London 31/01/2012 - Base metals advanced across the board during Tuesday LME pr-market trading, underpinned by a firmer euro and better sentiment in wider financial markets amid hopes that a deal on Greece's debt will finally be agreed this week.
The retracement from last week's multi-month peaks has paused for now and, although some of the metals are over-extended, further strength is expected in the short term, traders said.
"The uptrends are all still intact and, although they are all looking a bit overstretched, it is the end of the month," one said. "What we are likely to see later is positioning and support by the fund types for their end-month valuations. If anything, we may consolidate for most of the day."
The euro was gaining ground mostly against the dollar - it was last trading around 1.3190, although the currency had been above 1.32 at one stage.
The mood was a bit more optimistic in the eurozone after Greek Prime Minister Lucas Papademos said a debt swap deal between the government and its creditors could be reached by the end of this week following "significant progress" on talks on Monday.
The statement helped soothe fears of sovereign defaults in Greece and Portugal - the latter's 10-year bond yields rose to record highs on Monday, raising worries that the country may need a second bailout.
For the metals, physical demand remained subdued after the Chinese New Year holiday.
"Given the gap that has opened up between Shanghai and LME copper prices, we feel the run-up in LME prices in recent weeks may be overstretched," William Adams of FastMarkets said.
COPPER INVENTORIES FALL AGAIN, NO CHANGE IN TREND SEEN
Copper jumped above $8,500 per tonne at one stage and then settled at $8,480, up $51 from the previous close.
Warehouse inventories fell for the 20th successive day, with a net 2,300-tonne fall bringing the total down to a fresh 28-month low of 330,825 tonnes. They last rose on January 3; the current trend of withdrawals is expected to continue.
Cancelled warrants - metal booked for removal - rose to a new all-time high of 97,150 tonnes due to further cancellations in New Orleans and now amount to 30 percent of the stockpile. Since the start of the year, cancelled warrants have climbed from 41,000 tonnes, when they accounted for 11 percent of the total.
Aluminium briefly perked up above $2,300 before moving back to $2,295, a $16 advance. Stocks dropped 2,050 tonnes to 4,994,425 tonnes.
Lead similarly stepped back from levels above $2,300, with recent trade at $2,293, up $28. This was despite a hefty 18,050-tonne jump in stocks to 363,150 tonnes, the highest since November 8. This reflected warrantings in Singapore and Johor.
In other metals, zinc traded at $2,142, up $18, with stocks dropping 2,775 tonnes. Tin business at $24,100 was up $125 after inventories fell 215 tonnes to 9,100 tonnes, a new low since March 2009.
Nickel traded at $21,325, up a modest $20, while inventories fell 264 tonnes to 94,512 tonnes. Steel was indicated at a little-changed $511/519. In the minors, cobalt was steady at $32,000/33,200, while molybdenum was neglected.
(Additional reporting by Perrine Faye, editing by Mark Shaw)