LME MORNING - Base metals hold strong but momentum stalls ahead of key Chinese data

London, 09 July 2010 - Base metals rose during LME premarket trading on Friday as equities and the euro firmed but momentum stalled in mid-morning following a rebound in the dollar and ahead of key imports data from China over the weekend.

Copper rose as high as $6,740 per tonne before stabilising around $6,700, still up some 1.4 percent from the previous close, while the rest of industrial complex made small gains in light trading volumes.

"Sentiment has been boosted by yesterday's US jobs data and the fact that South Korea felt the need to raise interest rates, which suggests the country is not concerned about a fallout in global demand caused from the EU debt crisis," analyst William Adams of FastMarkets said.

European shares, which started the day half a percent stronger, were flat in recent trade with Wall Street pointing to a slightly lower open later after climbing for the last three sessions.

The euro, meanwhile, retreated to $1.2665 after hitting a fresh two-month high at $1.2721 earlier today, supported by comments from ECB President Jean-Claude Trichet, who said on Thursday that the eurozone economy should grow "at a moderate and still uneven pace in an environment of high uncertainty".

Details about Europe's bank stress tests also reassured investors who feared harsher criteria for the checks, while encouraging US data also helped soothe nerves about the state of the world economy - US jobless claims dropped to their lowest level in two months this week.

In addition, interest rate increases by the South Korean and Malaysian central banks raised confidence about Asia's recovery after the International Monetary Fund said a double-dip world recession was unlikely.

Attention today will be on US wholesale inventories but the main driver for metals will be tomorrow's preliminary Chinese trade data - China is by far the largest consumer of base metals.

"Markets are now consolidating gains from earlier this week as market participants are reluctant to enter new positions ahead of the Chinese data, which will likely be a significant market mover," Credit Suisse said. "Strong import numbers would be positive for sentiment next week."

Total copper imports including anode, refined, alloy and semi-finished products are expected to show an increase to around 430,000 tonnes from May's 396,712 tonnes. This would mark the first increase in monthly imports in three months amid a favourable LME-Shanghai arbitrage and strong spot premiums.

This implies that June imports of refined copper, which are due to be released late in July, could exceed 300,000 tonnes compared with 279,690 tonnes in May.


Copper was last up $100 at $6,710 but $35 below yesterday's one-week high. It was helped by a double dose of inventory drawdowns, as both LME and Shanghai stocks registered declines.

LME stocks fell for the 16th day in a row, raising confidence that this year will not see the usual trend reversal in which stocks build up during the slow summer period - factories using copper are expected to close for a much shorter time this year than last to benefit from the current economic recovery.

Stocks fell a net 2,100 tonnes at 436,900 tonnes, the lowest since November 27, 2009, although this was offset by a net decrease of 2,875 tonnes in cancelled warrants, the metal booked for removal. Shanghai stocks also declined this week, down some five percent or 7,099 tonnes from the previous week.

"Chinese and other investors may be taking advantage of lower price levels to stock up on copper for its asset value, diversification and strategic value," John Meyer of investment bank Fairfax said.

The rest of the base metals also firmed but gains were more modest. Aluminium traded up $14 at $1,999 after stocks registered a net decline of 5,875 tonnes, sending the total to a new low since July 2009 at 4.398 million tonnes. Here the change was also countered by the move in cancelled warrants, which fell 5,175 tonnes.

Nickel business at $19,410 was still up $10 as earlier news that the year-long strike at Vale Inco's Sudbury and Port Colborne operations in Canada had formally ended after workers ratified a new labour deal was largely shrugged off. Inventories fell for the 23rd successive day, dropping 666 tonnes to 120,660 tonnes, a fresh low since the end of September last year, although cancelled warrants dropped 540 tonnes.

Elsewhere, tin rose $135 to $17,685 after stocks fell a net 130 tonnes to 16,475 tonnes, the lowest since June 2009. Zinc advanced by $5 to $1,860 and lead rose $9 to $1,837 amid a lack of momentum.

Mediterranean steel billet was quoted at $415/429 per tonne, slightly down from a previous close of $420/430. Stocks rose a net 1,235 tonnes to a two-month high of 30,485 tonnes following fresh inflows into Tekirdag in Turkey.

Cobalt was indicated at $37,400/40,000, unchanged on the day, after stocks rose another seven tonnes to a fresh record of 174 tonnes. Molybdenum was flat at $30,000/32,000.

(Editing by Mark Shaw)