LME MORNING - Base metals soft, copper slides after big inventory increase

By: Martin Hayes

London 27/08/2013 - Base metals fell away in Tuesday’s LME pre-market, reflecting a downturn in data-driven macroeconomic sentiment, traders said.

"Prices on the LME are getting off to a fairly weak start to the new week of trading following yesterday’s [UK] holiday," broker Commerzbank said. “July's figures for durable goods orders in the US fell considerably short of expectations, which weighed on sentiment.”

Copper fell away steadily, breaching $7,300 on the downside and triggering sell-stops. Business is expected to become choppy as this shorter week unfolds.

"It looks a bit tired and as we get to the end of the week we could see a lot of end-month stuff going through. There is a US holiday [Labor Day] next Monday as well, so some of the weaker longs may get a bit wobbly," a trader said.

US durable goods orders for July fell 7.3 percent after three months of gains, data showed on Monday - the largest drop this year and far exceeding the forecast of a three-percent decline.

This exacerbated the pessimism triggered by other data released last week on industrial production, housing starts and new home sales. These could mean economic growth this quarter will perform below expectations.

"After last week's housing data, this has been the second data point that disappointed. In response, commodity market participants are likely to become more cautious in the days ahead and could even start to reduce positions," broker Credit Suisse said in a report.

On Friday, US home sales data for July at 394,000 undershot the expected 487,000. This casts doubts on the timing and extent of the expected tapering of the US's current stimulus package of monthly bond-buying.

There were few other drivers for the metals in early trading, with the euro drifting gently against the dollar - it stood around 1.3342 recently. Business and movements are expected to pick up towards the end of the week on end-month considerations and book-squaring.

Today, the August German IFO business climate came in at 107.5, slightly better than forecast. Later, the market awaits the S&P/CS HPI, Richmond manufacturing index and US CB consumer confidence, which is forecast at 79.6 from 80.3 previously.


In the metals, copper swung below $7,300, settling at $7,292.50 per tonne, a $67.50 decline from Friday's kerb close. Copper stocks rose for the first time in 29 sessions lead by warranting in Johor and New Orleans, up a net 12,125 tonnes at 576,350 tonnes.

Aluminium business at $1,880.25 was $12.75 lower, with the market stalling just below the $1,900 level. Inventories fell 6,025 tonnes to 5,422,150 tonnes, with cancelled warrants falling 6,175 tonnes to 2,027,325 tonnes.

Zinc traded at $1,976, a $12.75 decline but lead at $2,210.25 was up 25 cents. Zinc stocks rose 1,275 tonnes to 1,024,850 tonnes while lead inventories dropped 1,325 tonnes to 186,525 tonnes.

Nickel at $14,389 was $136 lower after stocks climbed 1,842 tonnes to a fresh all-time high of 211,902 tonnes, while tin at $21,550 was down $200.

Steel was quoted at $120/200 but cobalt and molybdenum were neglected. Molybdenum stocks dipped 12 tonnes to 204 tonnes, with cancelled warrants also 12 tonnes lower at 24 tonnes.

 (Additional reporting by Lynette Tan and Eddie van der Walt, editing by Mark Shaw)