LME MORNING - Base metals sluggish, copper may pick up as weekend approaches

By: Kathleen Retourne

London 19/07/2013 - Base metals were stagnant during the Friday LME pre-market, treading water and looking for direction. While today’s moves are biased to the downside, a steady euro helped underpin prices – last at 1.3128 against the dollar.

“Prices are trading in familiar range as market digests rhetoric from the FOMC,” a trader said. “A steady euro seems to be limiting the downside at the moment, so wouldn’t rule out a run higher for the end of the week.”

This week the key focus has been Fed Chairman Ben Bernanke’s testimony to congress. Delivering his semi-annual monetary policy report before the Senate banking committee, in Washington, Fed Chairman Ben Bernanke said that the Federal Reserve's asset purchase programme was "by no means on a pre-set course".

“[Wednesday’s] speech from Bernanke didn’t see the change of tone that many expected which may have caused a bit of profit-taking across the metal complex but nothing of major importance,” said Triland.

Copper at $6,874 per tonne was down $26 on the previous day’s close, while stocks declined for the third consecutive day, down a net 2,275 tonnes to 638,325 tonnes. Cancelled warrants were also lower - at 334,175 tonnes they lost 2,425 tonnes.

Aluminium was up $2 at $1,807 as stocks and cancelled warrants fell. Cancelled warrants slumped 34,475 tonnes to 2,155,900 tonnes, due to a 34,175-tonne reduction in Detroit. Headline stocks were down 1,825 tonnes to 5,477,725 tonnes.

Shortly after it was announced the LME would be looking into warehouse queues, the Dec-13/Dec-14 spread saw an initial and rather aggressive move in tightening spreads. But, the spread has eased significantly today with lending activity re-emerging. That Dec/Dec spread last showed a contango of $84 - it had eased to $64  contango on July 10

“More action was seen on the forwards actually, as an intense lending activity on the 2014 period right at the close corrected the tightness that had recently developed there,” said Triland.

Zinc was $4 lower at $1,852 as stocks and cancelled warrants declined 4,000 tonnes to 1,071,625 tonnes and 2,155,900 tonnes respectively.

Lead at $2,030 was $6 lower with no changes in stocks. Tin lost $54 at $19,491, although it to saw no inventory movement.

Nickel at $13,953 declined $47 despite a 108 decline in stocks to 196,062 tonnes and cancelled warrants rose 642 tonnes to 26,910 tonnes.

Steel was soft at $130/190 although stocks and cancelled warrants fell 2,340 tonnes to 67,275 tonnes and 51,935 tonnes respectively.

“High oversupply should stand in the way of a lasting recovery of steel prices; other factors preventing this according to the China’s Iron & Steel Association (ISA) are declining exports and high stocks in the warehouses of wholesale traders,” said broker Commerzbank.

“Although government bodies are meanwhile seeking to reduce the high overcapacities - stricter environmental standards are to be imposed for example - a few other factors speak for continued high steel production in the coming months,” it added.

(Editing by Martin Hayes)