LME MORNING - Base metals stuck in range, copper finds resistance

By: Kathleen Retourne

London 10/07/2013 - Base metals were treading water in the LME pre-market on Wednesday as the market took stock of Chinese trade data, while participants also awaited FOMC minutes from the US later today.

“Prices between the base metals now seem to have a disconnect,” a trader said. “Copper has slipped back on the expectation that QE will be lifted later in the year and overhead resistance is keeping market in check. However, nearby spreads have tightened - aluminium, zinc and lead are largely well supported. Rangebound for now.” 

Meanwhile, Chinese trade data fuelled concerns that  the country is in a slowdown as both imports and exports declined in June - in the latter case for the first time since early 2012.

China's copper imports in June climbed by 5.6 percent month-on-month to 379,951 tonnes, but the poor performance of both imports and exports pointed towards an economic slowdown for the world's top metals consumer, according to preliminary General Administration of Customs data.

Attractive arbitrage opportunities between the exchanges in London and Shanghai, with a roughly two-month delay, means purchases being reflected in the import statistics explained broker Commerzbank.

“For another thing, the copper stocks in the warehouses of the SHFE have been slashed since the end of March by around 75,000 tonnes or 30 percent – they currently find themselves at a nine-month low – while cancelled warrants in the Asian LME warehouses are close to a record high."

"Both these factors point to robust demand from China. Last but not least, Chinese traders are likely to have taken advantage of the low copper prices to trade opportunistically. Imports could thus continue to be relatively robust in the coming months too," said the bank.

Meanwhile, China's trade balance came in at a $27.1 billion surplus, against an expected $27.8 billion and up from the previous month’s $20.4 billion.

Later today the US FOMC will be releasing its minutes from its last meeting, and Fed chairman Ben Bernanke is set to speak. Market participants will be watching for any mention on its stance surrounding quantitative easing measures.

“Focus will also be on discussions about the exit strategy and expectations about the interest rate path,” said Credit Suisse. “Remarks by Fed officials indicate some unease with the market’s reaction to the meeting, particularly the expected timing of the first rate hike. More clarity on the Fed’s views would surely be welcomed by a market looking for guidance.”

In currencies the euro remained under pressure, but has managed to climb back above $1.28 last at $1.2804.

In other data releases German CPI numbers were as expected at 0.1 percent, while French industrial production surprised to the upside, falling 0.4 percent against an expected 0.5 percent fall. Italian industrial production disappointed at 0.1 percent.

COPPER BUSY

Copper at $6,777 per tonne was up $57 on the previous day’s close, while volumes have already seen 11,500 lots change hands on Select so far. Stocks were down a net 4,125 tonnes to 646,000 tonnes and cancelled warrants at 342,600 tonnes declined 4,750 tonnes.

Spreads are moving in and out of tightness - August-September, which was yesterday in contango – was last at a backwardation of $5.00, while August-3 months and Sept-3 months were at $1.00 and $2.00 respectively.

Aluminium was back above $1,800 at $1,805, a $15 increase, as inventories declined 8,150 tonnes to 5,425,425 tonnes and metal booked for removal slipped 7,600 tonnes to 2,244,275 tonnes.

Lead at $2,056.50 was down $19.50, while both stocks and cancelled warrants were down 1,100 tonnes to 194,875 tonnes and 109,225 tonnes respectively. Nickel was stuck around four-year lows, last at $13,480 still up $155, although stocks jumped 1,296 tonnes to 194,712 tonnes.

Zinc at $1,880 was $11 higher as stocks fell 4,900 tonnes and cancelled warrants at 677,325 tonnes lost 5,125 tonnes. Tin at $19,457 jumped $152, stocks were stagnant at 14,410 tonnes but cancelled warrants at 3,680 tonnes jumped 1,005 tonnes.

Steel was last quoted at $100/210 with no change in inventories, while in minor metals cobalt was indicated at $29,500/31,100 and molybdenum was neglected.  

(Editing by Martin Hayes) 

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