LME MORNING - Base metal rally continues, amid stop-loss buying and stimulus hopes

By: Kathleen Retourne

London 10/09/2012 - Base metals built on Friday’s gains during Monday LME pre-market trading, powering ahead as fresh stimulus hopes and last week’s ECB announcement gave prices a push forward.

A strengthening euro is also providing support, now at $1.2779. just under last Friday's olur-month highs.

 “Prices are up on a mix of stop-loss buying and the expectation that further QE measures will be forthcoming,” a trader said.

“Short term trends clearly point northwards, but I feel that caution is needed as the scale of intervention from central banks could disappoint. For me, the reality is that the US non-farm number illustrates that economic and unemployment growth are not on the right track, and further policy decisions are to be taken, 'kicking the can further down the street',” he added.

Even news that Chinese factory output grew at its slowest pace in more than three years during August, increasing by just 8.9 percent, down from 9.2 percent in July, was not enough to dampen the early mood. Some analysts believe that Beijing will now have to front-load stimulus.

“China is tackling its cooling economy - growth in industrial production and fixed assets investments fell further in August – by implementing economic stimulus programmes,” said Commerzbank. “For example, China’s planning authority – the National Development and Reform Commission (NDRC) - has given the go-ahead for infrastructure projects worth the equivalent of 124 billion euros.

The Federal Open Market Committee (FOMC) will meet in Washington this week, and many analysts expect it to announce QE3 in its statement on Thursday, thus making it the third major central bank, behind the People's Bank of China and the European Central Bank, to announce policy action.

The ECB's plans to roll out 'unlimited bond buying' will face two key tests this week, with the German court ruling on the legality on such action, and with the Dutch going to the polls to elect a new government.

In company news, the on-again, off-again merger between Glencore and Xstrata appears to be on again, with Glencore increasing its share offer to 3.05 for every Xstrata share, up from 2.8. It also agreed to keep Xstrata CEO Mick Davis at the top for a period of six months.


Copper peaked to its highest since May 10, at $8,109.75 per tonne, and settled at  $8,097 up $147 on Friday’s close, after poor data from US and China increased stimulus hopes. Volume has been highs as well, with 14,550 lots changing hands on Select so far.

Warehouse inventories were down a net 1,300 tonnes to 214,650 tonnes, while cancelled warrants at 35,800 were up 6,050 tonnes, due to metal booked for removal in New Orleans, Singapore and St Louis.  

 Aluminium was holding comfortably above $2,000 at $2,045 a 16-week high and up $22. Tightness in aluminium spreads remains, the September/October spread is currently showing a backwardation of $8.00/10.00.

Stocks were down 1,500 tonnes, due to removals in Baltimore, Detroit and Johor. However, Rotterdam and Vlissingen both posted increases of 3,000 and 3,525 tonnes respectively. Cancelled warrants declined 11,050 tonnes to 1,622,150 tonnes

Lead was at four-month highs of $2,137.50, up $45.50, hile stocks fell 300 tonnes to 303,150 tonnes. Cancelled warrants were up 2,675 tonnes, due to metal booked for removal in Detroit.

Zinc peaked at $1,997.25, the strongest since May 8, and is now at $1,992 up $22. Inventories slipped 3,925 tonnes to 938,275 tonnes, the lowest since June 16. Cancelled warrants were also lower, declining 3,925 tonnes to 136,250 tonnes.

Nickel prices are around the strongest since July 5, currently at $16,749, up $249, while inventories fell 264 tonnes to 120,816 tonnes and cancelled warrants at 14,232 tonnes declined 90 tonnes. Tin at $20,375 was up $425, - nventories were stagnant at 11,665 tonnes, while cancelled warrants rose 410 tonnes to 7,470 tonnes.  

Steel was offered at $375, while stocks and cancelled warrants were unchanged at 50,115 tonnes and 16,900 tonnes.  

In minor metals, cobalt was indicated at $29,000/30,250 with stocks at 370 tonnes and cancelled warrants up six tonnes to 50 tonnes. Molybdenum was offered at $27,000, while stocks declined 12 tonnes to 174 tonnes, due to drawdowns in Rotterdam.

(Additional reporting by Eddie Van der Walt. Editing by Martin Hayes)