LME MORNING - Base metals in consolidation mode, await drivers from US data and G20

By: Kathleen Retourne

London 15/02/2013 - Base metals held within their recent ranges in Friday's premarket, stuck in consolidation mode while awaiting the outcome of the G20 meeting and US data releases.

Movements have been dictated by currencies - the euro continued its descent, falling to 1.3311 against the dollar - its weakest since January 24 - after stops were triggered on the way down. It has since settled slightly higher at 1.3329.

Sentiment took a turn for the worse on Thursday after the release of forecast-missing GDP data from Europe and Japan, while in today’s data the Italian trade balance for December at 2.16 billion euros came in below the expected 2.22 billion euros and November's 2.36 billion euros. The EU trade balance for the same month at 12 billion euros was better than the expected 10.7 billion euros, however.

"The base metals remain in consolidation mode - they seem to be capped by overhead selling, which is not surprising given prices are up in the multi-month high ground, but dips are being well supported," FastMarkets analyst William Adams said. "Aluminium is the metal showing most strength, which is interesting considering premiums are at or near record highs."

The Chinese week-long holiday for lunar New Year continues to dampen business, with the country set to return from Monday. But business may still be light, with not all businesses reopening, while the US will be absent on Monday for Presidents Day.

Attention will now turn to the G20 meeting that takes place today. Discussions are likely to centre on currencies and exchange rates.

"Exchange rate policy discussions likely to continue after G7 members committed to preserve 'market determined' exchange rate regimes earlier this week," said Credit Suisse.

Date due form the US later today include Empire State manufacturing, industrial production, preliminary UoM consumer sentiment and preliminary UoM inflation expectations. Good numbers from the US today should support prices.

In other markets, Gold fell to its lowest in more than five months this morning at $1,625.70 per ounce and Brent crude oil gave back 34 cents to $117.66 per barrel.

Equities are also mostly lower, with the Nikkei dipping more than one percent to 11,173 and the FTSE and Dax both down about 0.2 percent.


Copper at $8,243 per tonne was up just $6 on the previous day’s close. Inventories rose a net 2,550 tonnes to 401,675 tonnes after Johor stocks climbed 2,425 tonnes to 42,425 tonnes.

Aluminium was still strong on technical buying at $2,166.25, up $8.25. Volumes continued to outpace those of copper, with 4,216 lots changing hands on Select so far against copper’s 2,467 lots. Stocks fell 2,650 tonnes to 5,145,150 - widespread drawdowns offset a 4,500-tonne increase at Vlissingen.

Rusal, the world's largest primary aluminium producer, is switching to monthly premiums for customers from annual premiums, its practice in previous years, Macquarie said.

"The company says that over half of its sales will be priced on this basis in 2013.  The move follows a substantial rise in premiums over the last few years, to record levels, driven primarily by financial market carry (stock financing) trades coupled with certain idiosyncrasies in some warehousing systems," the broker said in a report. "Rising premiums, in turn, have enhanced returns from the carry trades."

 Zinc fell back below $2,200 - it was last at $2,196.75, up $7.75. Stocks rose 5,450 tonnes to 1,193,550 tonnes, with the most significant increase in New Orleans, while cancelled warrants fell 2,475 tonnes to 647,150 tonnes.

Lead was $3.50 higher at $2,410 after a 75-tonne rise in inventories to 287,150 tonnes and a 300-tonne drop in cancelled warrants to 151,800 tonnes.

Nickel business was last at $18,309, up $55, after stocks fell 240 tonnes to 153,480 tonnes and cancelled warrants rose 216 tonnes at 25,056 tonnes, close to record highs.

Tin at $24,885 was $60 higher after a 25-tonne stock increase to 13,375 tonnes, while cancelled warrants at 2,265 tonnes were up 50 tonnes.

Steel was last at $300/330, while in the minor metals cobalt was indicated at $25,050/26,450 and molybdenum was offered at $24,500.

(Editing by Mark Shaw)