LME MORNING - Base metals edge off lows but remain under pressure

By: Kathleen Retourne

London 18/02/2013 - Base metals slipped in start-of-week premarket trading, with copper and nickel falling to three-week lows as the end of the Asian New Year holiday period initially failed to rejuvenate the complex.

“The return of Chinese traders to the market after their week’s holiday has not yet been able to give any impetus to base metals,” Commerzbank said “For seasonal reasons, however, demand for metals in China should pick up again from now on."

Despite the restart in China following holidays, business levels across markets should remain slack today given that US markets are closed today for the Presidents Day holiday.

"That probably means we won’t see any real significant clues as to market direction till midweek," broker RBC said.

For the metals, pricing against the February 'third Wednesday' prompt date takes place during the official rings - otherwise, a flat session is in prospect.

“With prices near the top of the multi-month range there is likely to be increased selling interest around and if sentiment in China is not that bullish that could add downward pressure on prices,” FastMarkets analyst William Adams said.

Poor EU current account data at 13.9 billion euros, below the expected 15.3 billion euros, pulled down the euro and weighed on prices - the single currency was last at 1.335 against the dollar, down around a tenth of a cent.

The dollar index added 0.15 to 80.62, close to an earlier six-week high of 80.73. The US currency continued to rally on yen weakness after the G20 group this weekend avoided singling out Japan for criticism for allowing its currency to depreciate in an attempt to spur inflation.

While the finance ministers failed to come to an agreement over currency policy, they agreed there would be no 'currency war' and put back aims of setting new debt-cutting targets.

No further frontline data is expected today. Friday's US figures, despite mostly upbeat readings, had little impact on metals. The Empire State Manufacturing Index was 10.0 against a forecast -2.1 but US industrial production fell 0.1 percent. The UoM Consumer Sentiment index was 76.3, above a predicted 74.8.


MARKETS SLIP

Copper fell to a session and three-week low of $8,127 before settling at a higher $8,136, still down $71. But volumes have improved markedly on last week - around 7,620 lots have changed hands on Select so far.

Copper inventories were up for the third consecutive day, rising a net 2,625 tonnes to 404,300 tonnes. New Orleans and Antwerp were responsible, up 2,525 tonnes and 1,450 tonnes respectively. Cancelled warrants continued to drop, down 1,025 tonnes to 29,325 tonnes, the lowest level since December last year.

Aluminium halted its technically lead rally, falling $20 to $2,147 after total stocks rose 11,700 tonnes to 5,156,850 tonnes thanks to an 18,700-tonne increase at Vlissingen. Cancelled warrants dropped 10,500 tonnes to 1,974,625 tonnes.

Nickel earlier dipped below $18,000 for the first time in three weeks but has since stepped back to $18,090, still down $285. Stocks were down 210 tonnes at 153,270 tonnes and cancelled warrants at 24,894 tonnes were down 162 tonnes.

Lead was down $16 at $2,417 after stocks rose 1,275 tonnes due to a 1,475-tonne increase in Johor. Sister metal zinc was $14 lower at $2,161 - stocks and cancelled warrants both fell 2,500 tonnes to 1,191,050 tonnes and 644,650 tonnes respectively.

“A meteor shower on Friday damaged buildings at the Chelyabinsk zinc plant in Russia, but there are no reports of production being affected,” ANZ Commodities said.

Tin was $109 lower at $24,690. While stocks rose 75 tonnes to 13,450 tonnes, cancelled warrants slipped 100 tonnes to 13,450 tonnes.

Steel was indicated at $300/330, with stocks unchanged for the 26th consecutive session at 83,070 tonnes. Cancelled warrants, however, jumped 2,535 tonnes to 40,625 tonnes, the highest since November 16.

In the minor metals, cobalt was indicated at 25,000/26,500 and molybdenum was neglected.


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

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