WSJ:BASE METALS: LME Metals Mostly Lower; Market Awaits China Buying
SINGAPORE (Dow Jones)--London Metal Exchange base metals were mostly lower in Asian trading Wednesday, with copper posting a small loss as traders booked profits after Tuesday's strong rally. Despite the lack of momentum, hopes of a pick-up in Chinese buying activity continued to underpin sentiment in the market.
At 0715 GMT, copper was trading at $9,130 a metric ton, down $39 from Tuesday's settlement. Copper came off amid a lack of fundamental news to push it higher, a Sydney-based trader said.
"This is a market that is living day-to-day for good news," he said. "It's like an ill person, it needs good news every day to feel better; without the good news people just jump off the boat."
Without strong indications of large-volume Chinese physical demand, "people don't have the confidence to hold copper at these levels," he said.
Copper moved in a narrow range between $9,122.75/ton and $9,171/ton and will probably remain range-bound before taking direction from a slew of U.S. and euro-zone data expected later Wednesday and Thursday, a Singapore-based trader said.
Euro-zone and U.S industrial production numbers, and U.S consumer price index are due Wednesday, while U.S. housing starts will be announced Thursday, MF Global said in a report.
On the fundamental side, there are some suggestions of a modest pick-up in Chinese consumption nearby, the Singapore-based trader said, noting two consecutive days of stock draw-downs from warehouses in South Korea.
Stocks fell by a net 2,075 metric tons Tuesday, with the bulk of the metal leaving Gwangyang. That followed a 2,175 tons drop Monday, with the biggest draw-down registered at Busan terminals. Combined stocks at LME monitored bonded warehouses now stand at 473,675 tons.
Despite the draw-downs, however, sentiment in the Chinese market remains uncertain amid concerns that recent credit tightening measures will limit buyers' ability to secure loans and could harm construction, a major sector driving copper consumption.
After industrial production data Tuesday showed the Chinese economy was still growing impressively, the People's Bank of China announced an increase in reserve requirements for banks by half a percentage point with effect from June 20, the sixth such increase this year. Requiring banks to hold more cash as reserve reduces lending by making less credit available in the market.
Base metals shrugged off the news of the RRR-hike Tuesday, instead taking direction from better-than-expected Chinese industrial production data that calmed fears of a slowdown in the world's second-largest economy.
Output in May came in 13.3% higher than year-ago levels, China's state statistics bureau said. That was slightly higher than a 13.2% increase expected by economists.
Aluminum saw some gains early Wednesday amid continuing concerns over the effect of Chinese power cuts on primary metal smelters and product makers, but the metal was trading lower by late afternoon.
A 40-50% concentration of LME warrants in the hands of one market participant was helping aluminum stay around the current levels, a trader said. LME data for June 10, the latest available from the exchange, showed a substantial position held by a single party, although it wasn't known who is holding the warrants.
Nickel was the only gainer Tuesday, trading around $22,330/ton in late afternoon, up $15/ton from Monday PM kerb.
The following are LME three-month base metals prices at 0715 GMT and the changes from the previous PM kerb:
