LME MORNING - Base metals price flit sideways amid Cyprus uncertainty, copper inventories soar

By: Martin Hayes

London 22/03/2013 - Base metals were stuck in a sideways-trading mode during Friday's LME premarket, having inched cautiously away from their lows. While the slight improvement largely reflects a modest uptick in the euro, the mood remains uncertain, traders said.

The moves were tentative and volumes generally slack, with attention in all financial markets directed towards Cyprus and the unresolved banking bailout crisis there.

"The base metals are stuck in consolidation mode, with some metal prices holding just above recent lows, while others like copper are holding up better," William Adams of FastMarkets said.

The onset of a weekend with the yet-to-be resolved Cyprus bank bailout issue paramount, coupled with the virtual lack of economic data, will keep fresh interest and any risk appetite to a minimum throughout the session.

"We suggest with the upside gaps being filled across all metals the markets may have found their approximate ranges for the time being," LME RDM Sucden said.

The main driver for financial markets will be the banking crisis in Cyprus, whose government is still trying to put together a plan to raise 5.8 billion euros from its own resources to receive a 10-billion-euro bailout that will allow it to remain in the single-currency bloc. No deal is on the cards yet, while banks in the country will stay closed until next week.

In other markets, equities were trawling lower in Europe, while the euro was at a steadier 1.2930 against the dollar, still hovering above the four-month lows of 1.2841 set in mid-week. Equities are now looking vulnerable on the charts - there could well be a deeper pullback in stock markets, given the Cyprus situation.

"This is something we have been wary of for some time. If that materialises, we would expect it to drag industrial metal prices lower too," Adams added.

Data flows on Thursday were mixed, which has contributed to the short-term uncertainty and caution, with a positive Chinese PMI figure offset by soft eurozone readings, while the US weekly employment data was uninspiring. Today's releases are confined to the German Ifo Business Climate Index, when fell to 106.7 in March from February's 107.4.


COPPER'S RELENTLESS INVENTORY UPTREND

Copper moved away from the $7,600 pivot level to trade at $7,628 per tonne, up $43 from the Thursday close. But the inventory mountain continues to build, with stocks up for the 27th day in a row. The net-5,025-tonne increase lifted the total to a fresh 10-year high of 562,475 tonnes, with 5,600 tonnes warranted in Johor.

Aluminium moved away from the early four-month low of $1,915 to $1,927 but was still $11 lower. Inventories were up 200 tonnes at a new three-month peak of 5,230,025 tonnes, with 7,500 tonnes placed on warrant in Vlissingen.

In others, nickel at $16,880 was $150 lower, while inventories rose 474 tonnes to a new three-year high of 162,762 tonnes. Zinc was $3 lower at $1,931, with stocks down 2,000 tonnes at 1,193,825 tonnes.

Lead gained $3 at $2,173 - stocks were down for the 12th day in a row, falling 1,500 tonnes to 268,475 tonnes, a fresh low since October 2012. Tin was up $205 at $22,800 even though stocks rose 55 tonnes to 14,105 tonnes.

Steel billet was neglected, while inventories held at 83,070 tonnes for the 50th successive day. This trend may soon end, however, after there was a 1,300-tonne increase in cancelled warrants today.

In the minors, cobalt was indicated at $25,000/25,200 although stocks jumped 17 tonnes to 444 tonnes, the highest since the contract was introduced in February 2010. The recent flurry of business and inventory moves reflects broker pricing-in of physical material in the spot market.

Molybdenum was neglected but stocks were up 24 tonnes to 132 tonnes, the highest since late January.


(Editing by Mark Shaw)

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