LME MORNING - Metals steadier as rebound continues, cut gains with sentiment nervy

By: Martin Hayes

London 12/04/2012 - Base metals checked back from their initial highs during  Thursday morning LME premarket trading, although prices remained steadier - the complex continued to stage a recovery from the recent sharp sell-off.

But the mood was nervous, with erratic movements seen possible in the short term  given wider market trends. European equities seesawed either side of unchanged levels, while the euro was broadly steady in mid-range around 1.312 against the dollar.

"The talk about eurobond purchases has taken some of the sting out of the sell-off to some extent," a trader said.

European Central Bank executive board member Benoit Coeure suggested on Wednesday that the central bank could turn to its bond-purchase programme again to ease stress in Spain, the latest area of eurozone debt contagion.

The mood was only tentatively better, though, given that the wider macroeconomic mood has been dampened by worries over the US economic recovery, moderating Chinese activity and the resurgent eurozone crisis. This is likely to leave metals prices vulnerable.

"We expect some more sideways action for the balance of the week as the market digests the recent bearish news on the economic front," broker RBC said.

For now, the focus will also be on data releases towards the end of the week after Chinese trade figures earlier this week indicated a slowdown in domestic demand.

The market forecast for China's first-quarter GDP growth rate - due on Friday - is 8.4 percent, down from growth of 8.9 percent in the fourth quarter of 2011. China industrial production figures for March will also be made available on Friday morning in Asia.

US data releases scheduled for Thursday include the March PPI, the February trade balance and weekly unemployment claims.  

"We would not be surprised by further strength in the base metals in the short term but would keep a wary eye on developments in EU debt. On balance, we still feel the base metals will work lower over the medium term," FastMarkets analyst William Adams said.


Copper moved away from the key $8,000 level - prices had fallen as low as $8,118 on Wednesday, the softest since January 16. Business this morning was seen either side of $8,100, with recent trade at $8,123 per tonne, up $83 from Wednesday.

Warehouse stocks, meanwhile, fell a net 1,075 tonnes to 266,075 tonnes.

Tightness remained robust in the April/May spread, which was trading at $30 backwardation - this rate had been as narrow as $6.00 premium just before the Easter break.

Aluminium continued to swing either side of $2,100, with recent business at $2,109, up just $10. Stocks rose 8,950 tonnes to 5,059,875 tonnes due to a 10,000-tonne warranting in Johor.

In other metals, zinc traded at $2,014, up $19, with inventories falling 425 tonnes from what had been near 17-year highs to 900,325 tonnes. Lead advanced to $2,064, a $13 gain - stocks dropped 975 tonnes to 373,550 tonnes.

Nickel traded at $18,192, up $192, while stocks declined 888 tonnes to 98,442 tonnes. Tin trade at $22,600 was up $175, although there was a 75-tonne inventory increase.

Steel was steady at $513/520 - stocks fell for the 22nd successive day, dropping 1,040 tonnes to 30,160 tonnes, a fresh low since July 19. In the minors, cobalt and molybdenum were both indicated at $30,500/32,000.

(Editing by Mark Shaw)