LME MORNING - Base metals mixed; zinc and lead hit fresh highs, aluminium and tin flounder

By: Kathleen Retourne

London 19/09/2012 - Base metals were mixed on the LME on Wednesday morning - while zinc and lead hit fresh multi-month highs, aluminium and tin dropped into negative territory.

Sentiment was boosted this morning by news that the Bank of Japan has joined other global central banks in promising more stimulus to bolster its economy. It added a further 10 trillion yen ($127 billion) to its asset buying and loan programme for the purchases of government bonds and treasury discount bills.

The announcement of a third round of quantitative easing (QE3) from the US late last week triggered a rally on the LME on Friday before profit-taking kicked in at the start of this week in what is seen as an overbought market. Today's news from Japan has given the metals a further boost, though.

"Metal prices are making significant gains across the board this morning. They are thus resuming their upswing of the past two weeks after bouts of profit-taking," Commerzbank said.

Mounting tensions with China as well as a slowing global economy have caused concern over the prospects for the Japanese economy in the short term.

"After China, Japan is the second-largest Asian importer of metals and is dependent on imports, having no mining industry itself," Commerzbank added. "The economic stimulus measures could therefore have a positive impact on demand for metals."

Also positive for the metals was the release of the National Housing Association of Home Builders index, which came in at 40, its strongest number since February 2007, signalling that the US economy may be in the early stages of a recovery.

In Europe, the euro is close to intraday lows around 1.30 against the dollar while Spain's reluctance to ask for a bailout weighs. The single currency was last at 1.3027, having been as high as 1.3085 at one stage.

Data released later today includes new housing starts in the US, as well as building permits and existing home sales.


ZINC CANCELLED WARRANTS SOAR

Aluminium is currently in negative territory at $2,152.50 per tonne, down $7.50 on the previous day's close. The Cash/October spread is now at $15.00/18.50 backwardation but lower than the previous day's $28 back.

Today is September's 'Third Wednesday', where tightness in the market resulted in the sensitive 'TOM/Next' (tomorrow/next day) spread trading out as far as $40 backwardation yesterday. TOM/Next is currently at just $0.50 back, in from $9.00 back earlier; tightness is expected to continue into the October spread.

In stocks, inventories were slightly lower at 5,078,175 tonnes, down 575 tonnes. But both the Detroit and Rotterdam totals rose, up 3,800 tonnes and 3,000 tonnes respectively. Cancelled warrants - metal booked for removal - were up 67,875 tonnes to 1,604,475 tonnes, with the New Orleans total rising to 95,200 tonnes.

Zinc at $2,142 was up $34 but down from its session and six-month high of $2,153, which it hit shortly after today's stock data was released. Cancelled warrants saw another notable jump, increasing 46,875 tonnes to a fresh all-time high of 264,675 tonnes.

New Orleans holds the vast majority of metal booked for removal at 226,250 tonnes. Total stocks were up 425 tonnes to 920,325 tonnes, with a 2,025-tonne increase in Johor.

Copper peaked at a four-month high of $8,422 earlier in the session and was last at $8,358, still up $39. Inventories were down 1,350 tonnes to 212,575 tonnes and cancelled warrants lost 2,220 tonnes to 41,025 tonnes.

Nickel dropped back below $18,000 after hitting a high of $18,170 and was recently at $17,985, still up $162. Stocks at 120,936 tonnes were up 954 tonnes.

Lead also enjoyed a boost, reaching $2,306.75 at one point - its highest since the end of January - before stepping back to $2,300, still up $26. Inventories and cancelled warrants were both down 2,600 tonnes at 285,950 tonnes and 101,750 tonnes respectively.  

Tin at $21,400 was also in negative territory, down $195. Inventories were stagnant at 11,955 tonnes but cancelled warrants fell 595 tonnes to 6,710 tonnes.

Steel traded at $355, with no change in stocks. In the minor metals, cobalt traded at $29,000 and was offered at that level, while stocks increased eight tonnes to 388 tonnes. Molybdenum was offered at $26,000.


(Additional reporting by Eddie van der Walt, editing by Mark Shaw)

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