LME MORNING - Base metals prices higher on China growth aim, gains curbed by caution

By: Martin Hayes

London 05/03/2013 - Base metals initially rose during Tuesday LME premarket trading, underpinned by positive Chinese economic growth prospects, although gains were subsequently trimmed by overall caution, traders said.

As well, the snap rally paused for breath around notable overhead targets and, with trading relatively slow, prices may now consolidate this bounce from multi-week lows seen in some on Monday.

"Overall sentiment is still flat, so we may see some ranging this week ahead of the US jobs numbers on Friday," a trader said.

The US non-farm payrolls report for February will be released early on Friday afternoon. Before that, LME March traded options will expire tomorrow, while there are regular ECB and BoE rate-setting meetings in mid-week.

Today's modest uptick has been fanned by China setting a GDP growth target of 7.5 percent this year, which aided sentiment in equity and currency markets. Chinese authorities are focussing on rebalancing the world's second-largest economy, although measures to curb rising prices for property continued to weigh on sentiment.

In other markets, equities were steadier, while the euro continued to stabilise above Friday's three-month low of 1.2925 against the dollar - it was indicated around 1.3055.

On the data side later, the February US ISM Non-Manufacturing PMI and the March US IBD/TIPP Economic Optimism index will be released.

Earlier this morning, EU retail sales for January at 1.2 percent beat the forecast of 0.3 percent and were up from a previous month's -0.8 percent.

"While this was the strongest reading since July 2008, we must ask - given the December reading of -0.8 percent - whether much demand was held over for the extensive January sales," FastMarkets analyst Jono Remington-Hobbs said.


Copper retreated back below its early highs above $7,800 to trade at $7,775 per tonne, still up $50 from the Monday close. But the mood was tempered by daily inventory data, with stocks rising for the 14th successive day.

The net 10,575-tonne increase, which reflected inflows in Johor and New Orleans, lifted the total to a new 17-month high of 472,975 tonnes. Since the start of 2013, copper inventories have risen 48 percent or 152,925 tonnes from the end-2012 level of 320,050 tonnes.

Aluminium was rebuffed at the $2,000 level again and traded back at $1,988, still up $14, but it is seen ranging narrowly now. Inventories were down an unexciting 175 tonnes at 5,162,700 tonnes, with a 10,100-tonne warranting in Vlissingen offsetting regular outflows elsewhere. In the spreads, June/July was around $11/13 backwardation against a level of more than $20 last week.

In other metals, zinc was back above $2,000, trading at $2,014, up $12. Prices hit $1,995 on Monday, the lowest since January 17. Inventories declined by 4,550 tonnes to 1,193,750 tonnes. Sister metal lead at $2,226 was up $10, while stocks were down 75 tonnes at 287,100 tonnes. On Monday prices hit three-month lows of $2,214.50.

Nickel was trading at $16,593, up $143 - inventories fell 108 tonnes to 160,548 tonnes from what had been three-year highs. Tin at $23,500 was up $125 - stocks were down 90 tonnes at 13,485 tonnes.

In steel, business at $250 was the lowest since the billet contract was introduced in February 2008. Its previous low was $255 in March 2009. Inventories were unchanged for the 37th day in a row at 83,070 tonnes.

In the minors, cobalt was quoted at $25,050/25,750, with a one-tonne drop in inventories to 429 tonnes seen. Molybdenum was neglected.

(Additional reporting by Kathleen Retourne, editing by Mark Shaw)