LME MORNING - Base metals steadier, volatility lessens in wider markets

By: Kathleen Retourne

London 22/12/2011 - Base metals were hovering around yesterday’s closing levels on Thursday morning on the LME on short-covering and book-squaring. But only copper managed to show an increase, with the rest of the complex drifting lower.

In wider markets, the euro rose to 1.31 against the US dollar, while European equities rebounded after Wednesday’s slip.

“Base metals have managed to hold onto gains, with copper even enjoying some upside,” Standard Bank’s Marc Ground said. “The optimism surrounding copper is largely due to a significant drop in LME inventories over the last week as well as hopes for a strengthening US economy, buoyed by recent data flow

“To this end, this afternoon’s US consumer confidence and GDP data should be important in providing further price direction,” he added.

Volumes are considerably lower, with the market winding down as the end of 2011 approaches.

“Lower liquidity may mean that we will see erratic price swings in the last few days of the year,” Commerzbank said.

Datawise, the UK final GDP, the current account and business investment are due for release today, while in the US initial jobless claims, final GDP, University of Michigan consumer sentiment and inflation expectations are scheduled in busy pre-holiday session.

Stronger-than-expected trade data in China - refined copper imports climbed to their highest since mid-2009 - provided some support for base metals prices.


Copper outperformed the rest of the complex, edging higher while the rest have slipped - the red metal traded recently at $7,486.25 per tonne, up $36.25.

Copper stocks rose for the second consecutive day, although at a net 650 tonnes it was not a substantial rise and inventories at 371,950 tonnes remain near one-year lows.

Aluminium at $1,991 was down $3 on Wednesday’s close. Yesterday saw Feb/March spreads finish at $11.50 contango after a large long position was unwound.

“The spread finished at $11.50 [contango] - it was valued at $7.00 yesterday - but traded as wide as $12.75 as what was believed to be a 25,000-lot position was unwound,” Standard Bank said.

Stocks fell 700 tonnes to 4,953,025 tonnes. Cancelled warrants how saw a large jump, increasing 361,300 tonnes to 642,075 tonnes, after 355,000 tonnes were cancelled in Vlissingen, equal to a 66-day queue

Vlissingen, where one warehouse operator - Glencore-owned Pacorini - owns all the 23 listed sheds, has been compared with Detroit, where Goldman Sachs-owned Metro owns almost all the approved warehouses and where a six-month queue to take delivery of metal is currently reported.

Zinc saw another large increase in available stocks, which rose 16,550 tonnes to 826,825 tonnes, while cancelled warrants are now at 18,225 tonnes. Prices slipped to $1,870, a loss of $11.

Nickel lost $130 at $18,845 after inventories rose 1,668 tonnes to 89,568 tonnes and lead lost $9 to $1,976 despite stocks dropping 675 tonnes to 357,775 tonnes.

Tin drifted - it was last at $19,100, down $100. In inventories, there was a small drawdown of 10 tonnes, taking total stocks to 11,960 tonnes.

(Additional reporting by Clara Denina, editing by Mark Shaw)