LME MORNING - Metals on the march again, set fresh multi-month highs as dollar depression sets in

London 14/10/2010 - Base metals staged another upward surge on the LME on Thursday, with most racing to fresh multi-month highs this morning before pausing to consolidate the latest leg-up in the current strong upswing.

Nearly all the metals hit fresh cycle highs, with copper at a 27-month peak near $8,500, tin setting a fresh all-time high, lead at a fresh best since January and zinc and aluminium at new five-month highs.

“Bullish sentiment flows through the market [have been] boosted by the prospects that base metals ETFs are on their way and by the weaker dollar,” William Adams of FastMarkets said.

Sentiment was robust, generated by the ‘feel-good’ factor from one of the most upbeat LME Dinner weeks for some years, although it was the fresh losses in the dollar that were the prime driver again.

“Dollar weakening is prompting a commodity rally,” Fairfax analyst Marc Elliott said in a report.

In other commodities - forging higher in the slipstream of the crumbling US currency - gold was at new record highs above $1,387 per ounce, silver a fresh 30-year peak close to $25.00 and crude oil close to $85.00 per barrel.

Appetite for perceived risky assets is healthy, with the dollar cracking against a basket of currencies to 76.25, while it weakened to 1.4122 against the euro, the lowest for nine months

The dollar has been dragged down by mounting expectations that the US Federal Reserve will soon launch another round of quantitative easing.

For the metals there is, as yet, still no sign of the much-anticipated technical correction to almost two weeks of uninterrupted advances, with momentum indicators heavily over-extended. Fundamentally, recent drivers have not been uniform, with Chinese data this week mixed and US economic prospects bumpy.

“The markets are looking increasingly overbought so at some stage a correction will be seen but in the current situation there seems little point in trying to anticipate a pullback,” Adams said.

The annual LME week mood has been confident throughout, and with systems-based buying evident, further advances are likely.

"The fundamental backdrop for the sector remains supportive, and we expect the uptrend to extend," broker Credit Suisse said.


Copper touched $8,490 per tonne at one stage, the best since early-July 2008, before trading at $8,460, up $98 from the previous close.

Warehouse stocks rose a net 225 tonnes to 371,500 tonnes while cancelled warrant tonnage - the metal booked for removal - dipped to 23,850 tonnes.

Given the strong upside momentum, prices are targeting the $8,490 all-time high set in July 2008. Beyond there, many analysts anticipate a run towards $10,000.

Tin established yet another record high, with metal changing hands at $27,150 before it settled at $27,050, up from the previous $26,775. The objective here is the $30,000 level.

“Production problems in Indonesia, the world’s second-largest producer and largest exporter of tin, are increasing,” Commerzbank noted.

PT Timah will not meet its production target of 50,000 tonnes this year and now anticipates output of just around 40,000 tonnes, it has announced.

Elsewhere, aluminium rose to a five-month best of $2,459 and then settled back at $2,449, up $33. Stocks fell for the 21st day in a row - down 4,150 tonnes at 4,318,100 tonnes, the lowest since mid-June 2009 again.

Zinc, which touched a five-month high of $2,442.50, was holding at $2,427, a $17 advance. Stocks dropped for the 10th successive day - down 825 tonnes at 609,275 tonnes, the lowest for five months.

Sister metal lead traded at $2,473, its highest since January 19, and then dropped back to $2,446, up $11 - there was a 550-tonne fall in stocks.

Nickel continued to trade sideways below its recent five-month highs of $25,200, with business at $24,520, up $120. Inventories rose for the fifth day on the trot - up 36 tonnes at 124,176 tonnes, the highest since the end of June.

Steel, which traded at its highest since September 24 on Wednesday at $478, saw another inventory fall. Billet stocks dropped for the 15th successive day, down 1,625 tonnes to 62,660 tonnes, another two-month low.

Cobalt and molybdenum were quoted at unchanged levels of $36,800/38,900 and $30,500/37,500 per tonne respectively.

(Editing by Mark Shaw)