LME MORNING - Base metals revive, underpinned by bullish trend

By: Barbara Stcherbatcheff

London 11/01/2011 - Base metals climbed on Tuesday as the euro firmed against the dollar, while traders lacked clear directional signals from external markets and the latest Chinese data cemented expectations for future monetary tightening.

Three-month LME copper rose to $9,450 on Tuesday, snapping a five-day losing streak as long-term bulls resurfaced, while supply tightness has eased. The metal did not react significantly to Chinese economic data that showed new loans and money supply rose more than forecast in December.

“We see this as a sign of strong physical demand given that price differences between London and Shanghai discouraged imports in December. Prices should find a bottom soon,” Commerzbank said.

For the rest of this week, metals are likely to consolidate during the annual commodity indexes reweightings, which will be completed on January 14.

“Weakness is not to be sold, but rather is to be owned, while strength in the markets is to be used only to reduce positions modestly, if at all,” Dennis Gartman, author of the Gartman Letter, said.

The euro dipped to around four-month lows against the dollar on Tuesday, trading at 1.2933, as traders worried that Portugal would become the next victim of the eurozone debt crisis.

There is no major economic data due on Tuesday, but wholesale inventories will be announced at 15:00 GMT, and the treasury currency report is due later this evening.


FINANCING DEALS

Most metals recorded a rise in stocks as investors gear up for financing deals and aluminium ETF launches and seek to capitalise on backwardations in lead, tin and copper.

“With cancelled warrants being re-warranted last week and yesterday's apparent re-warranting of off warrant metal, one must ask whether metal financing deals are now not being rolled forward and the metal is being put on warrant to be delivered against the hedge part of the financing deal,” William Adams, analyst at FastMarkets, said.

Aluminium fell $28 to $2,490 after stocks rose by five figures for the second consecutive day, climbing a net 24,200 tonnes to 4,393,700 tonnes due to a large movement in Detroit. On Monday, stocks rose 97,100 tonnes to 4,369,500 tonnes, the highest since September 2010, due to moves in the Dutch port of Vlissingen.

This week’s rise in inventories was not fresh material but simply off-warrant moving on-warrant due to pending ETF commitments by large commodity brokers, physical traders noted.

In news, Alcoa, the largest US aluminium producer, reported strong earnings of 24 cents per share in the fourth quarter of 2010, surpassing the 19-cent consensus estimate due to a rebound in aluminium prices. The company estimated that global demand will slow in 2011 as China’s measures to curb inflation put a lid on housing and automobile markets.

Copper traded at $9,454, up $133, after hitting a record high $300 higher just a week ago. LME copper inventories recorded a 1,350 rise in stock levels to 379,650 tonnes, the highest since September 2010, due to movements in New Orleans, while cancelled warrants also rose.

In news, Chile’s Collahuasi mine, the world’s third-largest copper deposit, will ship out most of its copper via Antofagasta alternative port the Altonorte smelter as it attempts to normalise deliveries following a three-week force majeure on sales triggered by a shiploader accident

Zinc gained $26 to $2,408, shrugging of a rise in stocks of 9,200 tonnes to 710,150 tonnes, the highest since October 2004, due to an increase in Port Klang, Malaysia. Sister metal lead traded at $2,620, up $34, while inventories rose 1,300 tonnes to 211,675 tonnes, the highest since September 1995.

Lead stocks continue to hover at 15-year highs - the metal hit a two-year high on January 6 as production from an Australian mine was interrupted after inspections found airborne lead particles in shipping containers.

Nickel was $625 higher at $24,500 and tin traded at $26,495, up from last night’s close of $26,250/26,300. Tin inventories rose a net 200 tonnes to 16,890 tonnes, the highest since July 2010.

Steel billet was indicated higher at $597/605. In the minors, cobalt was indicated at $38,000/44,000 while molybdenum was indicated at $37,000/38,500.


(Editing by Mark Shaw)

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