LME MORNING - Base metals consolidate, copper finds a little support from bargain hunters

By: Kathleen Retourne

London 22/04/2013 - Base metals were mixed in Monday's LME premarket - copper headed deeper into negative territory, nickel eked out some small gains and the rest were holding around Friday’s closing levels - but the bias remains to the downside.

Copper was battered in heavy selling, dropping to within $15 of last week's 18-month low of $6,800 per tonne, while nickel had set a low since July 2009 before rebounding.

Weekend meetings and developments from the IMF and G-20 underlines the global economic malaise, although the weak metals prices attracted some and bargain hunters provided some support.  

"Trading conditions are likely to remain choppy in the near term, but we would think any further price weakness in base metals will be treated as a buying opportunity, as those who are now playing from the short side are running out of capacity to sell," RBC Capital Markets said in a note.

“Money managers did not build up their net short positions in copper again in the week to 16 April, but actually reduced them further,” Commerzbank added. “That said, because the copper price has fallen sharply since the reporting date, financial investors were caught on the wrong foot and may well have squared their long positions again or indeed built up new short positions in the meantime.”

Commodities have been under pressure since Monday last week when poor US and Chinese data weighed on sentiment, Coupled with a mass sell-off in gold, this unsettled investors, who shunned metals in favour of equities.

Gold was last at $1,424.25/1,425.05 per ounce, up $18.50 on Friday’s close and more than $100 higher than last week's two-year low of $ 1,355.50.

In currencies, the euro was last at 1.3042 against the dollar, down around a tenth of a cent and consolidating from its session high of 1.3084.

The economic calendar is fairly quiet today, with European consumer confidence figures this morning and US home sales this afternoon taking precedence.

The pace picks up from tomorrow, however, when Chinese and European PMI numbers are expected, and on Friday, when the US releases its advance first-quarter GDP number.

There is unlikely to be much respite for the metals in the short term and further turbulent trading sessions are likely while the economic newsflow remains challenging. But it will not be one-way movements, given the technical picture, traders said.  


SENTIMENT SHAKY

Copper is bearing the brunt of growing economic pessimism in strong volumes, with around 15,500 lots changing hands on Select by 11:00 GMT.

 At $6,912 per tonne, the red metal was down $78 on Friday’s close. Inventories fell a net 1,275 tonnes to 613,075 tonnes and cancelled warrants at 157,725 tonnes were down 4,350 tonnes.

Aluminium fared better than copper but was still in negative territory - at $1,879, it was down $8. Stocks fell 9,225 tonnes to 5,176,850 tonnes - no locations posted an increase. Cancelled warrants at 1,987,525 tonnes were 9,075 tonnes lower.

Nickel declined to its weakest since July 2009 on Friday but it has since edged higher, gaining a modest $33 to $15,198 and shrugging off a second consecutive day of stock increases. Total stocks were at a fresh all-time high of 173,972 tonnes after a 984-tonne rise in Johor, a 426-tonne climb in Antwerp and a 396-tonne increase in Dubai.

Lead at $2,017 was down $3.50, with no changes in stocks, although cancelled warrants were 350 tonnes higher at 152,275 tonnes. Zinc slipped $6 to $1,880, shrugging off a 5,875-tonne stock increase to 1,104,775 tonnes and a 4,300-tonne rise in cancelled warrants to 864,825 tonnes.  

Tin at $20,675 was down $125 - stocks and cancelled warrants both fell 60 tonnes to 14,845 tonnes and 2,700 tonnes respectively.

Steel was indicated at $170/230 after stocks declined 65 tonnes to 77,480 tonnes and cancelled warrants at 47,710 tonnes were up 325 tonnes.

In the minor metals, cobalt was indicated at $26,500/27,500 following a five-tonne drop in inventories to 431 tonnes and a 14-tonne fall in cancelled warrants at 139 tonnes. Molybdenum was offered at $26,500; stocks were neglected.    


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

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