What's Moving the Metals Market? December 05, 2007

The base metal complex was mostly lower during London Metal Exchange premarket trade on Wednesday, with only bellwether contract copper gaining ground. A London-based trader said the complex was "coasting along" and while trading was a little erratic since it was options declaration day, he expected that it would simmer down and stagnate once the declarations had been made. "The metals are all in their ranges , so its not particularly exciting, even though the ranges are wide enough," he said, adding that many of the short positions had been cleared out at the end of last week. He said the equity markets were still having the biggest influence on the market, while the dollar was not having much impact. "Precious and oil are providing a little support, but not enough to have any follow-through effect," he said, adding that gold had seen some correction too. The trader added that December was a strange month and at this time of year people's risk appetite tended to dwindle.

"Those who have made money want to hang on to it and those who have lost money want to limit their exposure," he said, adding that it was these attitudes which affected liquidity and the way people traded. Basemetals.com analyst William Adams said in a report Wednesday that the market was still very gloomy about the weight of sub-prime issues and the credit crunch that was following in its wake. "Given the seriousness of the situation it is understandable that the market is not overly bullish, but we do wonder whether the market has lost faith in the remedies that the central banks are likely to administer," he said, adding that the potential fallout from a dollar crisis could reach far and wide. He noted that with regard to metals the pressure on European equity markets had not done much to "buoy sentiment." He noted that the LME inventory developments had been "less one-way."

In industry news, PT Koba Tin and PT Timah are expected to produce 68,698 mt He added that if more evidence that the deteriorating stock picture across most of the LME metals was abating, "it may alleviate some of the overriding negative sentiment in the market." Three-months copper was indicated at $6,732/mt at 1024 GMT on Wednesday, up $42 from its previous close, while aluminium lost $6 to be bid at $2,461/mt. Lead pulled back $50 to be indicated at $2,835/mt, while nickel lost $35 to $25,660/mt. Tin was bid at $16,600/mt down $50 from its previous close, while zinc was off $20 to $2,405/mt at 1024 GMT. Aluminium alloy was bid at $2,310/mt, off $5 from its previous close, while there were no bids or offers available for North American alloy.

Source: Platts

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