LME MORNING - Base metals weaken as risk appetite deflates, copper hits lowest since mid-2010

By: Martin Hayes

London 24/06/2013 - Base metals prices fell heavily during Monday LME premarket trading when already-soft sentiment was derailed further by a strong dollar, decreasing risk appetite and worries over tighter credit in China, traders said.

In the metals, copper fell to its lowest for nearly three years, aluminium its softest for close to four years, zinc a five-week nadir and lead its softest for one month.

With Friday's knee-jerk bounce having conclusively faltered, further losses are anticipated across the complex. Today's losses were heightened by concerns of a banking crunch - China's central bank let short-term interest rates spike higher last week when it did not inject funds into money markets.

"Metal prices find themselves under pressure once again as the new week of trading gets under way, having bucked the general negative market trend to enjoy a moderate recovery on Friday," broker Commerzbank said.

The euro was tailing lower against a strong dollar, hitting 1.3075, its lowest since June 6. Equities in Europe eased while other commodities - gold and crude oil - were also easing as risk appetite capital swung away from the sector.

"Sentiment remains very negative and technicals are challenging. This week, the data calendar is rather thin, leaving price risks skewed to the downside," broker Credit Suisse said.

Metals have seen a downswing in sentiment caused last week by the US veering towards phasing out monetary stimulus. As well, China's economic growth path is becoming bumpier.

"We feel prices are likely to head lower while the market adjusts to the changing conditions. We expect there will be sharp rebounds along the way, either as China steps in to fine-tune its monetary policy, or as good data or news of production cuts prompt rebounds. But overall we feel rallies are likely to be capped," William Adams of FastMarkets said.

On the data side, the June German Ifo Business Climate index was much as expected at 105.9 - there are no US figures due for release today.


 COPPER, ALUMINIUM AND NICKEL INVENTORIES SURGE

Copper fell as low as $6,613 per tonne, down three percent from the Friday kerb close of $6,818/6,820 before recent trade at $6,646.

Warehouse stocks climbed for the seventh day in a row - up a net 13,375 tonnes at 678,225 tonnes, a 10-year high. The increase was due to warrantings of 8,050 tonnes in New Orleans, 3,575 tonnes in Johor and 2,475 tonnes in Antwerp. But cancelled warrants - metal booked for removal and now in queues - rose to an all-time high of 321,575 tonnes.

Aluminium touched $1,772.25 and then moved back to $1,778, a $15 loss. Stocks rose 6,375 tonnes to 5,440,325 tonnes, a new all-time high, with 15,525 tonnes warranted in Vlissingen. Cancelled warrants were at 2,155,375 tonnes, a six-month high.

In others, nickel was $325 lower at $13,750 - inventories were up 786 tonnes at a record 186,198 tonnes. Lead dropped to $1,990 before settling at $1,997, a $23 loss. Stocks, however, fell 3,150 tonnes to 195,875 tonnes.

Zinc business at $1,821 was $23 lower - inventories dropped 5,575 tonnes to 1,065,850 tonnes, the lowest since May 14. Tin eased to $19,435, a $565 loss, while stocks were down 60 tonnes at 14,190 tonnes, the lowest since June 3.

Steel billet was quoted at $130/180, with stocks dropping 455 tonnes to a six-month low of 75,335 tonnes. Cobalt was indicated at $28,500/32,000, while molybdenum was neglected.


(Editing by Mark Shaw)

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