LME CLOSE - Copper sells off, nickel drops below $10,000/t

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Ewa Mantheyewa.manthey@fastmarkets.comCorrespondent+44 (0) 20 7337 2146

London 24/08/2016 - Base metals apart from tin ended Wednesday LME trading in negative territory - copper fell to its lowest since the end of June while nickel dropped below the key psychological $10,000 level.

In data today, the only numbers of note were US oil inventories at 2.5 million barrels, disappointing existing home sales at 5.39 million and the house price index, which also came in lower than expected at 0.2 percent.

Participants are generally cautious ahead of US Fed chair Janet Yellen's speech at the Jackson Hole symposium later this week.

"We don't expect to see much action...  at least until next week when markets will have had a chance to fully digest what Janet Yellen will say late on Friday," Edward Meir, INTL FCStone analyst, said.

Market participants are still assigning a roughly 20-percent chance of a rate rise in September and are looking at a 50-percent probability of a move in December.

"Naturally, any stronger hint of a September move by Yellen will send the dollar soaring and should undercut commodities going into next week, but having said that, rate timidity seems to be the modus operandi for this Fed and so we are not expecting any surprises coming out of Jackson Hole," Meir added.

In currencies, the dollar index edged up to 94.85 after hitting 94.21 yesterday.

In the metals, copper concluded at $4,632 per tonne, down $78 on Tuesday's close and its lowest since June 24. More than 20,000 lots changed hands on Select by the kerb close.

The red metal has come under pressure from continued stock increases in Asian LME-bonded warehouses. Total stocks increased a net 14,625 tonnes to 254,700 tonnes - the biggest increase was in Singapore at 12,550 tonnes, lifting the total there to 66,975 tonnes. Cancelled warrants fell 1,075 tonnes to 52,650 tonnes.

"There is anecdotal evidence of the Far Eastern traders covering short positions at these lower levels from $4,700 down but the low overnight volumes were insufficient to stem the flow. In the meantime, the trade are mostly on the side-lines and volumes were patchy to say the least until the price reached its current lows," broker Sucden noted.

Aluminium ended $23 lower at $1,646 after stocks jumped 24,575 tonnes to 2,259,100 tonnes. The increase was also centred on Asia - 20,400 tonnes arrived into Busan and 10,075 tonnes into Gwangyang. Market participants attributed the increases to metal being moved back on warrant.

Cancelled warrants were down 5,900 tonnes to 922,100 tonnes.

Zinc failed to close above $2,300 - it concluded at $2,276, down $26. Its cash/threes was last at a backwardation of $5.75 while cash/Sept and cash/Nov were backwardated at $7.50 and $1.10 respectively.

Stock moves were marginal - inventories fell 175 tonnes to 455,275 tonnes.

Nickel fell below $10,000 for the first time since mid-July during the kerb trading - it ended at $9,990/10,000, down $275. Stocks fell 342 tonnes to 373,206 tonnes while cancelled warrants rose 1,530 tonnes to 113,436 tonnes, a move centred on Kaohsiung.

"While prices drift, the Chinese are becoming more active in absorbing excess metal within their domestic system and there are equally expectations of higher stainless steel production in China backed up by their buying of ferro-nickel and ferro-chrome, which for the greater part creates fewer waves than the purchase of refined nickel," Kingdom Futures' Malcolm Freeman said.

Lead edged $6 lower to close at at $1,855; stocks were unchanged. Tin at $18,850 was up $150 - its highest since February 2015; stocks and cancelled warrants both fell 60 tonnes to 4,570 tonnes and 1,595 tonnes respectively. With stocks low, tins spreads are in backwardation - cash/threes was last at $9.

Tin has performed well despite reports that Refined Bangka Tin (RBT) has restarted production under new management some six months after Indonesia's largest independent tin smelter was shuttered.

Cobalt and molybdenum were indicated at $25,750/26,250 and $16,000/16,500 respectively. Molybdenum stocks and cancelled warrants both fell 18 tonnes to 18 tonnes and six tonnes respectively.


(Additional reporting by Kathleen Retourne and Dalton Barker, editing by Mark Shaw)



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