LME MORNING - Base metal little changed, shrug off Cyprus bailout

By: Eddie van der Walt

London 25/03/2013 - Base metals shrugged off news of a last-minute bailout deal in Cyprus, trading flat to lower on Monday morning while most other riskier assets trended higher.

Cyprus reached a last-minute agreement with international lenders to close its second-largest bank and force losses on wealthy depositors in exchange for a 10-billion-euro ($13 billion) bailout that will allow the country to remain in eurozone.

As part of the deal, Cyprus agreed to shut down the Laiki Bank of Cyprus and shift deposits of less than 100,000 euros to the Bank of Cyprus. Deposits of more than 100,000 euros at both banks will be frozen and used to recapitalise the Bank of Cyprus.

"The last-minute agreement on Cyprus should prevent an uncontrolled collapse of the country’s banking system and its euro exit," Credit Suisse analyst Valérie Plagnol wrote.

The country's banks are still closed but are now expected to reopen on Tuesday following more than a week behind shutters and cash withdrawals are still limited.

"There is a considerable amount of cynicism over the Cyprus deal on the trading desk this morning," one London-based trader told FastMarkets.

"I don't think this is over yet - there could well be a run on the banks when they do reopen," the trader added. "And even though the EU has not broken its guarantee, it has shown that it has considered it, thus proving it is not sacrosanct."

In wider markets, the euro climbed as high as 1.3047 against the dollar, up from Friday's close at 1.2988 and the four-month lows of 1.2841 hit in mid-week. The single currency was last at 1.3009.

In equities, the Nikkei is up 207 points at 12,546 and the Hang Seng gained 135 to 22,251. In Europe, the FTSE gained almost one percent to 6,447 and the DAX is up 106 points at 8,018.

In other commodities, safe-haven gold is down $5.95 at $1,602.60 per ounce but Brent crude oil gained 65 cents to $108.22 per barrel.

The data calendar is relatively light today but the market will look forward to a speech by US Federal Reserve chairman Ben Bernanke, who is joining outgoing Bank of England governor Mervyn King for a panel discussion at the London School of Economics.


Copper was last at $7,646.25 per tonne, down $8.75. Stocks continued to rise, up a net 2,875 tonnes to 565,350 tonnes - the highest since October 6, 2003. Johor received 2,975 tonnes but Singapore shed 850 tonnes. Cancelled warrants are 1,875 tonnes higher at 66,825 tonnes.

"There is a lot of copper about - they are stacked up to the gills in China as well so it is very hard to get excited about the price" the trader said.

Aluminium fell $8.75 to $1,938.25 per tonne. Inventories dropped 7,525 tonnes to 5,222,500 tonnes, with 3,000 tonnes leaving Vlissingen and 2,600 tonnes exiting Detroit. Cancelled warrants jumped 56,275 tonnes to 1,953,850 tonnes, with the bulk of the change occurring in Mobile, Alabama.

The Aluminium Corporation of China has signed an agreement with Russia's UC Rusal to cooperate in research development; the development of bauxite resources and investments in integrated hydro-powered aluminium production.

"Aluminium market developments highlight the pressure the whole sector is under," Rusal CEO Oleg Deripaska said. "This partnership between the two major global players in the aluminium sector is a significant step to address the current situation with the overproduction in the aluminium market."

Lead was at $2,194, up $5. Stocks declined for the 13th consecutive day, down 1,500 tonnes at 266,975 tonnes, the lowest since October 2. All of the material left warehouses in Johor. Cancelled warrants slipped 1,500 tonnes to 142,850 tonnes.

Zinc at $1,942.50 per tonne was down $9.50 even after stocks fell 4,675 tonnes to 1,189,150 tonnes, with 2,600 tonnes leaving New Orleans. Cancelled warrants were 4,675 tonnes lower at 714,725 tonnes

Nickel fell $51 to $17,094 per tonne. Stocks fell 738 tonnes to 162,024 tonnes and cancelled warrants are 1,758 tonnes lower at 26,502tonnes

Tin was up $32 at $22,957. Although stocks rose five tonnes to 14,110 tonnes, cancelled warrants jumped 320 tonnes to 2,890 tonnes.

Steel billet was neglected while cobalt was offered at $22,500 and molybdenum was offered at $26,500. Cobalt stocks increased two tonnes to 446 tonnes - an all-time high for the contract - while molybdenum cancelled warrants have fallen to zero.

(Additional reporting by Gregory Holt, editing by Mark Shaw)