London 26/01/2016 - Base metals shook off the torpor that has hit LME prices recently, staging an across-the-board technical rally amid some lively movements in equity markets and crude oil on Tuesday to end firmer.
Copper business picked up towards the end of the day - prices conclusively cleared $4,500 per tonne to hit their highest for nearly three weeks. Zinc and tin also rose to their best levels since the start of the month.
Traders said the gyrations in global stock markets, which were lower this morning and then firmer towards the close, as well as oil see-sawing either side of $30 per barrel were a backdrop but not the prime drivers for the metals.
"It just seems that the market is running a bit short going into the month-end and there is not the weight of selling that we saw a little while ago. There is some February date tightness as well so all in all it is just a natural correction now," a floor trader said.
This afternoon, US data was mixed - the January flash services PMI was slightly lower than forecast at 53.7 and the Richmond manufacturing index was 2 against an expected 3 but January consumer confidence was 98.1 compared with a predicted 96.6.
Market participants are looking towards the US FOMC's rate decision on Wednesday after its two-day meeting. The policy board is expected to keep its target rate unchanged at 0.25-0.50 percent but the recent sell-off in commodities and equities may have implications for the direction of future policy.
Despite the rallies seen today, the metals are limited on the upside and momentum may fade over the next week.
"Equities are down more often than they are up and oil is an oversupplied bear market so the general trend for metals is lower," the trader said.
As well, business flows will be affected by the forthcoming Lunar New Year holidays in China.
"Some of the strength we are seeing in base metals is attributable to short-covering ahead of the long Chinese New Year break, coupled with a number of headlines having to do with cutbacks across the metals space," Ed Meir of INTL FCStone said in a report.
In the metals, copper rose as high as $4,544.50 before concluding the kerb session at $4,535 per tonne, up $118 on Monday's close. In the spreads, the benchmark cash/threes backwardation widened, aiding the uptick - it was last at $5.75 against $3.25 on Monday. In today's warehouse data, stocks fell a net 1,450 tonnes to 237,375 tonnes while cancelled warrants were up 2,675 tonnes at 60,525 tonnes.
Tin moved back through the $14,000 level to finish the day at the high of $14,150, up $500, reflecting supply-side developments - Indonesia's PT Timah is looking to limit monthly tin sales to 500 tonnes; this would be a quarter of 2015 levels. This morning, stocks dropped 130 tonnes to 5,815 tonnes.
In others, zinc rose swiftly away from $1,500 and looks set to test $1,600 - it ended at $1,589, up $74. Stocks and cancelled warrants both fell 1,275 tonnes to 478,650 tonnes and 89,875 tonnes respectively.
Aluminium approached the $1,500 level overhead before closing at $1,494, up $19 - this morning inventories fell 5,900 tonnes to 2,819,525 tonnes.
Nickel moved up to $8,670, a $120 advance, although stocks climbed 1,278 tonnes to 450,828 tonnes. Lead was last at $1,651, up $29, while stocks and cancelled warrants both dropped 250 tonnes to 187,650 tonnes and 93,000 tonnes respectively.
Steel billet was indicated at $185/235, February steel scrap traded at $183 and rebar for the same month at $321.50. Cobalt was quoted at $21,900/22,100 and molybdenum at $11,500/12,000.
(Additional reporting by Ewa Manthey, editing by Mark Shaw)