LME MORNING - Base metals deflate in run-up to US jobs report, copper hit by stockpile increase

By: Martin Hayes

London 08/03/2013 - Base metals gradually lost ground during Friday LME premarket trading, repeating the pattern of the past few days, where gains in Asia were not sustained and subsequently reversed, traders said.

Metals continue to lack follow-through on tentative advances, with short-term negativity offsetting wider financial market strength. Still, business was low-key and ranges narrow while financial markets marked time ahead of the US February jobs report later today. The euro, which hit three-month lows of 1.2962 on Wednesday, was last around 1.3110.

"Cautious trade will probably continue until we get some clarity on the health of the US labour market and, perhaps more crucially, the state of China’s economy, given the implications for metal consumption," James Moore of FastMarkets said.

Over the coming weekend, China is set to release data on CPI and PPI inflation, retail sales, industrial production, new loans & money supply and fixed asset investment.

Before that, the focus today will be on the US February non-farm payrolls report. Forecasts suggest that 161,000 jobs were added last month, while the jobless rate will hold at 7.9 percent.

On Thursday, weekly US fresh unemployment claims came in at a six-week low of 340,000 against a forecast 354,000, while the ADP private sector report earlier in the week also exceeded forecasts.

This bodes well for the main report that, if around or above forecasts, could trigger a snap end-week rally in the metals, some of which are running on the short side. Other data releases scheduled for Friday include January US wholesale inventory figures, and February US average hourly earnings

Earlier, prices had received a lift from news that China's trade surplus narrowed to $15.3 billion in February from $29.2 billion in the previous month.


Copper was knocked out of its stride by a big inventory increase, falling to $7,720 per tonne, a $45 loss, with a test of $7,700 seen again. Warehouse stocks rose a net 28,200 tonnes to 509,425 tonnes, the highest level since April 15, 2010, due to warrantings of 6,125 tonnes in Gwangyang and 14,950 tonnes in Singapore.

This was also the 17th successive daily increase, with traders seeing LME inventories reaching one million tonnes by the end of the year while the supply-demand balance relaxes. So far in 2013, the stockpile has risen 59 percent

In Chinese trade data, the country's copper imports fell 15.1 percent in February on the previous month to 298,102 tonnes.

Aluminium drifted to $1,966, a $13 loss. Inventories fell 8,550 tonnes to 5,188,900 tonnes, with outflows seen as usual in Vlissingen and Detroit and only moderate inflows. China's aluminium imports fell 34.1 percent to 45,478 tonnes in February on the previous month.

In others, zinc dipped to $1,984, a $6 loss. Inventories fell again from mid-week one-month highs, down 2,475 tonnes at 1,195,550 tonnes. Sister metal lead was $10 lower at $2,201 - stocks fell 1,100 tonnes to 285,050 tonnes.

Nickel business at $16,590 was $60 lower - stocks declined again from Wednesday's three-year highs, down 24 tonnes at 160,938 tonnes. Tin was the exception, trading at $23,725, up $70, while stocks were down a modest five tonnes at 13,515 tonnes.

Steel billet was unquoted, with stocks holding at 83,070 tonnes, where they have been at since January 14 and the highest since late-November. In the minors, cobalt was indicated at $25,000/25,750, while molybdenum was neglected - there were no inventory movements in either.

(Editing by Mark Shaw)