LME MORNING - Base metals track euro lower, derisking seen ahead of Thanksgiving

By: Kathleen Retourne

London 21/11/2012 - Base metals were lower in Wednesday morning premarket trading when a softer euro weighed on markets after the eurogroup failed to come to an agreement about the Greek debt crisis.

The single currency was last at 1.2781 against the dollar, dropping below the 1.28 level and down around half a cent, pressured by international lenders failing to agree how to lower Greece's debt to a sustainable level.

The group, which insists some progress has been made, has arranged to hold another meeting on November 26.

“There was some disappointment with the lack of decision on Greece,” a nickel trader said. “We could see some de-risking as the US is off for Thanksgiving, and maybe some profit-taking ahead of this.”

“The lack of activity may have a gravity affect, and things could move lighter, but should see some fresh interest on Monday,” he added.

The outlook on the US, however, was more positive after housing starts picked up unexpectedly in October, rising to 890,000 against a forecast of 840,000 and 860,000 in September.

There was also greater hope that a political compromise would be reached on the looming fiscal cliff after US Federal Reserve Chairman Ben Bernanke implored lawmakers to strike a deal before the slate of tax hikes and spending cuts has a chance to weaken the country's economic recovery.

US markets will be closed on Thursday and very quiet on Friday for the Thanksgiving holiday so weekly unemployment data will be released today rather than tomorrow. Also due for release are the US flash manufacturing PMI as well as revised UoM consumer sentiment and inflation expectations.


Lead at $2,147.50 per tonne was down $23.50 on the previous day’s close after stocks and cancelled warrants both jumped. Inventories were up a net 25,200 tonnes to 361,625 tonnes - the highest since April 27 - after Vlissingen boosted stocks by 118 percent or 25,425 tonnes to 46,925 tonnes, of which just 100 tonnes were cancelled warrants.

Total cancelled warrants were up 31,775 tonnes at an all-time high of 140,800 tonnes due to a jump in Antwerp of 32,000 tonnes to 52,500 tonnes - they now account for 58 percent of stocks in this location.

Copper at $7,712 was down $71. Stocks were little changed, down 175 tonnes to 253,875 tonnes, while cancelled warrants dipped 925 tonnes to 41,250 tonnes.

“Copper also came under pressure after China data showed foreign direct investment dropped 3.5 percent to $91.7 billion in October for the 11th consecutive month,” ANZ Research said.

China’s bonded warehouse stocks of copper are reportedly more than 800,000 tonnes and potentially at record highs of around 1 million tonnes, about 30 percent higher year-on-year, it added, although stockpiles tend to build up at time of year due to seasonal restocking.

Aluminium fell $20.25 or more than one percent to $1,943.25. Although inventories slipped from yesterday’s all-time high, down 6,000 tonnes at 5,166,500 tonnes, cancelled tonnes fell 8,925 tonnes to 1,809,025 tonnes.

Nickel, which was yesterday’s standout performer, breaking above its 100 day moving average, was not immune to the downturn. It slipped $90 lower to $16,510. Stocks were down 336 tonnes to 133,578 tonnes and cancelled warrants at 12,576 tonnes were down 546 tonnes.

“There have been some rumours that the China reserve may be buying some nickel,” the nickel trader added. “Pricewise, it is doing slightly better but the fundamentals do not stack up and it is likely a technical rally."

Zinc at $1,915.75 lost $24.25, with stocks down 2,825 tonnes at 1,174,250 tonnes and cancelled warrants 3,075 tonnes lower at 544,475 tonnes slipped.

Tin at $20,500 was down $300. Stocks were unchanged at 11,530 tonnes and cancelled warrants fell 25 tonnes to 4,915 tonnes.

Steel was soft at $325/345. In stocks, drawdowns from Antwerp stores continue, falling another 2,015 tonnes to 63,115 tonnes, while Rotterdam inventories fell 130 tonnes to just 65 tonnes.

In the minor metals, cobalt was indicated at $22,500/24,000 and molybdenum was offered at $26,500.

(Editing by Mark Shaw)