LME MORNING - Base metals hit fresh highs but rally expected to be short-lived

By: Kathleen Retourne

London 12/01/2012 - Base metals hit fresh intraday highs on Thursday morning, further extending this week’s technically fuelled rally, with the technical picture of most moving from negative to positive and further boosted by index rebalancing.

But the mood was tinged with caution over pending developments in the eurozone.

“[Indices] are rebalancing right now coupled with… short covering keeping prices buoyant,” an LME floor trader said. “I don’t see it lasting too much longer given the wider concerns.”

The growing eurozone sovereign debt and default crisis continues to inject caution and uncertainty. The euro remains close to Wednesday's 16-month lows of 1.2660, while there are a series of upcoming data events that could determine price direction.

EU industrial production was better than expected in November at -0.1 percent on December against a forecast -0.2 percent, indicating that there is some form of stability on the EU industrial sector at present.

Italian industrial production data, also released this morning, was positive too at 0.3 percent against a forecast of -0.2 percent.

US data due for release today includes December retail sales figures, the December federal budget balance, November business inventories and weekly unemployment claims.

In data earlier, China's December CPI came in at 4.1 percent, just above the forecast of 4.0 percent and a small drop from 4.2 percent in November, while the December PPI was also slightly higher than expected.

As well as the string of data, price swings and activity will also reflect the annual fund rebalancing exercise, which concludes on Friday. Next week, business flows are expected to slow in the run-up to the Chinese New Year at the end of the month.


Copper briefly hit an intraday high of $7,923 earlier - its most expensive since December 5 - before settling at $7,915.50 per tonne, up $130.50.

Fundamental developments helped the rise - inventories dropped for the seventh consecutive day, falling a net 6,000 tonnes to 358,250 tonnes, the lowest since December 16, 2010. Cancelled warrants were down, dropping 775 tonnes to 49,225 tonnes.

Aluminium peaked this morning at $2,197 - the highest since November 14 - before dropping back to $2,193, still up $28 on Wednesday’s close.

Warehouse stocks halted their five-day decline, rising a net 11,075 tonnes to 4,973,725 tonnes due to warrantings in Vlissingen of 13,600 tonnes. Cancelled warrants fell 5,125 tonnes to 735,350 tonnes.

Nickel at $19,530 is at an intraday high, up $80 on yesterday’s close. Stocks were down 510 tonnes to 92,334 tonnes, while cancelled warrants declined 402 tonnes to 2,442 tonnes.

Tin was up at $20,900, a rise of $425 and its highest since November 30, while stocks were unchanged at 11,250 tonnes. Cancelled warrants, however, rose 310 tonnes to 2,560 tonnes due to the cancellation of 2,450 tonnes in Johor.

Lead inventories were up 975 tonnes to 352,650 tonnes, while prices gained $28 to $2,018. Zinc was up $12 at $1,948, with stocks falling 950 tonnes to 818,500 tonnes.

(Additional reporting by Martin Hayes, editing by Mark Shaw)