LME MORNING - Base metals weaken on soft manufacturing data, copper near 18-mth lows

By: Martin Hayes

London 23/04/2013 - Base metals fell across the board during bumpy LME premarket trading on Tuesday amid pressure from a string of mostly soft global manufacturing activity readings, which added to already-jittery sentiment in the complex, traders said.

Copper fluctuated violently, hitting and then bouncing off 18-month lows in heavy turnover - prices whipsawed around the short-term pivot level of $6,800 per tonne, losing some two percent from Monday.

"The weaker tone has returned, following the disappointing flash PMI manufacturing number in China," William Adams of FastMarkets said.

China' HSBC Flash Manufacturing PMI for April came in at 50.5, below the forecast of 51.4 and a drop from the March reading of 51.6, although a result above 50 still indicates continued expansion.

"Economic activity in China thus appears to be relatively subdued in the current month too, which is likely to preclude any noticeable recovery in metal prices in the near future," broker Commerzbank said.

The April Flash Manufacturing PMI for France at 44.4 was marginally better than the predicted 44.2 but Germany's reading of 47.9 undershot the predicted 49.0, while the eurozone outturn of 46.5 was below the hoped-for 46.8.

The US PMI is due later, as are a whole host of other US figures, suggesting volatile business flows for the rest of the day.

Wider macroeconomic sentiment continues to spark market volatility throughout the commodity sector as risk appetite waxes and wanes - gold and crude oil are both retreating this morning.

The patchy nature of the US economic recovery, continued eurozone sovereign debt overhanging and China's moderating growth are all contributing to heightened market uncertainty, traders added.

"There has been some over-reaction in the recent sell-off from a fundamental perspective, but that should not distract attention from the fact that (supply/demand) balances in most markets are less supportive of prices than was the case a year or so ago," broker Macquarie said.

This afternoon, US data includes PMI, the February US HPI, March US new home sales figures and the April US Richmond manufacturing index. Tuesday's metals-sensitive data underperformed - US existing home sales at an annualised 4.92 million in March undershot the expected 5.02 million.

"Overall, the metals remain vulnerable but we expect bargain-hunting to provide support before too long because they are looking increasingly oversold," FastMarkets' Adams added.


Copper business was volatile and busy from the outset, falling back from levels above $6,900 in Asia to as low as $6,762.25, its weakest since late-October 2011. The market then partly recovered to back above $6,800, but at $6,805 per tonne recently it was $130 lower, with turnover on Select approaching 20,000 lots by mid-morning.

In stocks data, inventories rose a net 8,525 tonnes to 621,600 tonnes, the highest since August 2003. Cancelled warrants - metal booked for removal - jumped 3.7 percent to a record 163,500 tonnes as queue-building operations continued.

Copper's key short-term pivot remains $6,800; the market will be vulnerable to renewed and swift declines given the likelihood of option-related sales adding pressure, with $6,700 the next downside target.

Aluminium was in the middle of a roughly $20 intra-day range, trading at $1,884, an $8 loss. Inventories fell 650 tonnes to 5,176,200 tonnes but cancelled warrants climbed 82,650 tonnes or 4.1 percent to 2,070,175 tonnes, the highest since late in January.

Zinc was $19 lower at $1,863, although there was a substantial stock fall for the seventh day in a row. The 6,175-tonne drop took the total down to a six-month low of 1,098,600 tonnes, although metal is mostly moving between warehouses - surplus production is building this year.

Sister metal lead fell $23 to $1,987. The latest stock fall - a 1,025-tonne decline - took the stockpile down to 258,825 tonnes, the lowest since October 2012.

Nickel at $15,166 was $134 lower and just hovering above the previous day's near-four-year lows of $15,092. Stocks were up 570 tonnes at a new record high of 174,546 tonnes.

Tin was $245 lower at $20,550, with inventories down 90 tonnes at 14,395 tonnes. Steel was neglected, while stocks held at 77,480 tonnes.

In the minors, cobalt was indicated at $26,500/27,750, close to six-month highs - stocks were down five tonnes at 426 tonnes. Molybdenum was quoted at $24,500/26,500.

(Editing by Mark Shaw)