LME MORNING - Base metals bolstered by positive Chinese data, stronger euro

By: Kathleen Retourne

London 17/01/2012 - Base metals rose in premarket trading on Tuesday morning on positive data out of China overnight and a stronger euro.

China's GDP growth data, which came in at 8.9 percent in the fourth quarter of 2011, was down from 9.1 percent in the previous quarter but above market expectations of 8.7 percent.

“Bit surprised by the move overnight - Chinese figures turned out quite well,” an LME floor trader said. "On the surface you read the headline – ‘worst for two years’ but they were not as bad as expected."

Retail sales also beat expectations with an 18.1-percent increase in December compared with a forecast 17.2 percent, while industrial production grew at 12.8 percent last month, against expectations of a 12.3-percent growth.

“Also the euro has got quite strong. I find that quite extraordinary, especially after the emergency fund got downgraded and there’s nothing good coming out of Europe at the moment and yet it got strengthened," he added.

The single currency is currently at 1.2784 against the dollar, pulling further away from last week's 17-month low of 1.2624, despite Standard & Poor's downgrading the eurozone's EFSF bailout fund by one notch to AA+.

“We have been up here before and the market has dropped back so let’s not get too carried away” the trader said. “But there are some more bullish reports out there for 2012 too and they are getting friendlier towards base metals again."

Ina report released yesterday, for example, Goldman Sachs said it expects all base metals apart from nickel to end 2012 higher than current levels, although it lowered its forecasts from previous levels.

“[I'm] still a bit cynical as the market limps from crisis to crisis and there is nothing better coming out, although there has been some better figures coming out of the US, which is encouraging - enough to draw a few believers back to the fold.”


Copper also jumped on continued stock declines - at $8,250 per tonne, it was recently up $161 on Monday’s close. LME inventories lost a further net 1,900 tonnes to stand at 353,425 tonnes, the lowest since December 14, 2010. Cancelled warrants at 66,075 tonnes were down 1,575 tonnes, with New Orleans responsible for 47,050 tonnes.

 The decline in stocks could see further tightening in the market as demand increases. Hopes that demand will grow this year were raised after Chinese imports hit a record in December.

Aluminium at $2,217.50 was up $56.50 despite stock moves. Inventories jumped past 5 million tonnes, rising a net 39,075 tonnes to a fresh all-time high of 5,006,525 tonnes. Of this total, bonded warehouses in Detroit and Vlissingen account for 1,369,250 tonnes and 941,975 tonnes respectively.

Cancelled warrants at 764,450 tonnes were up 24,825 tonnes, with Detroit and Vlissingen again responsible for the increase.

“Aluminium technicals are above the 100-day moving average. On a technical [perspective it] is doing alright but that has to be sustained overnight and it’s a long time to go until now and the end of the day,” the trader said. "It could change and probably will."

Zinc stocks also saw a substantial jump, increasing 17,975 tonnes to 834,700 tonnes, the highest since September 2. Cancelled warrants were down 725 tonnes to 7,275 tonnes. Prices at $2,011 were up $50.

Lead inventories were down to 351,075 tonnes, a drop of 1,125 tonnes, while cancelled warrants fell 700 tonnes to 30,075 tonnes. Business at $2,077 was up $47.

Nickel was up $155 at $19,580 after stocks dropped 198 tonnes to 92,034 tonnes, while tin at $21,700 was up $850. Stocks remain the lowest since April 1, 2009 at 10,935 tonnes.

Steel at $534/40 was down $1, while in the minor metals cobalt was quoted at $32,000/32,950 and molybdenum was offered at $31,100.

(Editing by Mark Shaw)