LME MORNING - Base metals mixed, copper and aluminium claw back losses but all remain jumpy

By: Kathleen Retourne

London 11/04/2012 - Base metals were mixed on Wednesday morning , with copper, aluminium and tin making a slight recovery after yesterday’s sharp sell-off while the rest remained trapped in negative territory.

Aluminium and copper fell to a fresh three-month low earlier but prices have since turned higher, although a nervous market is keeping a lid on gains.

But given the rapid deterioration in sentiment that developed over the Easter holiday period, prices are seen coming under further pressure. Wider markets and overall sentiment have been hit by an onslaught of global economic concerns.

"They don't go away, these problems," a trader said.

Concerns about eurozone debt contagion resurfaced after the yields on riskier Italian and Spanish debt climbed yesterday. Today, Italy’s 365-day bond jumped to 2.84 percent from 1.84 percent on March 13.

“The rising yield, in conjunction with the recently poor Spanish bond auction, is further evidence that the positive effects from the last two rounds of the ECB's long-term refinancing operations (LTROs) are fading,” FastMarkets analyst Jono Remington-Hobbs said.

Spain is the main concern for the market, with concerns mounting that the country could be heading towards a bailout. Austerity measures announced by the country have had little impact on investor fears, with the euro this morning around a soft 1.3114 against the dollar.

China's latest trade data highlighted a slowdown in imports, suggesting slackening demand in the world's key metals consumer, while Friday's US March employment report showed less jobs were created last month than expected, which pointed to stickiness in the country's economic recovery.

In further global news, a tsunami warning for all areas of the Indian coast has been issued after an earthquake registering 8.9 magnitude hit Indonesia. The area is an important hub for metal shipments from major ports, while there are producing facilities in the region - tin in particular.


MARKET UNCERTAINTY WEIGHS

Copper bottomed out at a fresh low since January 16 at $8,018 before recovering tentatively, with recent business at $8,066.75 per tonne, up $30.75 from Tuesday's weak close.

“Stops are rumoured to be building below $8,000 as traders would expect to see a rash of long liquidation on closes below this level,” RBC Capital Markets said.

Inventories, which have started to nudge up recently, fell a net 1,250 tonnes to 267,150 tonnes. Volumes are building, with 9,550 lots changing hands on Select so far.

Aluminium traded at $2,083, up $18 from the previous day's close.

“The market will remain over-supplied for the foreseeable future. High production costs, fuelled by high energy costs, are the main argument against aluminium prices falling to any great extent,” broker Commerzbank said

Inventories declined by a hefty 15,700 tonnes to 5,050,925 tonnes as “warehouse games” continue. This was due to withdrawals of 2,850 tonnes from Detroit, 6,000 tonnes from Vlissingen, 4,500 tonnes from Johor and 2,475 tonnes from Singapore.

"This is not physical demand - it is more 'smoke and mirrors' and metal moving around the warrants system," the trader said.

Zinc was under pressure below $2,000 - it was last at $1,989.50, down $0.50 but up from its sessions low of $1,977.25. Stocks climbed 925 tonnes to above 900,000 tonnes for the first time since May 1995 - the total is now 900,750 tonnes.

Lead at $2,010 was down $8 after inventories rose a 1,150 tonnes to 374,525 tonnes, while cancelled warrants stepped back to 12,425 tonnes.

Nickel at $18,050 is also stuck in negative territory, down $125. Stocks were down 696 tonnes to 99,330 tonnes and cancelled warrants at 6,834 tonnes fell 660 tonnes.  

Tin at $22,800 is around session highs and up $50 on yesterday’s close although stocks rose 105 tonnes to 13,150 tonnes, while cancelled warrants 860 tonnes were up just five tonnes.

Steel was indicated at a steady $500/520 - inventories fell for the 21st day in a row, dropping 3,380 tonnes to 31,200 tonnes, the lowest since July 19, 2010.

In the minor metals, cobalt was quoted at $30,500/32,000 and molybdenum at $30,500/32,000.


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

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