LME MORNING - Metals attempt to stabilise after sell-off but remain mired in uncertainty

By: Martin Hayes

London 13/12/2011 - Base metals mostly attempted to stabilise and consolidate during LME pre-market trading on Tuesday but the mood was flat, reflecting little-changed equities and a sluggish euro, leaving prices in the complex struggling for short-term direction.

"It is getting very slow now - the business is starting to dry up as we get near the year-end," a trader said.

The complex was again showing signs of strain, given the poor macroeconomic background and uncertainty in the eurozone - there are also worries over sovereign downgrades.

"If the markets fail to stabilise today, we could be in for another down-leg," William Adams of FastMarkets said.

Copper flirted with its lowest for two weeks but generally managed to avert a downswing below $7,600 while aluminium and zinc, which fell to their softest for nearly two weeks on Monday, also edged higher.

Equities, which fell sharply on Monday across the globe, were cautiously steady, with European shares a modest 0.1 percent steadier. The euro remained near two-month lows, trading around 1.3190 against the dollar, having hit a low of 1.3158.

For the metals complex, the threats surrounding the eurozone sovereign debt crisis will continue and trends in the wider financial marketplace will continue to override all but the most pressing metal-related fundamentals for now.

Pressure stems from renewed pessimism over the eurozone debt crisis and the ability of policymakers to tackle the problem effectively after last week's EU summit failed to arrive at a deal backed by all members.

On the data side from the US, November retail sales, October business inventories and the December IBD/TIPP Economic Optimism index will be released later today. There will also be a decision in interest rates from the US Federal Reserve and an accompanying statement from the FOMC.


Aluminium moved up to $2,026, an $11 gain, although the market focus was on another massive inventory increase - stocks climbed a net 95,850 tonnes on Tuesday to a new all-time high of 4,811,550 tonnes, due entirely to a 100,000-tonne warranting in Detroit.

In just three days, LME aluminium stocks have leapt by 190,384 tonnes or 4.2 percent - metal has been warranted in Vlissingen in the previous two sessions. Traders say yet more tonnage may be warranted against residual LME technical tightness.

Dec/Jan was around $2.00 backwardation, Feb/March at $1.50 backwardation, while Feb/one week stood around $5.50 premium.

"All that metal being warranted is not going to be available - it's financing stuff," a trader said.

Copper, earlier close to its lowest for nearly two weeks, traded at $7,620, a $14 advance. Stocks fell for the ninth day in a row, dropping 2,550 tonnes to 383,025 tonnes, a fresh low since January.

On the supply side, reports circulated that workers at Freeport-McMoRan Copper & Gold Inc’s Grasberg mine in Indonesia expect to sign an agreement with the company’s local unit to end a three-month strike in the next one or two days.

In other metals, tin business at $19,800 was down $100, although inventories fell four percent. The 510-tonne decline left the total at 11,580 tonnes, the lowest since April 2, 2009.

Lead was $5.50 lower at $2,100 but inventories fell for the 12th successive day, down 1,400 tonnes at 358,900 tonnes at the lowest again since late September. Zinc traded at an unchanged $1,932 - there was a 1,300-tonne fall in stocks.

Nickel traded at $18,300, down $150 still, although stocks declined by 330 tonnes. Steel was steadier at $557, while the minors were neglected.

(Editing by Mark Shaw)