LME MORNING - Metals down from multi-month highs, await stimulus news

By: Eddie van der Walt

London 11/09/2012 - Base metals retreated during Tuesday LME pre-market trading from multi-month highs set on Monday, but some still managed to gain on the overnight closes.

"The charts of the metals look strong so we would expect dips to be well supported for now and would not be surprised to see the rallies extend before too long," FastMarkets analyst William Adams said.

The market again waits for news on further monetary stimulus, as well as the fate of the European Stability Mechanism (ESM), which is held in the lap of a German Supreme Court ruling due out on Wednesday.

The US Fed is widely expected to announce a third round of quantitative easing (QE3) when it releases its statement on Thursday.

Disappointing news flowing out of China also weighs. Earlier in the week, factory production numbers for August disappointed, then, on Monday, the Chinese customs authority reported that copper import figures were just under 356,000 tonnes, down 2.9 percent month-on-month, and up just 4.4 percent on the previous year.

"The rather negative news we have been receiving from China of late continues," Commerzbank said in a note, adding however that the increase in domestic copper production may have had something to do with the fall. Figures from the Beijing's National Bureau of Statistics show it reached 511,000 tonnes in August.

In companies news, Qatar Holdings (QH) said it has not yet made a decision on the improved terms offered for the proposed merger between mining heavyweights Glencore and Xstrata.

On Friday, Glencore improved its offering from 2.8 shares for each Xstrata share to 3.05, making the deal worth $36 billion, with Xstrata boss Mick Davis set to lead the joint venture for six months. Qatar is a major Xstrata shareholder and is likely to hold the swing vote.

"Given the full details of the revised proposal are yet to be issued and a recommendation from the Xstrata board is yet to be given, we see no surprise in QH’s clarification of position," broker Liberum Capital said.

In data released so far, Japan's business survey manufacturing index showed a recovery from a fall of 5.7 in the second quarter to an increase of 2.5 in the third quarter.

Currencies saw the euro strengthen by 0.0042 to 1.2801 against the dollar, with the dollar index last down 0.23 at 80.16. Oil was last at $115.04 per barrel, up 35 cents.


Copper, which climbed to a four-month high at $8,109.75 on Monday, was last at $8,069.75, up $1.75 on the close. Stocks of the metal were stable, with a net decrease of just 50 tonnes to 214,600 tonnes. There were larger localised changes, however, with Incheon in South Korea receiving 300 tonnes and St Louis dispatching 225 tonnes. Cancelled warrants increased by 2,125 to 37,925 tonnes.

Aluminium also receded from its 16-week high at $2,065 reached on Monday. It was last at $2,062.25 per tonne, up $2.25 on the close. Stocks of the metal drifted lower for the second day in a row, dipping by 7,100 tonnes to 4,862,825 tonnes. Vlissingen saw 3,000 tonnes leave, while Detroit had an outflow of 2,975. Rotterdam alone had an increase, climbing by 2,950 tonnes. Cancelled warrants were down 10,100 to 1,612,050.

Zinc stocks decreased for the 18th consecutive time, falling by 5,175 tonnes to 933,100 tonnes, with 3,650 leaving New Orleans and 1,500 Port Klang, Malaysia. Cancelled warrants were down 5,175 to 131,075. The metal was last trading at $2,003.75 per tonne, down $11.25 on the close.

Nickel dipped $40 to $16,735 per tonne, despite a stock decrease of 6 tonnes. Stocks now total 120,810 tonnes, while cancelled warrants increased by 102 tonnes to 14,334.

Lead was last up $4 on the close at $2,124 per tonne. Warehouses saw a net outflow of 2,500 tonnes to 300,650 tonnes. Cancelled warrants were down 2,500 to 110,050. Tin was up $110 to $20,710 per tonne, with stocks unchanged at 11,665 tonnes and cancelled warrants up 440 to 7,910 tonnes.

One contract of steel traded at $335, while stocks were unchanged at 50,115 tonnes, and cancelled warrants also unchanged at 16,900. Minor metals cobalt and molybdenum were both neglected.

(Editing by Martin Hayes)