Market and product

Base metals were mired in poor sentiment in Wednesday’s LME premarket, off session lows but battered by the headwinds of poor demand, oversupply, a stronger dollar and a slowdown in China.

According to data from the Chinese National Bureau of Statistics China’s production of ten major nonferrous metals grew 2.6 percent year-on-year but fell 0.5 percent month-on-month to 4.36 million tonnes in October.

Industrial production rose 5.6 percent year-on-year in October, slowing from 5.7 percent in September, while fixed asset investment rose 10.2 percent year-on-year, down slightly from 10.3 percent in September.

And in the first 10 months of the year, foreign direct investment rose 8.6 percent from the corresponding period of last year, pointing to some slowing in October

Elsewhere, the German WPI came in lower than expected at -0.4 percent. There is no US data today – the country is observing Veteran’s Day – which may lead to choppiness this afternoon amid thin liquidity.

“Technically copper, lead and zinc all appear to be trading in oversold territory with markets vulnerable to short covering bounces if trends show any signs of exhausting,” a trader said.

The dollar was steady around multi-month highs against the euro at 1.0746

Copper fell to a fresh August low of $4,885 per tonne today and has since traded around this level – it was last at $4,925, unchanged from Tuesday’s close. More than 8,000 lots have changed hands so far.

Spreads were tighter, with the benchmark cash/threes last at a backwardation of $12, moving from just $4 earlier this week. Stocks fell a net 2,350 tonnes to 256,275 tonnes and cancelled warrants fell 2,100 tonnes to 64,225 tonnes.

Zinc, which had fallen to 2010 lows yesterday below $1,600, was last down $28 at $1,579. Stocks and cancelled warrants both fell 1,175 tonnes to 564,200 tonnes and 66,350 tonnes respectively.

More than 18,000 lots changed hands on Select by the kerb close yesterday, which gave more credibility to the move below $1,600, Triland noted.

“Although the metal managed to close above $1,600 the outlook is as weak as ever,” it said.

Aluminium at $1,505 was down $3 – stocks remained at multi-year lows after a 6,675-tonne drop to 2,990,825 tonnes. With cancelled warrants falling 6,725 tonnes to 1,350,250 tonnes, on-warrant material is at its lowest in seven years.

Spreads have started to reflect the stock moves – cash/threes was in a small contango of $14 and the Jan/3-month date was $6 backwardation.

Nickel at $9,510 was up $5. Stock moves were marginal – inventories edged 54 tonnes higher to 418,770 tonnes and cancelled warrants rose 312 tonnes. Still, there is talk of large cancellations of nickel booked shortly in Johor – the general consensus is that this material will end up in Shanghai.

Lead at $1,603 was down $31, up from a session low of $1,582 – its softest since June 2010. Stocks and cancelled warrants were both down 2,250 tonnes at 137,050 tonnes and 32,500 tonnes respectively.

Tin slipped $125 to $14,600 was down $125 even after and cancelled warrants increased 75 tonnes to 710 tonnes. Steel, cobalt and molybdenum were neglected.