LME MORNING - Base metals rally on Chinese optimism, Copper breaks 100 DMA

By: Kathleen Retourne

London 08/08/2013 - Base metals rallied on Thursday morning after the Chinese import numbers for July provided a boost to confidence.

Bellwether copper is one of the stronger performers, breaking above its 100-day moving average, with the rest of the complex following it higher.

Volumes have been robust, with around 20,500 lots of copper changing hands on Select by 10:30 BST.

“[The] Chinese are responsible, buying shorts back yesterday and buying overnight,” a trader said.

“As suggested yesterday, bullish data from China overnight has prompted prices to break out,” a second trader added. “It remains to be seen if follow through buying can sustain the rally as current conditions show lack of any real business.”

China's trade balance of at $17.8 billion for July was well below the forecast of $26.2 billion a year ago and the June 2013 reading of $27.1 billion. But exports rose 5.1 percent in July from a year ago, beating a forecast rate of 3.0 percent after June's 3.1-percent fall, the data showed.

China imported 410,700 tonnes of copper in July - the highest in 14 months, the third monthly increase in a row and up 12 percent on the same month of last year.

“China thus took advantage of the lower prices in July to buy opportunistically. Attractive arbitrage opportunities between the exchanges in London and Shanghai also played their part in this,” Commerzbank said in a note.

"The pick-up in Chinese imports, both for copper and trade generally seems to have been read as a bullish sign that China's stoking of domestic growth may be working and that seems to be fuelling a rebound in the metals," FastMarkets analyst Will Adams said.

Tomorrow, China will release a slew of economic numbers. If industrial production and fixed asset investment numbers prove strong, metal prices are likely to continue to find good support”, Commerzbank said in a note.

Meanwhile, a stronger euro also providing support after the German trade balance at came in at 15.7 billion euros was stronger than the expected 15.2 billion euros. The single currency was last at 1.3355 against the dollar.

Copper at $7,145 per tonne was up $41 on the previous day’s close but down from its intraday and seven-week high of $7,170. Inventories fell for the 17th consecutive day, dropping a net 4,025 tonnes to 5974,575 tonnes. Cancelled warrants fell 4,625 tonnes to 316,225 tonnes.

Aluminium was comfortably back above $1,800 at $1,820, a $23 jump. Inventories fell 1,800 tonnes at 5,471,475 tonnes and cancelled warrants fell 6,975 tonnes to 2,097,325 tonnes.

Nickel rose $172 to $14,147 - stocks were 120 tonnes higher. Lead at $2,129 was $13 higher - stocks increased 200 tonnes to 199,825 tonnes - and zinc at $1,873 was up $25.

Tin at $21,615 was $345 higher, having earlier peaked at $21,650 - its strongest since April 12. Prices have rallied over the past two weeks as uncertainty over Indonesian government export regulations continue to delay shipments from the world’s top tin exporter

“Tin could continue to outperform other metal markets, driven by supply-side issues,” ANZ Research said.

Steel was last at $140/200 following a 2,080-tonne decline in stocks. Cobalt and molybdenum were neglected.


(Editing by Mark Shaw)

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