London 12/03/2013 - Base metals were sideways-to-lower on Tuesday morning while seeking fresh incentives. A strong dollar - it was last at 1.3002 against the euro - is also capping gains.
The market is looking for fresh direction and, while not matching the robust trends in the global equity markets, prices are managing to avoid significantly extending recent across-the-board declines for now, traders said.
"Prices are trading around the bottom of their recent ranges," a trader said. "A buoyant dollar is however keeping rallies in check, and so resistance is proving hard to crack. Range trading for now, until more meaningful news/data provides direction."
Technical selling, particularly for aluminium and zinc, remains a feature. Indeed, around 4,600 lots of zinc changed hands by 10:30 GMT, just slightly lower than copper’s 5,700 lots.
"A rally of sorts is certainly due in zinc (and most of the other metals for that matter), but we think the longer term technical community will be good sellers on rallies for a few more days as selling programmes are completed," said RBC Capital Markets.
Metal markets are taking a back seat while the rally in equities drives investors out of commodities, pushing the equities-to-commodities ratio to its highest in four years. But further ahead, most metals may be able to shake off current torpor and possibly reflect the 'look-ahead' strength in equities.
"After two quarters of modest recovery, we expect base metal prices to continue to trend up through 2013-14," Stephen Briggs of BNP Paribas said in a report.
Supportive factors include faster demand growth than last year, accommodative monetary policy, currency weakness and, for some, emerging supply constraints and growing market tightness.
In company news, Antofagasta reported Ebitda of $3.83 billion for the 2012 full year, up 4.6 percent from 2011's $3.67 billion, with a total dividend, including a special dividend, of 98.5 cents against 2011's 44 cents. The mining company added that production will be down in 2013 at around 700,000 tonnes on the previous year’s 709,600 tonnes.
Copper at $7,729 per tonne was down $26 on the previous day’s close. Stocks continue to build, rising for the 19th consecutive day - they were up a net 4,350 tonnes at 517,900 tonnes due to a 2,825-tonne rise in Johor and a 1,850-tonne increase in New Orleans. Cancelled warrants at 33,400 tonnes were up 9,575 tonnes after a 10,000-tonne jump in New Orleans.
Aluminium was last at $1,951, just $0.50 lower. Stocks dropped 7,550 tonnes to 5,182,425 tonnes while cancelled warrants fell 1,250 tonnes to 1,872,825 tonnes.
According to China's National Bureau of Statistics, Chinese aluminium production hit a record high of 1.78 million tonnes in January and was only marginally lower in February at 1.73 million tonnes.
"According to SMM, production capacities of 451,000 tonnes [per year] have been shut down in China recently," Commerzbank said. "The low aluminium prices mean that a further 500,000 tonnes may also be temporarily shut down. This is urgently needed if the high surpluses are to be reduced to even a rudimentary extent."
Zinc edged $1.50 higher to $1,962 despite notable stock increases of late. Inventories rose a further 1,875 tonnes, with increases in Antwerp and New Orleans, to stand at 1,209,550 tonnes. Cancelled warrants at 598,350 tonnes were down 11,750 tonnes.
Nickel at $16,836 was down $39. Although stocks fell 144 tonnes at 161,316 tonnes, they remain around record highs. Cancelled warrants at 30,012 tonnes were up 558 tonnes.
"Nickel fundamentals remain awful but prices are increasingly being supported by financing nickel in LME warehouses and elsewhere; nickel risks mimicking zinc and aluminium performance of being stuck in a narrow trading range below marginal production costs for an extended period," Macquarie said in a note.
Lead was unchanged at $2,196 despite a 1,600-tonne drop in stocks to 283,300 tonnes. Tin was last at $23,675, down $25, with stocks were up five tonnes at 13,600 tonnes and cancelled warrants 310 tonnes higher at 2,260 tonnes.
Steel was offered at $330 but not bid; inventories were stagnant at 83,080 tonnes yet again. In the minor metals, cobalt was indicated at $25,000/25,750 and molybdenum was offered at $26,500.
(Additional reporting by Martin Hayes, editing by Mark Shaw)