FM:LME MORNING - Base metals under pressure, market remains cautious
London 27/02/2012 - Base metals were under pressure in premarket LME trading on Monday, giving up gains and slipping into consolidation mode amid an uncertain economic backdrop.
The dollar was stronger at 1.3407 against the euro - the single currency hit a two-and-a-half month high of 1.3487 on Friday.
“A stronger US dollar this morning is putting pressure on the commodity markets. London has opened with both base metals and crude oil under pressure,” RBC said. “The G20 meeting this weekend showed no signs of a concerted global effort to send aid to a failing Europe.”
G20 finance ministers met over the weekend to request higher contributions from eurozone countries to the European rescue fund amid concerns that it would not be enough to rescue a country should it be deeply in debt. The topic will be revisited in talks next month.
And concerns over sluggish Chinese metals demand following the Lunar New Year holiday last month has kept sentiment muted.
"While we have a positive outlook for the metals sector, we think markets will find it difficult to break much higher from current levels as long as we do not get clearer signals of strengthening demand from China," broker Credit Suisse said.
Datawise, the main focus this week will be on US and Chinese manufacturing PMI indices on Thursday.
“Consensus expects a pick-up in both countries, which would be a good precursor for the sector’s near-term performance. US durable goods orders will also be closely watched this week,” Credit Suisse said.
Aluminium was down around one percent at $2,314 per tonne, a loss of $23 on Friday’s close. It was the only metal to report an increase in stocks today - these rose a net 300 tonnes to 5,115,775 tonnes due to an increase of 5,000 stocks in Rotterdam, while 4,700 tonnes were delivered out of nine different locations.
Cancelled warrants fell 2,200 tonnes to 1,620,175 tonnes. Vlissingen cancelled warrants dipped by 1,500 tonnes but remained high at 908,400 tonnes while Detroit’s cancelled warrants at 533,275 tonnes were down 1,150 tonnes.
Copper dropped $97.25 to $8,433.25. Inventories at 300,475 tonnes were down 3,025 tonnes but this was offset by a fall in cancelled warrants, which dipped 2,200 tonnes to 87,825 tonnes.
“The temporary closure of Grasberg Mine in Indonesia, one of the world’s largest copper mines, could lend the price of copper further short-term support,” Commerzbank said. “Unrest among miners means that no work has been done there since last Thursday.”
Lead was down $18 at $2,190. Stocks fell for the 11th consecutive day, falling a further 2,325 tonnes to 368,175 tonnes. Cancelled warrants were down 1,325 tonnes at 35,050 tonnes.
Zinc dropped $17.75 to $2,062.25, while stocks at 867,725 tonnes were down 100 tonnes and cancelled warrants dipped 75 tonnes to 4,850 tonnes.
Nickel business at $20,000 was down $150 although inventories were down 138 tonnes at 97,398 tonnes. Cancelled warrants also fell, down 246 tonnes to 4,476 tonnes.
Tin at $23,640 was down $210. While stocks were unchanged at 10,250 tonnes, cancelled warrants edged 15 tonnes higher to 1,515 tonnes.
Steel prices were indicated at $525/540 after stocks fell 130 tonnes to 70,460 tonnes. Cancelled warrants at 38,415 tonnes were down 130 tonnes, with 31,460 tonnes of metal booked for removal from New Orleans.
In the minor metals, cobalt was quoted at $31,000/31,950 and molybdenum at $31,500/32,500.
