LME MORNING - Base metals retreat, prospects of slowing Chinese economy weigh

By: Martin Hayes

London 11/03/2013 - Base metals fell away during Monday LME pre-market trading, with fragile short-term sentiment punctured by soft weekend Chinese economic data that raised concerns that the pace of expansion there is moderating, traders said.

For the metals complex, inventory increases for some also underlined the lacklustre picture for physical offtake - consistent increases suggest that the stock movements are not due solely to warehouse manoeuvres between major players.

So far this morning, zinc, aluminium and lead have all set new three-and-a-half-month lows, while copper is not far off a similar downside milestone.

Broker Investec attributed today's downbeat mood to data from China, the world’s biggest consumer, which raised concerns about the country’s economic outlook.

Chinese industrial production in February grew 9.9 on the same month of last year, figures released on Saturday showed, below the forecast of 10.4 percent and a drop from 10.3 percent in January. Retail sales figures also disappointed, growing only 12.3 percent in February year-on-year against the forecast of 14.5 percent.

The dimmer outlook on China's economic growth outweighed optimism that the US economy is quickly recovering. Friday's February jobs report showed that the US added 236,000 new jobs last month, beating the forecast of 162,000 and causing the unemployment rate to fall to 7.7 percent.

"Much of the market seemed to have already priced in the good numbers," broker RBC noted.

"Despite the good February figures, the path toward the 'substantial' improvement in the labour market outlook that the Fed would like to see remains long," broker Credit Suisse added.

In other markets, equities broadly eased in Europe, while the euro was little changed around 1.3000 against the dollar - on Friday it fell as low as 1.2954, the softest since mid-December.


COPPER BACK BELOW $7,700, NO LET-UP IN RISING INVENTORIES

Copper was struggling below $7,700, falling to $7,670 per tonne, a $70 loss from the Friday kerb close. A test of the recent three-and-a-half-month low of $7,652 is likely soon.

Inventories rose for an 18th successive day, up a net 4,125 tonnes at 513,550 tonnes, the highest since the end of March 2010, with 3,650 tonnes warranted in Johor. The current uptrend shows no sign of letting up, with traders seeing LME stocks reaching one million tonnes by the end of the year.

Aluminium hit $1,936, the lowest since late-November 2012 and a $29 loss. Inventories rose 1,075 tonnes to 5,189,975 tonnes due to a 7,825-tonne warranting in Vlissingen.

Zinc fell as low as $1,928, its weakest since late-November 2012, down $39. Stocks jumped 12,125 tonnes to 1,207,675 tonnes, the highest since the end of January, with 12,000 tonnes put on warrant in Vlissingen and 4,700 tonnes in New Orleans.

Sister metal lead followed the pack to hit $2,176.50, down $36. The fall was despite a 150-tonne decline in stocks to 284,900 tonnes, the lowest for five months. Nickel dropped to $16,571, down $169, while inventories climbed 522 tonnes to 161,460 tonnes, a new three-year high.

Tin traded at $23,545 against Friday's $23,795, with inventories up 80 tonnes at 13,595 tonnes, the highest since February 28.

Steel billet was neglected, while stocks held at 83,070 tonnes for the 41st day in a row. In the minors, cobalt was quoted at $25,000/25,750, with inventories unchanged. Molybdenum was lifeless.


 (Additional reporting by Greg Holt in Singapore, editing by Mark Shaw)

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