LME MORNING - Base metals stage groggy corrective bounce but pressure to continue

By: Martin Hayes

London 21/06/2013 - Base metals clawed their way up from intra-day and fresh sell-off lows during Friday LME pre-market trading but this was a tentative knee-jerk reaction to Thursday's steep sell-off and may prove to be temporary, traders said.

"Yesterday was a day of long liquidation, stop-loss selling and probably some shorting too but it would appear that the lower prices have now started to attract bargain hunting," William Adams of FastMarkets said.

Earlier, copper hit a fresh low since October 2011, aluminium was around a three-and-a-half year low and nickel set its softest again for four years.

Market sentiment remains damaged by the implications of the sea-change in US monetary policy and further losses are likely, moving further into the summer slow period and with sizeable metal stockpiles developing.

"Another down-leg into the summer slowdown is now under way so we should expect more selling into the rebound," Adams added.

The catalyst for the financial-wide wash-out - other commodities and equities were also battered - was Wednesday's US Federal Open Market Committee (FOMC) meeting at which it said it saw improving labour market conditions and reduced economic risks.

This suggested that the US will consider reeling in its third stimulus programme, which will, as a consequence, remove cheap financing and eventually result in a rise in interest rates.

As well on Thursday, base metals came under pressure from concerns about a possible economic slowdown in top metals consumer China after the June HSBC Flash Manufacturing PMI on Thursday showed a reading of 48.3, below the forecast of 49.4. But US and eurozone PMI data yesterday was largely supportive.


Copper, which had fallen to a one-and-a-half-year low at $6,692 in earlier trading, moved back up to $6,808 per tonne, a $38 advance from the Thursday close, with turnover heavy already at some 16,000 contracts.

Warehouse stocks rose for the sixth day in a row - up a net 21,725 tonnes at a 10-year high of 664,850 tonnes. The increase was due to another 18,700-tonne warranting in Johor. This mini-run of stock increases has seen the copper stockpile rise 53,550 tonnes or around nine percent - stocks usually increase at this time of the year.

Meanwhile, cancelled warrants - metal booked for removal and now queuing - jumped 17,450 tonnes to an all-time high of 315,425 tonnes. Of this, 162,875 tonnes are in Johor.

Aluminium hit its weakest since October 2009 at $1,789.50 and then traded at $1,796, down $1. This week's run of bumper stock increases came to an end, with a mere 25-tonne fall from what were all-time highs to 5,433,950 tonnes.

"Aluminium could come under additional selling pressure with LME aluminium stockpiles hitting record high levels of 5.43 million tonnes," ANZ said.

Nickel set its lowest price since May 2009 at $13,630 and then moved back to $13,759, a $59 advance. Stocks fell 102 tonnes to 185,412 tonnes.

In others, zinc climbed to $1,837, up $7.50, with inventories falling 3,100 tonnes to 1,071,425 tonnes, a one-month low, Lead was just $1 lower at $2,017 - stocks declined 4,100 tonnes to 199,025 tonnes.

Tin was $90 lower at $19,410, with stocks dropping 85 tonnes to 14,250 tonnes. Steel billet was neglected but stocks dropped 65 tonnes to 75,790 tonnes, another six-month low.

In the minors, cobalt was indicated at $30,100/32,000, while molybdenum was unquoted. There were no inventory movements in either.

(Additional reporting by Eddie van der Walt, editing by Mark Shaw)