LME MORNING - Base metals inch higher, steady tone pervades complex

 

 

The single currency is currently at 1.3445 against the dollar, recovering some of the ground it lost yesterday and not far from an intraday high of 1.3463. It hit a two-and-a-half month high of 1.3487 on Friday.

 

 

“The metals remain buoyant for now, lifted by a weaker dollar, good economic data and less concern over EU debt now that Greece’s second bailout seems to be making progress, with German politicians approving the package,” FastMarkets analyst William Adams said. 

 

 

"So with the good news flows there seems little to unnerve the markets and therefore the steady tone seems set to continue," he added.

 

 

Yesterday, ratings agency Standard & Poor downgraded Greece to 'selective default' status after the country negotiated the biggest sovereign debt swap restructuring in history. But the downgrade had little impact on the market - investors paid more attention to Germany's agreement to the bailout policy.

 

 

“Traders however remain cautious, with volumes on the low side, after S&P cut Greece's credit rating to selective default and the ECB temporarily suspended Greek bonds as collateral,” RBC said.

 

 

Data out of the US yesterday was better than expected, which gave the market some lift towards the latter part of the day. Pending home sales data came in at two percent against an expected 1.2 percent and a previous -1.9 percent.

 

 

The main focus this week will be on US and Chinese manufacturing PMI indices on Thursday - consensus is for a pick-up in both countries, while the ECB's second long-term refinancing operations (LTRO) on Wednesday will also be closely watched.

 

 

“The markets still carry the Greek health warning and we are likely to see lower Chinese imports of copper given current prices, but… the momentum for higher prices is definitely there,” RBC added.

 

 

ALUMINIUM MAINTAINS UPWARD TREND, COPPER TICKS HIGHER

 

 

Stock movements - particularly in copper and aluminium - are also providing support due to tightness despite soft demand.

 

 

Aluminium was the standout metal on both Friday and Monday, trading at a fresh 2012 high yesterday and finishing above its 200-day moving average. It recently traded at $2,344 per tonne, up $13 on the previous day’s close.  

 

 

“The recent price increase in aluminium is mainly driven by the fact that aluminium production is particularly energy intensive,” Credit Suisse said.

 

 

Energy prices have been rising in the past few weeks on geopolitical tensions centred on the Middle East - Brent crude oil was steady at $123 per barrel, just $20 below its all-time high hit in 2008.

 

 

Aluminium cancelled warrants – metal booked for removal - reached a fresh all-time high of 1,628,650 tonnes, up 8,475 tonnes. Cancelled warrants in Vlissingen were down 1,500 tonnes and Detroit was down 900 tonnes at 532,375 tonnes. Baltimore, however, saw a rise of 9,875 tonnes, with cancelled warrants at 18,000 tonnes. 

 

 

“Is Baltimore going to join Detroit, Vlissingen and Johor as locations with large amounts of cancelled warrants?” FastMarkets' Adams asked.

 

 

Total warehouse stocks fell a net 2,350 tonnes to 5,113,425 tonnes.

 

 

Copper gained $34 to $8,570. Stocks have restarted their downward trend, declining for the fourth consecutive day to 298,850 tonnes, a loss of 1,625 tonnes and the lowest total since August 28, 2009. The combination of low inventories and a rise in cancelled warrants – which at 88,875 tonnes were up 1,050 tonnes - could provide price support.

 

 

In contrast, nickel was the only metal where inventories rose, climbing 1,044 tonnes to 98,442 tonnes, the highest since September 13. Cancelled warrants were down 186 tonnes to 4,290 tonnes. Still, recent business at $20,253 was up $78.

 

 

Lead at $2,263.50 increased $16.50 after stocks fell 2,825 tonnes to 365,350 tonnes - a one-month low. Cancelled warrants at 32,225 tonnes were down 2,825 tonnes. 

 

 

Sister metal zinc at $2,126.25 rose $26.25 - inventories slipped 75 tonnes to 867,650 tonnes and cancelled warrants increased 125 tonnes to 4,975 tonnes.

 

 

Tin business increased $415 or 1.75 percent to $24,120; stocks were unchanged for the second consecutive day at 10,250 tonnes while cancelled warrants at 1,215 tonnes were down 300 tonnes.

 

 

Steel was indicated at a wide $500/540. Stocks were little changed, dropping 65 tonnes to 70,395 tonnes, while cancelled warrants dropped 65 tonnes to 38,350 tonnes, prices. In the minor metals, cobalt was quoted at $31,000/31,950 and molybdenum at $31,500/33,000.