LME MORNING - Base metals track euro moves, downside risks from eurozone crisis remain

By: Kathleen Retourne

London 26/07/2012 - Base metals continued to track the euro during Thursday morning LME trading, with uncertainty continuing to dominated investor sentiment.

The single currency was last at 1.2130 against the dollar, recovering from Tuesday's two-year low of 1.2040 but still soft.

“Base metals continue to track currency moves as the eurozone crisis continues to unfold. Prices are prone to probe higher as any glimmers of light are met with short-covering, but it has to be said that risk remains to the downside as negative bias weighs heavy overall,” a trader said.

Optimism picked up after a European Central Bank official reportedly said the European bailout fund could be given a banking licence, which would help boost loans to countries such as Spain and Italy and stop the debt crises from spreading.  

Still, Spain remains in focus amid worries the country could be the fourth eurozone member state to seek a sovereign bailout after two of its regions - Murcia and Valencia - requested financial aid from the central government. Others are also believed to be heavily in debt.

This comes as a Greek exit from the eurozone looks increasingly possible - the country needs to commit to more budget cuts to secure additional bailout funds from international lenders.

Data from the eurozone today was mixed. M3 money supply at 3.2 percent year-on-year was better than the expected 2.9 percent, while private loans came in as expected at -0.2 percent. But Italian retail sales at -0.2 percent undershot the expected -0.1 percent.


Copper at $7,420 per tonne was down $26 on the previous day’s close despite a net drop in stocks of 1,525 tonnes to 249,900 tonnes. Only Johor saw an increase in stocks, up 325 tonnes to 11,875 tonnes, all of which are on warrant. Cancelled warrants fell 375 tonnes to 51,250 tonnes.

Aluminium was unchanged at $1,870. Inventories dropped for the third consecutive day, down a further 5,625 tonnes to 4,835,050 tonnes. Detroit, Vlissingen and Singapore were responsible for the bulk of the downturn, losing a combined 7,075 tonnes, while Rotterdam stocks rose for the third consecutive day to 482,900 tonnes.

This location is edging closer to surpassing Singapore - with 485,225 tonnes - to become the third-largest holder of aluminium after Detroit and Vlissingen. Cancelled warrants at 1,744,050 tonnes were down 350 tonnes.

Lead edged $1.25 higher to $1,856.25. Stocks fell for the seventh consecutive day, down 1,950 tonnes to 330,750 tonnes, taking inventories to their lowest since September 19.

Johor is responsible for the drop - inventories there have been falling since September 16 and fell a further 1,075 tonnes today to 73,625 tonnes. Of this total, 10,550 tonnes are cancelled warrants.

In other metals, zinc was trading at $1,801.25, was up just $0.25, while inventories fell 2,375 tonnes to 1,006,475 tonnes and cancelled warrants were down at 159,250 tonnes from 161,625 tonnes

Nickel prices were down $101 at $15,799, struggling in negative territory. Stocks were up 474 tonnes at 112,236 tonnes.

Tin at $17,300 lost $45, while stocks were up 75 tonnes to 11,745 tonnes and cancelled warrants at 4,000 tonnes were up 700 tonnes.

“We don’t think prices can dip that quickly without impending upturns,” RBC Capital Markets said. "We note with interest that physical tin prices in China are nearly $1,000 higher than they are on the LME, and would not be surprised to see some opportunistic re-stocking by clever consumers in anticipation of higher prices before year end."

Steel dropped below $400 to a wide $377/415 and inventories were stable at 57,070 tonnes. In the minor metals, cobalt was indicated at $27,300/28,200 and molybdenum at $26,000/27,350.

(Editing by Mark Shaw)