London 30/03/2012 - Base metals rose on Friday morning in premarket trading thanks to a stronger euro and month- and quarter-end book-squaring.
“Markets have been hit on negative economic data this past week, but end-of-month and end-of-quarter book-squaring are now a feature today,” a trader said. "The big question is: will this follow through?"
EU PMI data today came in at 2.6 percent, above an expected 2.5 percent and indicating that inflation still remains above the desired rate of two percent and not falling as quickly as some had forecast.
The data had little impact on the euro, which is still holding at 1.3337 against the dollar ahead of eurozone debt talks due this weekend. Finance ministers will meet on Friday and Saturday in Copenhagen to finalise the total size of the European Union's rescue fund.
Spain is a thorn in the eurozone's side at the moment. Fears are growing that debt contagion will engulf Spain, forcing it to ask for monetary assistance.
Unionised workers in the country yesterday went on strike to protest against government budget cuts and reforms ahead of a new budget today. The country's unemployment rate is running at around 23 percent.
In other data, Japan’s manufacturing PMI climbed to 51.1 and household spending and housings starts beat expectations but industrial production dropped 1.2 percent. In Europe, German retail sales fell 1.1 percent, while French consumer spending shot up three percent.
Due later are US personal spending, income and prices and Chicago PMI and University of Michigan data, while this weekend all eyes will be on Chinese PMI data, which could provide some price direction – should the index come in above 50, there could be some stabilisation in metal prices
“Copper, tin and zinc’s support levels are still holding, while the others have breached support levels but seem to be finding some scale-down buying,” FastMarkets analyst William Adams said.
“Concerns over China will weigh on prices further but it looks as though any move lower will be gradual - there is still scale-down buying interest around, which, given the tightness/availability of many of the metals, is not surprising," he added.
ALL METALS MAKE GAINS
Copper at $8,438 per tonne was up $88 or more than one percent on the previous day’s close. Stocks rose a net 650 tonnes to 256,275 tonnes, with inventories in Baltimore climbing 1,000 tonnes to 1,225 tonnes and Busan also seeing a 1,000-tonne increase to 10,775 tonnes. Cancelled warrants at 84,300 tonnes were down 1,150 tonnes.
“Chilean state copper commission Cochilco expects the tight supply and continued robust demand from China to produce a supply deficit on the global copper market and assumes that prices will rise - a view we share,” Commerzbank said.
Aluminium, one of the worst performers yesterday, picked up to $2,150, a rise of $15. Inventories continued to fall, losing 5,225 tonnes to 5,063,350 tonnes, the lowest since February 10. Cancelled warrants climbed 26,700 tonnes to 1,660,900 tonnes due mostly to a 28,425-tonne rise in Vlissingen warehouses.
Nickel has slumped below $18,000 and is struggling to climb back above this level - it is currently at $17,550, up $400 on the previous day’s close. Stock moves were positive - inventories fell 36 tonnes to 99,882 tonnes, while cancelled warrants at 4,746 were up 534 tonnes.
“With prices now well down through $18,000, we would think production closures of nickel pig iron facilities in China are inevitable, but as with most situations like this, the market tends to overshoot,” RBC said.
Clear chart support can be found at $16,500, it added, but the market has yet to see a major panic-related sell-off and support there could easily be broken.
Zinc prices are no longer higher than lead - they were recently at $2,010, a $5 rise. Stocks, after peaking at a 17-year high on Wednesday, declined for the second day but remain high, dropping just 725 tonnes to 898,100 tonnes. Cancelled warrants at 11,750 were down 600 tonnes.
Lead at $2,022 was up $27. Stocks were down 150 tonnes to 376,575 tonnes, while cancelled warrants were down 150 tonnes to 22,300 tonnes.
Tin rose above $23,000 to $23,110, a $410 increase. Inventories rose 155 tonnes to 13,080 and cancelled warrants were unchanged at 1,065 tonnes.
The International Tin Research Institute (ITRI) expects the global tin market to show a 10,000-tonne supply deficit this year, Commerzbank said. While demand is set to grow two percent on last year, production is likely to remain largely unchanged. According to ITRI, production in China has hardly expanded at all since 2001.
“In Indonesia too, the second-largest producer and largest exporter of tin, the government likewise expects production to be only marginally higher than last year,” Commerzbank said. "This is likely to prompt further increases in the price of tin over the course of the year."
Steel was quoted at $510/520 after stocks declined to 43,420 tonnes, a 2,210 loss and the lowest total since August 3. Cancelled warrants were also low at 16,640 tonnes, down 1,430 tonnes.
In the minor metals, cobalt was quoted at $30,000/32,450, while molybdenum was neglected.
(Editing by Mark Shaw)