LME MORNING - Base metals soggy, eurozone sentiment worsens

By: Kathleen Retourne

London 13/11/2012 - Base metals were on the defensive in Tuesday morning LME premarket trading, pressured by the latest impasse in the eurozone over Greek debts.

The International Monetary Fund (IMF) and European leaders have failed to come to a decision on funding for Greece before paying the next tranche of 31.5 billion euros of aid, deciding instead to meet again on November 20.

A televised disagreement between IMF chief Christine Lagarde and Jean-Claude Juncker, head of the eurogroup of finance ministers, highlights the divisions over Europe.

Lagarde was visibly angered when Juncker announced that Greece would have until 2022 to meet its debt reduction target of 120 percent of GDP - two years longer than previously stated. This is a breach of the IMF's debt sustainability target of 2020 that was agreed in March when a second bailout of Greece was signed off.

The euro fell as low as 1.2670 against the dollar, its softest since September 7, and was last at 1.2682.

Disappointing data from the eurozone also weighed - German ZEW economic sentiment for November came in at -15.7, below a forecast -9.9, while ZEW economic sentiment for the eurozone for the same month -2.6 was below the expected 0.2.

"This data continues to suggest that deterioration in the core continues while sentiment across the EU as a whole stabilises at a low or even negative base," FastMarkets analyst Jono Remington-Hobbs said.

Concerns that China may extend its tax programme on property, which would dampen demand for base metals from the crucial construction sector, also added to woes.

But there are some bright spots - reports that China’s State Reserves Bureau (SRB) has tendered to buy 160,000 tonnes of primary aluminium from local smelters had underpinned prices to some extent on Monday.

The reports also suggest the SRB will also tender for more aluminium and perhaps buy 165,000 tonnes of refined copper cathode for state reserves, ANZ noted.

“As the Chinese customs authorities reported at the weekend, aluminium imports in October already exceeded 100,000 tonnes for the third month running. In the past, China has always shown itself to be a good trader, and is likely to have acted opportunistically this time too, taking advantage of the low prices,” Commerzbank added.


Aluminium at $1,960 was down $8 on the previous day’s close but had some support from Chinese stockpiling. The Dec/Jan spread is still tight at $9.00/10.00 backwardation.

Cancelled warrants were once again higher, up a net 18,500 tonnes at 1,840,025 tonnes - a fresh all-time high. In Detroit, a further 23,725 tonnes were booked for removal, taking the total there to 824,925 tonnes. Inventories, meanwhile, fell 4,175 tonnes to 5,101,625 tonnes.

Copper at $7,595 was $43 lower, while inventories at 254,350 tonnes were 8,850 tonnes higher due to 7,725 tonnes being delivered into New Orleans. Cancelled warrants at 39,200 tonnes were down 350 tonnes.

Zinc dropped $17.75 to $1,915.25. Stocks and cancelled warrants both fell 3,000 tonnes at 1,155,350 tonnes and 559,600 tonnes respectively.

Lead at $2,137.25 was $19.75 lower. In the spreads, tightness in Nov/Dec has increased - it was last in a backwardation of $14.00/19.00 - while Dec/Jan was last at $2.00/3.50 back. Inventories and cancelled warrants both dropped 3,075 tonnes to 327,950 tonnes and 121,825 tonnes respectively.

Nickel at $15,910 was down $145 after stocks rose 3,312 tonnes to 133,104 tonnes, the highest since February 3, 2011, after Antwerp received 3,408 tonnes of material. This is the first time nickel has been stored at this location. Warehouses there have recently received a steady inflow of material - including aluminium, lead and zinc - and queues are starting to build.

Tin fell $175 to $20,200 despite a fall in stocks of 195 tonnes to 11,485 tonnes. Cancelled warrants were 245 tonnes lower due to drawdowns in Johor.

Steel was quoted at $340/345 - inventories were unchanged. In the minor metals, cobalt was offered at $29,000 but not bid and molybdenum was indicated at $23,300/24,500.  

(Additional reporting by Martin Hayes, editing by Mark Shaw)