Industrial metals (copper, aluminium, nickel, etc.) daily review (May 18, 2010)

MARKET ROUNDUP

Industrial metals futures fell to a 1-1/2-week low Monday morning, as the dollar strengthened and broader market concerns persisted about the European debt crisis and its potential impact on global economic recovery.

IN FOCUS

- The pace of the U.S. economic rebound may be slowing, manufacturing data suggested on Monday, as concerns grow about the impact of Europe's debt crisis on global growth.

- A rise in U.S. homebuilder sentiment according to an industry gauge to the highest level in more than two years offered a glimmer of optimism and some hope for housing after a long slide.

- Deliverable aluminium inventories rose to 478,294 from 433,500 tonnes one week earlier. Stocks on warrant rose 23,180 tonnes to 413,386 tonnes.

- Chile's copper exports totaled $3.153 billion in April, up 56 percent from $2.021 billion in the same month the previous year, the central bank said on Monday.

- Miner Rio Tinto expects mined copper production to fall about 15 percent this year, mainly due to lower grades, an executive said on Monday. Andrew Harding, chief executive of the group's copper unit, told Reuters Insider television mined copper output would fall to about 680,000 tonnes in 2010 from 804,700 tonnes last year.

- The move, which will drain about 300 billion yuan ($44 billion) of cash from the banking system, is bound to fuel speculation that officials are preparing for an influx of capital in anticipation of a longawaited decision to let the yuan resume its climb, stalled since July 2008.

- Vale and union leaders at its Sudbury mining operations must resume talks aimed at ending a 10-month strike, a provincial mediator ordered on Monday.

- China government's decision to raise electricity rates for manufacturing sectors including aluminum production, could threaten closure of up to 2.7 million tons of capacity, will increase production costs by up to $110/ton, says Barclays Capital.

FUNDAMENTAL OUTLOOK

Industrial metals futures rose more than one percent on Tuesday, regaining some ground after losing more than 7 percent in the previous session in a sell-off of industrial metals triggered by Europe's debt crisis and fresh concerns of a slowing Chinese economy. Outlook for industrial metals is sideways to up for the day. We expect industrial metals to bounce back from the current levels. Copper and aluminum in particular looks strong for the day.