LME MORNING - Base metals coast, copper dips back below $7,000/t

By: Kathleen Retourne

London 07/08/2013 - Base metals were trading sideways on Wednesday morning, with a lack of drivers draining liquidity from a seasonally becalmed market.

"Prices are trading in their current ranges as the summer slowdown takes hold," a trader said.

The August doldrums are now underway, with much Europe absent for holidays. Additionally, many market participants prefer to wait on the sidelines ahead of the Chinese data releases at the end of the week.

"Recent attempts by the base metals to break higher and challenge key resistance have highlighted the lack of buying support at key levels," said FastMarkets analyst Jono Remington-Hobbs.

"We identify two major causes of this lack of momentum - the depth of the summer slowdown and, potentially a more potent reason, the release of Chinese monthly economic data on Friday morning, which could move a market that is seasonally thin," he added.

As well, concerns of stimulus tapering in the US remains a fixture of the market, overshadowing sentiment and capping moves higher, but for now metals seem content to trade sideways.

Yesterday, Federal Reserve regional president Richard Fisher unsettled investors after he said: "Unless we see some disturbing data, we should start trimming bond buying in September." The US central bank is currently committed to buying $85 million in bonds in an open-ended programme.

"[Fisher] noted that the Fed 'must carefully remove the program's pole pin... so as not to prompt market havoc'. At the same time as Fisher was speaking, the ISM non-manufacturing data was released coming in at 56.00, well above market expectations of 53.1 expanding at its fastest pace in 5 months," MKS in a note said.

In data, French trade balance numbers surprised to the upside at -4.4 billion euros. Later today, German industrial production data will be released.

"Any movement reacting to published data could be exacerbated due to lack of market liquidity," the first trader said

Copper at $6,982 per tonne was down $23 on the previous day's close, while inventories fell for the 15th consecutive day, dropping a net 3,525 tonnes to 601,600 tonnes - the lowest since March 24. Cancelled warrants, the metal booked for removal and in queues, were down 1,750 tonnes at 320,850 tonnes.

Aluminium at $1,785 was down $13 - stocks and cancelled warrants were both 7,350 tonnes lower at 5,473,275 tonnes and 2,104,300 tonnes respectively.

Nickel at $13,760 was up $30 after inventories and cancelled warrants both slipped 918 tonnes to 203,988 tonnes and 31,464 tonnes respectively.

Lead fell $3.50 to $2,107, with inventories and cancelled warrants both falling 575 tonnes. Sister metal zinc at $1,852 was down $5 - inventories at 1,052,075 tonnes were 3,225 tonnes lower

Tin was $50 higher at $21,300, continuing to benefit from technical short-covering. In the nearby forward spreads, cash/August was last at a backwardation of $13.50, while August/Sept was at $10.00 back. Stocks were unchanged at 13,775 tonnes.

"The spread remains tight although some nearby lending came out," Triland said in a note. "Indonesia's tin export rules continue to delay shipments... Meanwhile, some consumers are pinning their hopes on the end of Ramadan to bring out fresh offers of material."

Steel was indicated at $120/200 - inventories fell for the 18th consecutive day, down 1,690 tonnes to 42,185. In the minor metals, cobalt was indicated at $25,000/27,500 while molybdenum was neglected.

(Editing by Mark Shaw)