LME MORNING - Base metals cautiously higher, eurozone and China in focus

By: Kathleen Retourne

London 27/09/2012 - Base metals held onto marginal gains in LME premarket trading on Thursday, recovering from yesterday's heavy losses and shrugging off predominantly soft eurozone data.

But prices will remain under pressure on concerns about eurozone finances and deteriorating growth in China, although Commerzbank sees the "current process of adjustment as temporary rather than as the start of a trend reversal", it said.

"The correction of metal prices continues, though within reasonable limits: the London Metal Exchange Index has fallen a good three percent from the five-and-a-half-month high it achieved in mid-September," Commerzbank said. "Prior to this drop, it had surged by 16 percent within just four weeks."

Eurozone M3 money disappointed at 2.9 percent, below the expected 3.3 percent, while private loans year-on-year at -0.6 percent was below the forecast 0.1 percent. But eurozone retail PMI at 47.1 against a previous 44.4 and German import prices at 1.3 percent against an expected 0.9 percent both surprised on the upside.

US final second-quarter GDP and weekly US unemployment claims are due later today.

The eurozone debt crisis is showing no sign of improvement. Yesterday, yields on Spanish 10-year bonds rose back above the psychologically important six percent while violent protests in Spain and Greece added to woes. Spain will announce its 2013 budget draft later today.

Concerns that Chinese demand is weakening is also capping prices. While some stockpiling of 300,000 tonnes of copper was announced in the province of Yunnan, overall demand has been softer.

The Chinese market is quiet - the arbitrage window has closed and higher prices have kept Asian buyers at bay.

The People's Bank of China announced a 290-billion-yuan injection into financial system intended to address an expected liquidity squeeze ahead of the week's holiday. Traders there are also closing out positions in anticipation of the break.

"China has been revising down its macro forecast for next year and a lot of the fundamentals data for base metals also point to softness, physical premiums are down and apparent consumption of copper has fallen in August," Kedia Commodity said.


Copper at $8,168 per tonne was up $48 on the previous day's close. Stocks movements were subdued - stocks and cancelled warrants were both down 450 tonnes at 220,075 tonnes and 39,875 tonnes respectively.

Aluminium at $2,095 was up $23. Inventories fell 7,550 tonnes, although Baltimore stocks were up 1,075 tonnes and Rotterdam a further 2,850 tonnes.

Lead at $2,273.75 rose $9.75 after stocks fell for the 15th consecutive day, losing 3,525 tonnes to 270,650 tonnes, with drawdowns in Singapore and Port Klang, Malaysia. Total inventories are now the lowest since January 24, 2011. Cancelled warrants were also down 3,525 tonnes.

Zinc rose $16.50 to $2,087.50 after an 8,825-tonne increase in inventories to 983,300 tonnes. New Orleans was responsible for the rise, up 8,775 tonnes to 696,025 tonnes, of which 317,600 tonnes are cancelled warrants. Total cancelled warrants were down 1,500 tonnes at 360,675 tonnes

Tin at $20,980 was $180 higher. The tightness in nearby spreads has eased - 'TOM/Next' (tomorrow/next day) was last at a backwardation of $0.50 after closing yesterday at $10.00/60.00 back. Stocks were unchanged at 12,155 tonnes and cancelled warrants were stagnant at 6,865 tonnes.

Nickel was $185 or more than one percent stronger at $18,240 after inventories fell 186 tonnes to 122,256 tonnes and cancelled warrants edged 174 tonnes lower to 16,752 tonnes. Steel was softer at $330/368, with inventories and cancelled warrants unchanged.

In the minor metals, cobalt was indicated at $27,300/29,750 and molybdenum was offered at $25,000.

(Editing by Mark Shaw)