London 28/03/2013 - Base metals were off earlier lows, but still struggled in negative territory during Thursday morning trading sessions.
However, the complex has been hit by a multitude of negativity the past week, including a soft euro, concerns over Cyprus and poor data, and is still managing to hold up fairly well, considering the wider environment,
Metals had shown a slight recovery during yesterday’s afternoon sessions, which traders attributed to bargain hunting and a physical hedger pushing prices higher. However, this morning has seen metals once again on the back foot.
Prices may pick up in afternoon sessions, as short covering is likely as we head towards the long weekend, but many market participants are expected to wait on the sidelines.
“Market players are clearly biding their time this morning and waiting to hear the latest news from Cyprus. Trading is thus likely to be dominated by political events during the course of the day,” said Commerzbank.
Markets have been driven by news out of Cyprus all week. Today will mark the first day of banks opening their doors, since they closed on March 16.
The country called for calm amid concerns there will a bank run after high deposit accounts were raided and the country's second largest bank was ordered to close to secure a 10-billion-euro rescue package from the EU, the IMF and the ECB.
In data, German retail sales beat the expected -0.5 percent to come in at 0.4 percent, but German unemployment change was disappointing when it vastly overshot expectations, at 13,000 against the expected -2,000 and a previous -3,000.
Adding to eurozone woes, M3 money supply in February fell to 3.1 percent year on year and private loans fell a further -0.9 percent in February - they were expected to fall -0.7 percent.
Retail PMI has fallen to 43.7 showing continued contraction at a faster rate within the EU manufacturing sector.
“This indicates slowing recovery within the core eurozone countries as this indicator is based upon Germany, France and Italy,” said FastMarket analyst Tom Moore. “This, coupled with the maintained contraction in EU manufacturing, signals that the improvements we saw at the start of the year was due to restocking rather than genuine recovery.”
Releases scheduled for Thursday afternoon include March US Challenger Job Cuts and weekly US unemployment claims. The key event will be the publication of Chinese PMIs over the weekend.
“The approach of the second quarter is instilling little confidence and the deteriorating outlook for Europe seems to be weighing on sentiment,” said FastMarket analyst William Adams.
“It will be interesting to see whether the next set of manufacturing PMI numbers from China and the US, if strong, are enough to give sentiment a boost. But for now, it looks as though the markets are content to continue consolidating at lower levels,” he said.
Copper at $7,602 per tonne was down $6 on the previous day’s close, while stocks continued their upward trajectory, increasing 1,875 tonnes to 569,775 tonnes - the 31st consecutive day of rises and the highest level since October 6, 2003.
Cancelled warrants - the tonnage earmarked for removal - were also up, increasing 26,825 tonnes to 76,975 tonnes, the strongest level since May 02, 2012. Several locations posted increases this morning, including Busan (+8,975 tonnes), Gwangyang (+3,025 tonnes), Johor (+5,375 tonnes) and New Orleans (+10,000 tonnes).
“A simple case of more stocks leading to more cancelled warrants,” said a copper trader, adding it could possibly due to warehouse games and queue building.
In other copper news, strikes at Chilean ports have escalated. Yesterday, the port of San Antonio, one of Chile's largest, has joined other terminals in an indefinite strike action over pay this week, local sources said.
The strike, which started in the port of Angamos on March 16 and spread to at least three other terminals this week, has lasted longer than many expected. An attempt to solve the conflict by Chile's Labour sub-secretary ended without success on Tuesday, a local source said.
Aluminium at $1,912 was down $5, while stocks were up 6,750 tonnes to 5,237,400 tonnes as Vlissingen boosted material by 14,775 tonnes to 1,694,050 tonnes. Cancelled warrants were up 3,100 tonnes to 1,954,625 tonnes.
Zinc at $1,895.25 a $12.75 loss, the metal was hit hard yesterday when it dropped under key support levels, triggering stops and resulting in a flurry of activity, volume of more than 12,800 lots on Select by the close outpacing all other metals. Volume today has been more subdued with 3,930 lots changing hands by 10:45 GMT.
Inventories were down for the seventh consecutive day, falling 7,175 tonnes to 1,175,525 tonnes, with drawdowns in Antwerp and New Orleans. Cancelled warrants were lower at 711,800 tonnes, a 625 tonnes loss.
Lead fell to four-month lows yesterday of $2,095, last at $2,111, it was still down $7. Stocks fell 1,750 tonnes to 262,725 tonnes and cancelled warrants at 137,950 tonnes, down 1,900 tonnes.
Nickel fell $70 to $16,780 after a 768 tonne rise in stocks to 165,420 tonnes. Tin at $22,960 dropped $40, as stocks rose 190 tonnes to 14,025 tonnes and cancelled warrants at 3,130 tonnes increased 510 tonnes.
Steel is struggling, last at $175/250 and inventories were unchanged for the 54 consecutive days. In minors, cobalt was offered but not bid at $25,750, it saw a 100 tonne jump in cancelled warrants to 237 tonnes due to metal booked for removal in Rotterdam. Molybdenum was offered at $26,500, with no changes in stocks.
(Editing by X)