London 28/11/2012 - Base metals were drifting back during routine LME premarket trading on Wednesday, with the trend reflecting the lack of follow-through to yesterday's rally, traders said.
The market remained broadly constructive, however, given the rallies so far this week that have lifted prices in the complex towards and, in some cases, above range ceilings.
"It is slow - I think copper really needs to get back above $7,800 again to get some of the shorts chase it up. It looks like consolidation for a while," a trader said.
Prices were tracking back from the multi-week highs that many hit yesterday - broad rallies had been sparked by the eurogroup agreeing terms for the next tranche of financial aid for debt-ridden Greece. This morning, the euro was also extending losses, while overall risk appetite was muted.
The single currency, which was above 1.30 against the dollar on Tuesday at a six-week high, was languishing nearer the 1.29 level, settling recently around 1.2920.
Wider market sentiment remains fretful given that sovereign debt stresses in the eurozone remain and concerns are increasing over the forthcoming negotiations over the impending US budgetary fiscal cliff. Reports that little progress is being made threaten to tip the US back into recession next year.
Nevertheless, the metals are expected to continue to range, having stalled overhead on Tuesday - copper hit its highest then for some three weeks, while aluminium, tin and zinc all touched levels last seen late in October. Technicals have turned broadly positive.
"We would not be surprised if the metals remain buoyant unless another bout of weakness hits equities, which could lead to a broad-based sell-off," William Adams of FastMarkets said.
On the data side today, releases include the November German preliminary CPI, October eurozone private loan figures, October US new home sales and the latest US Federal Reserve Beige Book.
COPPER FLIRTING WITH $7,800/T, WHILE ALUMINIUM STOCKS HIT ALL-TIME HIGH
Copper traded at $7,777.75, a $28.75 loss from the Tuesday close - prices were above $7,800 in the previous session, when the market peaked at $7,828.75, its best since November 2. Warehouse stocks rose a net 425 tonnes to 249,975 tonnes.
Aluminium was $2.50 lower at $2,006.50, with prices fluctuating either side of the $2,000 level so far. On Tuesday, the market hit $2,022, its highest since October 11. Stocks climbed 3,750 tonnes to 5,178,250 tonnes, a fresh all-time high.
Zinc dropped $5 to $1,988, with the $2,000 level that prices momentarily cleared on Tuesday the upside target. Inventories increased 3,125 tonnes to 1,200,450 tonnes, just 275 tonnes below recently near 18-year highs.
Lead eased $24.25 to $2,188.75, with stocks unchanged at 361,475 tonnes. Nickel was $64 higher at $16,994 even after stocks surged 1,938 tonnes to 136,386 tonnes, the highest since January 20, 2011.
Tin slipped to $21,075, down $125 - inventories were down 35 tonnes at 11,990 tonnes. Steel billet was quoted at $330/345, with the usual stock decline seen - inventories fell 2,015 tonnes to 74,815 tonnes.
In the minor metals, cobalt was quoted at $22,500/27,450 per tonne and molybdenum at $23,750/2,600. Inventories in both were unchanged.
(Additional reporting by Eddie van der Walt, editing by Mark Shaw)