Copper Trips, Giving Players The Jitters

LME copper stumbled lower on Tuesday morning after a paltry stock draw gave the market the jitters, traders said.

LME stocks fell only a net 475 tonnes on Tuesday compared to 2,100 tonnes the previous day prompting some concern about the possibility that tightness was evaporating.

"The market is nervous, very nervous," one senior floor trader said. "People remember how quickly the backwardation collapsed after it got up to $200."

But another trader said the net figure included 3,025 tonnes of deliveries out of warehouses, balanced by 2,550 tonnes of fresh material coming in with most entering the Singapore facility.

 

"Stocks are still very low overall and about 40 percent of them are in the U.S. There's not a lot in Europe," he said.

Total stocks now stand at 141,100 tonnes, above a six-year low around 90,000 tonnes seen last November.

During ring trading, nearby lending hammered the cash/ threes backwardation to about $50 from $70/$75 on Monday evening. The cash/June spread bore the brunt of the lending, moving to a $1 contango at one point from a $12 backwardation.

Futures also slipped, but found support at $2,450 during most of the session, ending the kerb $23 lower at $2,451. Some analysts say the futures market was overheated and needs to take a rest and correct lower before it can break through the $2,490 resistance, where it failed on Monday.

Other metals eased in sympathy with copper. Aluminium also got a jolt from the stocks report. An increase of 2,050 tonnes was the first since the LME began daily reports on April 7.

The cash/threes spread moved to a $22/$20 contango after $19/$18 on Monday evening.

Futures broke $1,650 support but stabilised, finishing the morning $15 weaker at $1,638. Support is pegged at $1,634/7 and then at $1,616.