LME MORNING - Base metals subside as bull-run correction continues, copper price unable to clear $8,300/t

By: Martin Hayes

London 06/02/2013 - Base metals prices gradually lost ground during low-key Wednesday LME premarket trading, with a short-term ranging pattern having set in now that the momentum of last week's strong rally has faltered, traders said.

"The market really does appear to be winding down ahead of the Chinese New Year Holidays next week, and with this week's light data load out of the US, there just isn’t much to drive outright prices other than currencies," broker RBC said.

Trends in other markets - namely equities and currencies - were broadly similar as well and current consolidation in the complex may continue. The euro, which hit a one-week low on Tuesday of 1.3458, was slightly lower still at around 1.3520 against the dollar ahead of the regular European Central Bank meeting tomorrow.

Volumes and conditions are expected to continue to dwindle - many participants in China have already started their holidays ahead of next week's Lunar New Year. China will be officially closed over February 9-15.

For now, as well, there are worries about Europe's economic path after political concerns resurfaced in Italy and Spain on Monday, raising fears that both fiscally strapped nations would have difficulty addressing their budget deficits. Some also now think that the ECB might do or say something that would weaken the euro at Thursday's policy meeting.

The economic agenda is light today, with no US data scheduled - figures are restricted to the usual weekly crude oil inventory changes. For the metals, February traded options expire at late morning. In aluminium, the focus will be on the $2,100 strike, where 1,533 calls are open.


Copper extended its session drift, easing to $8,230 per tonne, a $41 loss from the Tuesday kerb close, having again stumbled above $8,300. Inventories crept higher again, with a net 1,450-tonne increase lifting the total to a new 26-month high of 386,500 tonnes.

"Prices appear to have stalled after hitting four-month highs on Monday. We still expect to see prices push a little higher in the next week, potentially testing $8,430. But to maintain our level of confidence, we would like to a see a close above $8,300," broker ANZ said.

Aluminium was pivoting around $2,100, with business at $2,103 down $8 on the previous close. Inventories declined 10,450 tonnes to 5,147,750 tonnes, with usual outflows seen from Detroit and Vlissingen.

In the spread, the crunch June/July backwardation was trading between $16 and $14 against a level of $19.50 yesterday.

"There is clearly room for more tightness as the larger players seek to get more material below their control," RBC added.

In other metals, lead business at $2,438 was down $20.50, while inventories fell for the 13th day in a row - down 100 tonnes at 289,900 tonnes. Sister metal zinc was $9.50 lower at $2,167 - stocks were down 2,600 tonnes at 1,197,075 tonnes.

Nickel traded at $18,526, down $169 - stocks fell 162 tonnes to 150,672 tonnes - and tin traded at $24,846, down $79., with inventories down 40 tonnes at 13,275 tonnes.

Steel billet was neglected, while inventories were unchanged at 83,070 tonnes for the 18th successive day.

In the minors, cobalt was indicated at $25,000/26,450, while molybdenum was neglected - there were no inventory movements in either metal.

(Additional reporting by Perrine Faye, editing by Mark Shaw)