LME MORNING - Base metals build on rebound, buying interest and fiscal cliff hopes lift mood

By: Kathleen Retourne

London 30/11/2012 - Base metals rose on strong buying interest in Friday's premarket, continuing yesterday’s rally and looking set to end the week on a high.

A stronger euro is helping to underpin prices - the single currency was last at 1.3008 against the dollar, gaining ground on hopes the US will avoid the approaching fiscal cliff.

“Market participants are clearly confident that an agreement will be reached in the US budgetary dispute,” said Commerzbank. “Metal prices are likely to find further support from firm equity markets around the world of late - evidence of the increased risk appetite shown again by market players.”

US President Barrack Obama offered the Republican Party on Thursday a detailed plan involving $1.6 trillion in new taxes and $50 billion in spending aimed at averting the fiscal cliff.

The plan was little different from previous deficit-reduction plans, offering few concessions to Republicans, who rejected the deal. Republican speaker John Boehner warned that there had been no "substantive progress" in talks; still, the wheels are in motion.

The market is looking ahead to Saturday's November Chinese manufacturing PMI numbers, which are expected to show a rebound in industrial output. Following a reading of 50.2 in October, it is expected to come in at 50.8.

Should this prove to be the case, metal prices could continue to rise next week.

Data from the eurozone this morning was mixed - the unemployment rate in the EU was as expected at 11.7 percent but the CPI flash estimate year-on-year at 2.2 percent disappointed. Earlier, October German retail sales also disappointed at -2.8 percent, below the forecast -0.5 percent.


Aluminium at $2,090.25 per tonne was up $27.25 on the previous day’s close. Tightness in the nearby spreads is growing - Dec/Jan was last at $18.00/20.00 backwardation, with traders reporting a great deal of buying out to the December date.

Meanwhile, inventories were at a fresh all-time high, rising a net 17,700 tonnes to 5,207,225 tonnes. Vlissingen was responsible for the majority, up 24,350 tonnes to 1,415,075 tonnes. This lowered the gap with leading aluminium holder Detroit, which currently holds 1,455,025 tonnes, to around 40,000 tonnes.

Gwangyang stocks also climbed 3,000 tonnes for the second consecutive day, reaching 48,775 tonnes. Cancelled warrants fell 12,200 tonnes to 1,766,425 tonnes.

Copper at $7,949 was up $49.50. Volumes are already sizeable, with around 10,800 lots changing hands on Select so far. Stocks were little changed, down 975 tonnes at 248,150 tonnes, while cancelled warrants at 34,550 tonnes were down 175 tonnes.

Lead was up $17 at $2,239 even though inventories and cancelled warrants were little changed, both dipping 75 tonnes to 362,275 tonnes and 159,125 tonnes respectively.

 Sister metal zinc enjoyed a $28 gain to $2,055 although stocks rose 1,075 tonnes to 1,199,175 and cancelled warrants at 611,700 were down 1,650 tonnes.

Nickel was up $250 at $17,250; stocks increased 18 tonnes to 136,374 tonnes and cancelled warrants at 17,778 tonnes were up 1,380 tonnes. Tin was unchanged at $21,870 - stocks rose 45 tonnes to 12,060.

Steel at $330/350 was $5 higher, while Antwerp inventories fell 2,015 tonnes to 49,010 tonnes. Total stocks now stand at 70,785 tonnes, with cancelled warrants at 22,425 tonnes.

In the minor metals, cobalt was indicated at $22,600/27,450 while molybdenum was neglected. Both metals saw no change in stocks.

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