LME MORNING - Base metals pause for breath after solid week of gains

By: Kathleen Retourne

London 20/01/2012 - Base metals nudged lower during Friday morning LME trading, with prices dipping after a week of solid gains. Pulling down the metals complex was a drop in equities and the euro.

Several traders said that the metals complex was punching above its weight, going up too much too fast, and that a price correction is to be expected.

“Markets are getting overbought and feel the euro has done a lot of work very quickly on the upside. With the Chinese now on holiday we could see prices start to drift away,” a trader said.

“After the strong rise we now look for a pull-back - whether a pull-back turns into a slide remains to be seen,” said FastMarkets analyst William Adams.

The market is expected to be choppy next week as China will be on holiday for its New Year celebrations. Volumes are expected to drop, reducing liquidity and adding to the possibility of increased volatility. 

“Next week is likely to be a volatile week with China closed for the New Year holiday so it may be that the markets consolidate while they wait to see what the mood is once China returns to work on January 30,” said Adams.

Earlier, Chinese PMI data showed that manufacturing activity was contracting in January, coming in at 48.8 – six out of the past seven readings have now been below the 50 level.


Aluminium cancelled stocks - metal booked for removal - reached another all-time record high at 866,600 tonnes. Detroit cancelled warrants jumped 98,525 tonnes to 359,925 tonnes, a record high for this location and breaking the previous high of 309,825 tonnes in April 2011.

The latest increase means that a queue of seven months has now developed - even when the rise in the daily load-out rate to 3,000 tonnes is enacted in April.

Net warehouse stocks were down 175 tonnes to 5,005,050 tonnes, while business at $2,211.75 per tonne was down $20.25. 

Copper net warehouse stocks fell for the 13th consecutive day, dropping 2,450 tonnes to 348,750 tonnes - 1,175 tonnes of which came out of New Orleans. Cancelled warrants at 68,900 tonnes were down 900 tonnes, while prices fell  under $8,300 to $8,277.50, a decline of $172.50.

Zinc inventories grew for the fourth day in a row, increasing 2,825 tonnes to 843,325 tonnes and cancelled warrants were down 300 to 22,400 tonnes. Prices at $2,014 were down $16.

Nickel was holding above the $20,000 level for the first time since the end of October. It had hit a peak of $20,400, then slipped back to $20,200, unchanged from yesterday’s close.

“It is profiting not only from the current generally upbeat market sentiment but also from announcements by Norilsk Nickel, the world’s largest nickel producer, that it plans to reduce its production this year,” said Commerzbank.

Net warehouse stocks for nickel have fallen 120 tonnes to 91,688 tonnes, while cancelled warrants at 1,662 tonnes were down 120 tonnes.

Lead slipped $20.75 to $2,162.25, while inventories declined 1,200 tonnes to 347,525 tonnes, with cancelled warrants at 43,150 tonnes. Tin stocks were down 945 tonnes to 9,800 tonnes while cancelled warrants at 1,595 tonnes were down 545 tonnes - business, at $21,600 was down $300.

Steel billet traded at $520, down $12, and the lowest since mid-October.

(Editing by Martin Hayes)