FX:LME MORNING - Base metals drift as Greek crisis saps confidence
By: Barbara Stcherbatcheff
London 17/06/2011 - Base metals were mixed on Friday on the LME ahead of a report from the US conference board which may show that leading indicators rebounded last month, while worries about the fate of Greece heightened risk aversion as the heavily indebted country attempts to avoid default.
Metals prices have held up well over the past few months, despite signals that the European debt crisis is escalating and economic growth may be deteriorating around the world.
“The effect of uncertainty in the banking system combined with ongoing low interest rates and a weaker US dollar should maintain commodity prices, i.e. copper,” John Meyer, analyst at Fairfax, said on Friday.
But all this may be about to change if the Greek debt crisis derails the global recovery - on Thursday, former Federal reserve Chairman Alan Greenspan said a Greek default is “almost certain,” and that the European sovereign debt crisis has the potential to push the US into another recession.
“We feel the overall down trend is likely to remain in place but may well continue to unfold in a 'two steps down one step up' pattern,” William Adams, analyst at FastMarkets, said on Friday.
“The markets look vulnerable on the back of growth prospects and the debt crisis in Europe, but given seriousness of the Greek debt situation we would not be surprised if some hope came out of today’s meetings and that might be enough to give markets a boost.”
Economists expect that leading indicators will have probably bounced back in May after declining in April, snapping a bearish trend in data which has emerged in recent weeks. On Thursday, the Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 – the lowest reading since mid-2009.
NICKEL FUNDAMENTALS IMPROVE
A slew of indicators are suggesting that investors have reason to become more bullish on nickel in the short-term.
LME nickel stocks have fallen by 24,000 tonnes or 18 percent since the start of the year, two large mining projects have been deferred by several months due to technical problems and the International Nickel Study Group has reported a supply deficit in the global market in April for the fourth consecutive month.
“The current price level for nickel is therefore attractive in our opinion and we anticipate that prices will rise to a good $25,000 a tonne by the end of the year,” analysts from Commerzbank wrote on Friday.
Nickel traded at $21,645 per tonne, up $40.
Copper traded at $9,068 per tonne, up $3, while stocks declined by 1,325 tonnes to 470,825.
Copper output in Japan, the world's second largest consumer of the metal, will plunge 21 percent in the April-September first-half of this financial year from the same period last year, due to damage to plants from the March 11 earthquake, Reuters reported.
Aluminium traded at $2,543 per tonne, down $18, while stocks fell by 10,125 tonnes to 4,602,425 due to large movements out of several warehouses, including Busan, Detroit, Malaysia Rotterdam, Mobile and Singapore. Cancelled warrants fell by 1,575 tonnes to 513,900.
In news, China might change the tax rebate rate on aluminium exports from 13 percent to 9 percent to decrease the exported amounts of the metal, Fairfax reported.
Zinc traded at $2,213 per tonne, up $7. Lead traded at $2,475 per tonne, down $6, and tin traded at $24,900, down $5. Steel billet was indicated at $557/565 per tonne.
Aluminium alloy stocks rose by 6,900 tonnes to 115,160 tonnes, the highest since February 2002. More off-warrant metal is being registered as long-running technical tightness disappears.
In the minors, cobalt was indicated at $35,000/36,250 and molybdenum was quoted at $35,000/36,500.
