What's Moving the Market?

Base metal complex trade volumes were "very low" during the London Metal Exchange premarket Friday morning, with not much to indicate which direction the metals would take later in the day, a trader with an LME ring dealer said. "There is hardly anything through this morning, so I don't know if that means we could suddenly have a flurry later today," he said. The trader said market players were also "finding their footing again" after OPEC's cutback announcement late Thursday. The trader said firmer oil prices had lent support to gold, and in turn to the base metal complex. Oil prices posted modest gains in Asian trading on Friday as OPEC in its emergency meeting Thursday decided to cut output by 1.2 million barrel/day in a bid to halt a price slide, which has seen oil futures lose some $20/barrel since hitting a high of $78 in July this year. The group also left open the possibility of another cut at its December 14 meeting in Abuja, Nigeria.

Basemetals.com analyst William Adams said nickel remained plagued by an acute stock shortage and "recent supply disruption will not have helped that." He noted that even if production recovered in New Caledonia, the market would still remain tight and therefore vulnerable "which means all eyes will no doubt remain on LME stocks at present. We think there is a good chance of these heading lower, in which case we see prices embark on another up leg," he said. Nickel was indicated at $31,500/mt at 0858 GMT Friday pulling back $250 from its previous close, while aluminium slipped $11 to $2,730/mt. After very little movement Thursday, copper was bid steady at $7,660/mt at 0858 GMT Friday morning unchanged from its Thursday close. Adams said on Thursday zinc had moved up to "just a stone's throw away from the $4,000/mt level," but he said given the ongoing fall off in stocks, it was only a question of time before it is heading higher again." Zinc inched up $5 Friday to $3,955/mt.

Adams said even lead had held up well. "But we are also nervous on lead, one because it has already done so much and two, because we feel consumers will back off at these numbers," said. Lead was indicated at $1,490/mt at 0858 GMT Friday, pulling back $15 from Thursday's close. Adams said although current prices for tin were high, "the long term chart (monthly) looks quite constructive, so we would not be surprised to see further moves above $10,000." Tin climbed $50 to $9.910/mt on Friday morning, while aluminium alloy was bid at $2,270/mt dipping $15 from its last bid on Thursday. North American alloy lost $20 to be bid at $2,310/mt at 0858 GMT Friday. "Overall we remain bullish, but without copper joining in, the others may be reluctant to advance too much further, but we expect copper to join in before too long," said Adams.