London 11/07/2011 - Base metals struggled to attract buyers on Monday morning, with fresh European sovereign debt concerns and still-high Chinese inflation figures curbing investor appetite.
The bearish mood carried over from Friday, when June’s US non-farm payrolls report sent a shock through markets. Only 18,000 jobs were created last month, while the country’s unemployment rate climbed to the highest level for this year at 9.2 percent.
Economists were calling for a gain of 105,000 jobs in June. The jobless rate rose even as the participation rate declined to 64.1 percent, the lowest since March 1984.
“Market balances continue to tighten, which is likely to translate into upward price pressure,” Credit Suisse said. “However, given the elevated economic uncertainty after the disappointing US payrolls, the cyclical metals sector may take a breather first before resuming the medium-term uptrend.”
The downbeat tone has been maintained this morning. Europe’s bailout fund may need to be doubled to cover a potential crisis in Italy, European Central Bank announced, according to a report in Germany’s Die Welt.
And China's annual inflation accelerated to a three-year high in June at 6.4 percent, leading investors to anticipate more monetary tightening measures in the near future.
But copper was still underpinned by strikes at several major copper mines around the world - production at Freeport Indonesia’s Grasberg mine has been paralysed for a second week after the breakdown of talks between workers and management, Reuters reported.
“Concerns over slowing macroeconomic activity coupled with the traditional summer slowdown in industrial activity are likely to weigh on industrial metals in the coming sessions, with copper likely to challenge support around $9,600,” FastMarkets analyst James Moore said.
No major economic data is expected on Monday.
Copper lost $34 to $9,627 per tonne and aluminium traded at $2,510 after closing indicated at $2,535-2,540 on Friday. Stocks of the latter fell 8,900 tonnes to 4,431,325 tonnes - it was the 33rd consecutive session where inventories declined.
Nickel traded at $23,704 per tonne, down $186 from Friday’s close. It had hit it highest since May 19 at $24,299 on the same day. Stocks fell for the 11th day in a row to 104,226 tonnes.
Zinc was $20 lower at $2,339. Here, inventories climbed 15,100 tonnes to 894,825 tonnes - the highest level in 16 years. The net rise was the result of a 15,850-tonne stock inflow into New Orleans - the third straight day of increase in this location.
This is believed to be metal of Australian origin that is being locked up in a warehousing deal. Australian producer Nyrstar extended at the end of June its lead and zinc offtake agreement with Glencore through to 2018. New Orleans warehouses are also believed to store large quantities of zinc of Spanish origin from Xstrata's Asturiana de Zinc, partly owned by Glencore.
Lead was down $28 at $2,691, shrugging off a 1,575-tonne drop in sticks to 306,725 tonnes. Cancelled warrants also fell, dropping 1,850 tonnes to 22,125 tonnes.
Tin was flat from the previous session at $26,800 after stocks declined 2,080 tonnes to 19,810 tonnes. Cancelled warrants were down 465 tonnes.
Steel billet was indicated at $583/595, cobalt at $34,500/37,000 and molybdenum at $32,100/36,000.
