306 tonnes and cancelled warrants at 20,982 tonnes were down 498 tonnes.

Tin business was $5 lower at $24,900 after stocks rose 10 tonnes to 13,325 tonnes.

“For tin, we can easily see the price testing the 100-day moving average ($22,625) should the technical selling persist, but we would think the trade would come in as buyers at that point as the fundamentals still look quite positive,” RBC Capital Markets said.

Steel was quoted at $300/330 and in the minor metals cobalt was indicated at 25,000/26,500 while molybdenum was neglected.


(Editing by Mark Shaw)

RELATED TOPICS