LME MORNING - Base metals mixed, S&P downgrades priced in but eurozone issues remain

By: Kathleen Retourne

London 16/01/2012 - Base metals gave up some of their gains during Monday morning trading on the LME when as eurozone fears counteracted stock falls across the complex.

The downgrade of several eurozone countries by ratings agency Standard & Poor's on Friday had little impact on base metal prices, with traders believing that the news had already been priced in.

But despite a strong start this morning, the complex is not immune to the wider financial markets - prices have since dropped back, with US markets also closed for Martin Luther King Day.

“Trading could be thin today due to the US holiday,” a trader said. “Markets are in the top of current ranges and will trade around these levels for the next few days but wider eurozone concerns will come to the fore and we will see lower numbers after the final tranche of index re-balancing is done."

“Obviously the data released from China tomorrow will have a bearing initially, but there a wider issues closer to home.”

A slew of data is due this week, with the metals market keeping a keen eye on China in particular. The country will release data on GDP, industrial production and fixed asset investment on Tuesday, which may provide a better view of the country’s current economic picture.

 “A moderation of growth is widely expected, but a negative surprise could weigh on sentiment,” broker Credit Suisse said. “The fact that the copper futures curve at the SHFE is now in contango also signals that demand is weakening.”


Dwindling stockpiles at LME warehouses provided support for copper, with the red metal recently at $8,035 per tonne, an increase of $35. It had inched close to $8,100 earlier this morning but struggled to keep at this level.

Cancelled warrants rose 1,625 tonnes to 67,650 tonnes, with 48,175 tonnes cancelled in New Orleans, while total warehouse stocks fell for the ninth consecutive day to 354,575 tonnes, a net drop of 2,250 tonnes and the lowest since December 14, 2010.

“In the case of copper, bets on falling prices were moderately expanded again in the week to 10 January - financial investors have thus taken an overall negative view of copper for the 17th week in a row,” Commerzbank said.

Aluminium was $6 higher at $2,151 after stocks declined 3,100 tonnes to 4,967,450 tonnes. Cancelled warrants are at 739,625 tonnes, with 224,700 tonnes cancelled in Detroit and 422,800 tonnes at Vlissingen.

Tin lost $50 to $21,000 despite another drawdown in inventories, which saw stocks drop a further 45 tonnes to 11,160 tonnes, their lowest since April 2, 2009 still.

Nickel was also down at $19,398, a drop of $202, despite a 228-tonne drawdown in stocks to 92,232 tonnes.

Zinc inventories dropped back by 775 tonnes to 816,725 tonnes, while cancelled warrants declined 625 tonnes to 8,000 tonnes. Prices at $1,957 were down $10.

Lead at $2,026.50 was up $15.50 after stocks fell 300 tonnes to 352,200 tonnes and cancelled warrants were at 60,775 tonnes.

(Editing by Mark Shaw)