LME MORNING - Copper's downward slide unsettles investors, metals listless in China's absence

By: Kathleen Retourne

London 04/04/2013 - Base metals were mostly lower during Thursday morning trading, although all remained close to the previous day’s closing levels in thin conditions.

Zinc and tin edged slightly higher but copper was down 0.3 percent, with around 6,000 lots traded on Select by 10:45 BST. Aluminium and nickel were down to similar extents.

“[There is] very little interest in the market,” a trader said. “The opposite can be said for the stock market, but trend is a friend, and people are buying, but I can’t see it being sustainable. In metals, funds have been short for a while, and we have seen some bottom picking, but these have been stopped out.”

While the FTSE was last down 0.1 percent, Germany's Dax was up 0.4 percent and France's CAC-40 was up 0.8 percent.

“As equity markets climb noticeably, more and more market players are evidently losing patience and are reshuffling their investments from commodities into equities,” Commerzbank said. "For as long as this trend continues, metal prices are unlikely to make any significant recovery."

“That said, we find it difficult to understand the current price performance of metals given that the market environment is characterized by economic recovery. We therefore view the price slide as exaggerated and anticipate higher metal prices again in the course of the year,” it added.

In data from the EU released earlier this morning, the final services PMI for the region for March at 46.4, was slightly below the expected 46.5 although Spanish and Italian numbers at 45.3 and 45.5 respectively both beat expectations. The PPI for February was on target at 0.2 percent.

Investors were also looking ahead to the latest monetary policy statement from the European Central Bank later today. The ECB is expected to leave interest rates unchanged but markets will be on the lookout for any sign that the bank is preparing to cut rates later this year to help the eurozone out of recession.

In Europe, there are French and Spanish bond auctions, the BoE interest rate statement and announcements on QE, followed by the ECB rate announcement and press conference. US data includes Challenger job cuts, initial jobless claims and speeches from Federal Reserve chairman Ben Bernanke and FOMC members Evans, George and Yellen.

The SHFE will be closed today and tomorrow for the Qing Ming or tomb sweeping festival and will reopen on Monday. The public holiday in China, Taiwan, Hong Kong and Macau has also weighed on LME trading volumes despite the extended sell-off this week.


COPPER TECHNICALS EYED  

Copper at $7,362.75 per tonne was $23.75 lower despite cancelled warrants hitting a fresh all-time high of 143,975 tonnes, predominantly due to increases in Asian warehouses - the Gwangyang total rose 10,275 tonnes to 24,425 tonnes, Singapore 8,825 tonnes to 9,600 tonnes and Incheon in South Korea to 2,775 tonnes from zero.

"Many markets threaten to fall below key technical supports, such as $7,300 for copper," broker Credit Suisse said. "A break below these levels could trigger further follow-through selling."

“If markets continue like this, we could see lower levels we were not expecting,” the trader added. “We were up around $8,300 in February and could potentially fall the same distance to around $6,600 - at which point people could start to suffer.”

A lack of demand has weighed heavily on the red metal, with expectations of a pick-up in China after the New Year break failing to materialise and stocks rising for 34 consecutive days - they climbed a net 6,850 tonnes to 579,175 tonnes today, the highest since September 30, 2003.

Antwerp was responsible for the bulk of the rise, up 4,800 tonnes to 121,650 tonnes. Johor stocks climbed 1,950 tonnes to 127,250 tonnes and New Orleans to 1,050 tonnes at 168,700 tonnes.

Aluminium slipped $7.50 at $1,864 even though stocks fell 5,275 tonnes to 5,206,800 tonnes but cancelled warrants at 1,913,425 tonnes were down 8,425 tonnes.

Nickel at $16,063 was down $42 - it had earlier fallen to $15,980, its softest since November 16. Inventories were 96 tonnes lower at 165,942 tonnes and cancelled warrants at 23,346 tonnes were up 342 tonnes.

Zinc, the only metal to close positively yesterday, was last at $1,860, up $2 - stocks fell 5,300 tonnes to 1,156,725 tonnes but cancelled warrants at 693,850 tonnes were down 4,450 tonnes.

Lead slipped $6 to $2,044. Stocks and cancelled warrants were little changed at 260,900 tonnes and 136,425 tonnes respectively. Tin ticked $25 higher to $22,725 after stocks fell 15 tonnes to 14,485 tonnes and cancelled warrants dipped 45 tonnes to 3,405 tonnes.

Steel was indicated at $205/250, with stocks falling a further 520 tonnes to 82,030 tonnes after yesterday's drop and cancelled warrants rose 650 tonnes to 45,175 tonnes.

In the minor metals, cobalt was indicated at $25,000/25,750, while stocks increased six tonnes to 448 tonnes. Molybdenum was offered at $26,500 but not bid.


(Editing by Mark Shaw)

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