LME MORNING - Metals retreat as eurozone jitters return to spook sentiment

By: Martin Hayes

London 12/12/2011 - Base metals headed lower during Monday LME pre-market trading, weighed down by losses in equity markets, a retreat in the euro and the general downswing in sentiment after doubts over the eurozone debt crisis re-emerged.

Copper fell to its lowest for just more than a week, pulling the other metals lower in its wake, as the modest short-term pick-up in sentiment on Friday dissolved. The new fiscal pact to buttress the euro that was unveiled last week in Brussels failed to get unanimous backing from the EU summit meeting, which leaves financial markets again vulnerable.

"The weaker tone this morning seems to be on concerns that last week’s EU summit did not do much to tackle the current issues," William Adams of FastMarkets said.

All EU countries except Britain agreed to stricter budget rules and a stronger fiscal union and to provide up to 200 billion euros in bilateral loans to the IMF. But the capacity of the eurozone's bailout fund was capped, while there was no hint the ECB was ready to take stronger action.

This morning, equity markets tumbled in Asia and Europe, with European shares recently some 0.6 percent lower. The euro was also under pressure, steadily falling back against the dollar to near 1.3250.

Chinese Customs data released on Saturday offered little support - although exports rose 13.8 percent in November form the same month of last year, import growth slowed to 22.1 percent from October's 28.7 percent, the lowest since 2009.

For the metals, the countdown to the end of the year accelerates this week - business flows and price movements are likely to become erratic.

"Prices are generally under pressure and drifting lower but there seems little energy within the complex to become more directional," Adams said.


ALUMINIUM INVENTORIES SOAR TO ALL-TIME HIGH

Aluminium skidded down to $2,031, a $34 loss, not helped by inventories rising 126,650 tonnes or 2.7 percent to a new all-time high of 4,715,500 tonnes due to a further massive warranting in the Vlissingen warehouse.

Today, 128,625 tonnes were warranted there, taking the total in that location to 888,800 tonnes - on Friday 47,050 tonnes were put on warrant as well.

This is believed to be metal mostly of Russian origin and is being warranted by a large Europe-based trader into newly built Pacorini-owned warehouses in the Dutch city, traders said.

In the earlier Chinese data, aluminium imports climbed 30.7 percent to 78,673 tonnes last month.

Copper dropped to $7,640 per tonne, down from the Friday close of $7,815/7,816, ignoring warehouse stocks data - inventories fell for the eighth day in a row, down a net 500 tonnes at 385,575 tonnes, the lowest since late January.

China's copper imports in November rose 18 percent to 452,022 tonnes from last month. This reflected some pre-holiday booking before the Chinese New Year in late January 2012 and some arbitrage buying when prices dropped to $7,100.25 on November 24 before rebounding on November 30.

In other metals, zinc eased to $1,966, a $37 loss. Stocks were up 2,550 tonnes to 759,900 tonnes, the highest for one month.

Lead fell back to $2,116, down $49 from the close on Friday, although stocks fell for the 11th successive day, down 1,400 tonnes at 360,300 tonnes, the lowest since late September.

Nickel traded at $18,175, down from $18,600 - inventories were up 282 tonnes at 90,324 tonnes but there was a massive 78-percent jump in cancelled warrants - the metal booked for removal. This was due to 2,712 tonnes of full-plate Russian metal cancelled in Rotterdam.

Tin business at $19,820 was $430 lower - there was a 75-tonne stock decline to 12,090 tonnes. In steel, inventories were down 1,625 tonnes at 65,845 tonnes, with prices steady at $542/553.

Cobalt was indicated at $30,000/31.100, while molybdenum stood at $28,000/30,750.


(Additional reporting by Yoke Wong, editing by Mark Shaw)

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