LME MORNING - Base metals sell off, key support levels broken

By: Kathleen Retourne

London 01/03/2013 - Base metals sold off on the LME on Friday morning when sentiment took multiple blows from largely disappointing economic figures in a data-heavy day.

Many metals have sunk to multi-month lows, triggering stops on the move down

“A slew of poor economic data has taken its toll on prices, with major support areas giving way,” a trader said. “Technical sales will now feature, as prices look to find new support levels.”

“We expect the base metals to remain under pressure while the market adjusts after having become too optimistic in recent months,” FastMarkets analyst William Adams added.

The EU CPI flash estimate and the unemployment rate both disappointed at 1.8 percent and 11.9 percent respectively. The Italian preliminary CPI undershot at 0.1 percent, while the Italian unemployment rate increased 11.2 percent quarter on quarter and 11.7 percent month on month, which added to growing concerns about the country’s stability. The euro was last at a soft 1.3048 against the dollar.

Chinese HSBC manufacturing data also missed forecasts earlier and its manufacturing PMI fell to 50.1 in February from 50.4 in January. The comparative HSBC number, however, came in on expectations at 50.4.

“We believe that the Chinese economy remains on the road to recovery and will lend buoyancy to metal prices again in the medium term,” Commerzbank said. “In the short term, the pressure on metal prices could abate if the ISM index in the US does not fall as sharply as expected this afternoon. After all, a number of regional indices have proved to be surprisingly positive of late.”

Core PCE numbers, personal spending and the revised University of Michigan numbers are due from the US later as well as personal spending and income, consumer sentiment and inflation expectations, construction spending and total vehicle sales.


TECHNICAL SELLING PULLS DOWN PRICES

Copper bottomed out at $7,658.50, its weakest since November 13, and was last at $7,690 per tonne, down $125 on the previous day’s close. Volumes are exceptional, with 16,300 lots changing hands on Select by 11:00 GMT.

In stocks, inventories rose for the 12th consecutive day, up a net 12,650 tonnes at 458,775 tonnes, the highest since October 10, 2011. Johor stocks rose 6,825 tonnes to 75,425 tonnes and Antwerp rose 4,825 tonnes; there were smaller increases in New Orleans and Johor.

“Still rising copper stocks are weighing on prices. Copper stocks registered on the Shanghai Futures Exchange climbed by 18,500 tonnes to a good 226,000 tonnes this week, bringing them to almost the same level as the record high they achieved a year ago,” Commerzbank said.

Aluminium slumped to its softest since November 23 at $1,962 and was last at $1,967, down $44 or 2.2 percent after a 10,500-tonne jump in inventories to 5,172,550 tonnes, once again due to increases in Vlissingen. Stocks in this location rose 15,375 tonnes to 1,599,700 tonnes. Cancelled warrants were also higher, up 17,900 tonnes at 1,930,850 tonnes.

Traders said that further technical selling in aluminium is expected in the coming days because longer-term models will now be active.

Zinc was last at $2,025, a $40 decline - the metal has been hit by technical selling all week, with 8,760 lots changing hands on Select so far this morning. Stock moves added to the metal’s woe - these rose 4,650 tonnes to 1,200,050 tonnes after 4,075 tonnes entered New Orleans and Antwerp received 650 tonnes.

Lead at $2,232 was down $49 - stocks and cancelled warrants both fell 50 tonnes to 287,225 tonnes and 149,550 tonnes respectively. Nickel at $16,438 was $167 lower after stocks jumped 1,572 tonnes to 159,552 tonnes, the highest since March 10, 2010. But cancelled warrants climbed 2,250 tonnes to 25,218 tonnes, a new all-time high.

Tin was last at $22,990, down $410. Stocks fell 25 tonnes to 13,575 tonnes and cancelled warrants rose 25 tonnes to 2,410 tonnes.

Steel closed at just $255/265 yesterday and last offered but not bid at $330, while inventories were unchanged yet again. Cobalt was indicated at $25,000/25,750 and molybdenum was offered at $24,700.  


(Additional reporting by Eddie van der Walt, editing by Mark Shaw)

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