LME MORNING - Base metals tread water ahead of US non-farm payrolls

By: Kathleen Retourne

London 02/08/2013 - Base metals were little-changed in uninspired Friday premarket trading, with participants preferring to wait on the sidelines ahead of today’s blockbuster US jobs report.

“Trade is very thin so far - participants are waiting on non-farm data later today,” a trader said. “So far trading as been fairly easy technically, but normally when things feel easy that’s when a move comes to catch people out, so I am waiting for that.”

Trading has been steady but unspectacular, with around 9,500 lots of copper changing hands on Select by 10:30 BST

“Before the market shifts its attention back to more metal-specific data again next week - in China, for example, the preliminary import figures for July will be announced - economic data are once again the central focus as the week draws to a close,” Commerzbank said.

“If the labour market report in the US, which is due to be published this afternoon, is likewise surprisingly positive, metal prices are likely to surge sharply once more,” it added.

The US non-farm employment change for July is expected at 184,000, down from 195,000 in June, while the unemployment rate is forecast to come down to 7.5 percent.

In forerunners to the main event, weekly unemployment claims today came in at 326,000, below the forecast 346,000, while yesterday’s private sector ADP change in non-farm payrolls came in at 200,000, well above the forecast 179,000.

“We are starting to see less bad figures of late, so maybe sentiment is changing for the better,” the trader said.

In the eurozone, though, data released so far today disappointed. The eurozone PPI for June at 0.0 percent was below the expected 0.1 percent and Spanish unemployment claims undershot at -64,900.

Metals rallied in early trading yesterday after China's official PMI, a survey of large firms, climbed to 50.3 in July from 50.1 in June. The 50 level separates contraction from expansion.

But gains were pared after the ECB kept interest rates at 0.5 percent and president Mario Draghi said that economic indicators suggest that the euro region is through the worst but that the council plans to keep interest rates low for the foreseeable future.


Copper was back above the psychologically important $7,000 level, with recent trade at $7,022, a $24 increase on Thursday’s close. Still, the upside from here may be limited.

“We do not think that copper can embark on a sustained rally at this point, as global mine supply continues to grow firmly, with inventories elevated,” Credit Suisse said.

Stocks fell for the 13th consecutive session, dropping a net 2,050 tonnes to 608,675 tonnes, while cancelled warrants rose 4,425 tonnes to 317,000 tonnes.

In supply-side news, a labour dispute has reportedly broken out at Chuquicamata - the second-largest copper mine in Chile with output of 400,000 tonnes per year - with some workers blocking access to the site.

“Codelco said copper concentrate and smelter was still operating, but there was no word on whether production has been halted,” ANZ said.

Aluminium was $1.25 higher at $1,813.25 after a slight increase in inventories, up 1,275 tonnes to 5,472,375 tonnes.

Zinc was $15 higher at $1,870 after stocks and cancelled warrants both declined 4,000 tonnes to 1,041,400 tonnes and 611,375 tonnes respectively. Lead increased $8 to $2,114 - inventories and cancelled warrants both ticked 100 tonnes lower.

Nickel was up $60 at $13,955. It peaked above $14,000 on Thursday but inventories, which rose a further six tonnes to a fresh all-time high of 204,336 tonnes today, are capping gains.

Tin was last at $20,949, up $29. Stocks rose 65 tonnes to 13,910 tonnes and cancelled warrants fell 350 tonnes to 4,455 tonnes

Steel was indicated at $120/210, with stocks and cancelled warrants both down 2,080 tonnes at 48,035 tonnes and 33,085 tonnes respectively. The minor metals were neglected.

(Editing by Mark Shaw)