LME MORNING - Base metals struggle, economic uncertainty weighs

By: Kathleen Retourne

London 08/11/2012 - Base metals were mixed in Thursday morning LME trading while a soft euro and concerns surrounding the US fiscal cliff dominated sentiment.

“We still expect both a continuation of the Fed’s highly accommodative monetary policy and a political compromise to avoid hitting the fiscal cliff. However, events in the eurozone remain a global concern,” Credit Suisse said.

The kneejerk bounce that followed the re-election of US President Barack Obama has faded. The focus has reverted to the continued problems with eurozone sovereign debt, notably Greece.

“Shorts in the market running up to the election covered overnight on Tuesday after the result came through. This brought an end to the brief bout of short-covering and this, coupled with a weaker euro as attentions turn back to Greece, has prompted the pullback at this time. Continued pressure on the euro will keep prices in check,” a trader said.

Earlier, Greece’s parliament passed a crucial austerity bill in a narrow vote. Approval of cuts and tax increases over two years was a major step for Greek efforts to secure the next instalment of its international rescue loans.

Nevertheless, the single currency remains under pressure, coming close breaking under the two-month lows of 1.2734 against the dollar it set yesterday, settling recently around 1.2729.

For today, the major macroeconomic events are monetary policy announcements by the UK and EU - both are expected to leave interest rates unchanged, although the ECB press conference could yield fresh remarks on the outlook for troubled member states such as Greece and Spain.

Trading may be volatile today after the 18th National Party Congress in China opened this morning in Beijing, marking a once-in-a-decade change of leadership event.

“We are confident that great efforts will be made to ensure that the start of the new government is accompanied by convincing economic data. To this end, further infrastructural projects - above and beyond those already known - are likely to be announced, which should be reflected in robust demand for metals,” Commerzbank said.


COPPER WEAKENS

Copper at $7,582.25 per tonne was $27.75 lower on the previous day’s close. Inventories were down a net 725 tonnes at 244,850 tonnes, while cancelled warrants increased 6,475 tonnes to 40,800 tonnes. Volumes are robust, with 8,726 lots changing hands on Select so far.

Zinc business was $13.25 higher at $1,909.25. It has also seen notable business through Select at 4,620 lots.

Cancelled warrants hit a fresh all-time high this morning, rising 26,350 tonnes to 452,075 tonnes. Antwerp was responsible - 30,000 tonnes of metal were booked for removal, marking the first cancellations of zinc from this location. Total warehouse stocks were lower, dropping 3,575 tonnes to 1,163,075 tonnes.

Aluminium at $1,925.50 was up $5.50. Tightness in the Dec/Jan spreads remains - it was last at a backwardation of $2.50.

In stocks, Vlissingen and Detroit were the only locations to post any increases, up 4,800 tonnes and 2,850 tonnes respectively, but total stocks at 5,086,325 tonnes dropped 1,900 tonnes. Cancelled warrants at 1,678,600 tonnes were down 7,575 tonnes.

Lead was up just $1.75 at $2,177.75. Cancelled warrants and inventories both dropped 2,675 tonnes to 314,775 tonnes and 130,940 tonnes respectively.  

Nickel dropped $69 to $15,926 after stocks increased 264 tonnes to 130,764 tonnes, the highest since February 2, 2011. Tin was last at $20,399, up $99, while inventories and cancelled warrants were unchanged.

Steel at $335/345 was unchanged. Stocks in Antwerp continue to decline, falling a further 1,560 tonnes this morning. Total inventories now stand at 97,435 tonnes. Cancelled warrants were also 1,560 tonnes lower at 47,840 tonnes.

In the minor metals, cobalt was offered at $27,500 and molybdenum was quoted at $23,900/24,500.


(Additional reporting by Martin Hayes, editing by Mark Shaw)

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