London 16/04/2012 - Base metals ticked up off their lows but remained under pressure on the LME on Monday morning, with only zinc making slight gains after Friday’s sharp sell-off.
The euro dropped below 1.3 against the dollar this morning before a slight recovery to 1.3027 but remains weak. Spain was the leading cause for the downturn in confidence - yields on 10-year bonds are at a 2012 high at 6.12 percent ahead of this week’s auctions on Thursday.
Sentiment started to sour on Friday when the release of poor Chinese data, an increase in Chinese copper stocks, a fragile euro and worsening eurozone sentiment conspired to drag the complex deeper into negative territory - three-month copper broke below the key $8,000 level "with plenty of stops being elected [en] route", broker RBC Capital said.
Markets have shrugged off the latest move by the People’s Bank of China on April 13, announcing that the renminbi’s trading band against the US dollar in the inter-bank foreign exchange market would be widened to 1.0 percent from 0.5 percent
"The current market concerns in industrial metals are probably a bit overdone,” Credit Suisse said. "This week, the German ifo Index and US Empire Manufacturing Index could provide some support.
Today's economic agenda includes the EU trade balance data and US retail sales, Empire State manufacturing, TIC data business inventories and the housing market index.
“Our view remains bearish for the medium term and with copper extending to the downside we feel the other metals will follow. Generally, we feel most of the base metals, with the exception of copper, will remain under pressure until more cutbacks are announced,” FastMarkets analyst William Adams said.
ZINC ONLY METAL TO POST GAINS, COPPER BACKWARDATION CONTINUES TO RISE
Copper is off its low of $7,855.25 but has failed to break above $8,000 on poor eurozone sentiment. It was recently at $7,953 per tonne, down $43 on Friday’s close.
Stocks at 261,700 tonnes were down a net 2,700 tonnes, while cancelled warrants at 65,025 tonnes were down 3,300 tonnes. Volumes were high for this time of day with just over 11,000 lots changing hands on Select so far.
Tightness in the market will be watched closely ahead of April’s 'Third Wednesday' this week for pricing against the April date. Cash/threes is now at $59/72 backwardation, while cash/May is at $52/55.
Aluminium at $2,076.50 was down $3.50. Inventories dropped 7,425 tonnes to 5,045,275 tonnes - they fell 3,000 tonnes in Vlissingen, 2,175 tonnes in Detroit and 1,500 tonnes in Johor. Busan, on the other hand, saw a 1,000 tonne-increase, taking the country’s total stocks to 53,050 tonnes. Cancelled jumped 39,423 tonnes to 1,655,450 tonnes.
Zinc at $1,995 was the only metal to make any gains, increasing $9 and heading back to $2,000. Stocks dropped back from Friday’s fresh 17-year high to 901,900 tonnes, down 8,600 tonnes. Cancelled warrants were down 375 tonnes to 18,600 tonnes – 14,175 of which is due to metal booked for removal in Chicago.
Lead at $2,064 was down $1, while inventories at 371,875 tonnes were down 23,675 tonnes and cancelled warrants were down 25 tonnes at 23,675 tonnes.
Nickel at $18,091 was down $214. It was the only metal to see an increase in stocks today - these rose 942 tonnes to 99,330 tonnes, while cancelled warrants at 5,646 tonnes were down 552 tonnes.
After 22 days of consecutive drawdowns, steel stocks were unchanged from Friday, while cancelled warrants were also unchanged, with the metal indicated at $502/518. In the minor metals, cobalt was quoted at $30,000/32,000 and molybdenum at $30,500/32,000.
(Additional reporting by Clara Denina, editing by Mark Shaw)