London 03/05/2016 - Base metals put in a mixed performance when LME trading restarted on Tuesday after an extended weekend break. After an strong start, most - bar nickel and tin - have drifted lower.
Metal prices had pushed higher towards the end of last week, with the LME base metal index hitting a six-and-a-half-month high.
But a correction was on the cards because the move was speculative and not a reflection of demand, market participants said.
"Metal prices find themselves under pressure… copying the weakness shown by oil prices yesterday. The subdued economic date is no doubt also having a bearish effect," Commerzbank noted.
Oil continued lower today - Brent crude was last down 4.2 percent at $45.35 per barrel.
Data from China over the weekend and overnight undershot. The April Caixin manufacturing PMI at 49.4 was below the forecast of 49.8 and March's reading of 49.7. The official manufacturing PMI was also weaker at 50.1 although it managed to hold above 50.
Key data for the rest of Tuesday includes US IBD/TIPP economic optimism and vehicle sales figures for April.
In the metals, copper at $4,942 per tonne was down $108 on the pre-weekend close although business has been robust - more than 10,000 lots have changed hands while the metal trades either side of $5,000.
Inventory moves were mixed. Stocks increased a net 5,175 tonnes to 154,675 tonnes due predominantly to arrivals in Busan and Kaohsiung. But cancelled warrants were also higher at 36,350 tonnes, with 2,500 tonnes freshly cancelled in Singapore.
Market participants have attributed the moves to competing trading houses taking different views on the market.
Aluminium made a strong start, peaking at $1,684, but it was turned back by resistance at this level and it was last at $1,656, a $23 loss.
Stocks fell 6,650 tonnes to 2,639,075 tonnes while cancelled warrants dropped 44,350 tonnes to 1,172,650 tonnes after 37,700 tonnes were put back on-warrant in Vlissingen. The LME's queue-based rent cap (QBRC) regulation, aimed at reducing long queues, is now in effect.
The tightness in spreads has eased - the benchmark cash/threes was last at a contango of $10, having closed on Friday at $1. But the June and July three-month dates remain tight.
Nickel hit a fresh November high at $9,675 and was last at $9,590, still up $145. Stocks edged 66 tonnes higher to 417,504 tonnes while cancelled warrants at 129,366 tonnes were 4,260 tonnes higher after increases today in Kaohsiung and Rotterdam. Cancellations have been ticking higher for a month, rising close to 39,000 tonnes in moves centred on Rotterdam, Johor and Kaohsiung.
"There are many sceptics out there, maintaining that there is insufficient physical demand out there to justify the higher prices. But if you follow the technicals, as the funds clearly do, then [Friday's] close above the 200 daily moving average is important," Triland noted.
Lead at $1,781 was down $24; stocks and cancelled warrants both fell 700 tonnes to 174,325 tonnes and 78,250 tonnes respectively. Spreads have tightened - cash/threes was at a backwardation of $0.50 while cash/May is at $5.
Zinc fell $2 2to $1,926 - stocks dropped 2,475 tonnes to 401,800 tonnes, their lowest since July 2009 - but tin at $17,290 was $70 higher even after stocks rose 115 tonnes to 5,690 tonnes.
Steel, cobalt and molybdenum were neglected.
(Editing by Mark Shaw)