LME Metals Dn In Asia On SHFE; China GDP Eyed

SINGAPORE--Base metals on the London Metal Exchange Thursday held steady most of the day until an afternoon selloff in Shanghai Futures Exchange metals triggered a round of LME selling, traders said.

Market players on the SHFE liquidated positions ahead of the release of Chinese first quarter economic data at 0700 GMT, which some feared may lead to higher interest rates and weigh on base metal physical demand. The market will likely look to the data to provide short-term direction for the complex, traders said.

Three-month copper was trading at $7,811 a metric ton as of 0615 GMT, down from its intraday high of $8,035/ton and $175 lower from the London Wednesday afternoon kerb. Aluminum was $18 lower at $2,860 and zinc had fallen to $3,590, down $89 from the kerb.

"I think if the GDP and CPI figures are quite high, the government will think the economy's still too strong," said Fred Gu, a trading manager at Baiyin Resources, a commodity trading house in Shanghai. "People assume there will be more action from the central bank and that will pressure the physical domestic market."

The government announced Thursday that China's GDP grew 11.1% in the first quarter, above the economists' average forecast of 10.3%.

The losses on the SHFE and on the LME in Asia may lead to more profit-taking in London trading, said the head of trading at a Japanese commodity brokerage.

"Usually when something like this happens there should be follow-through selling," the trader said.

Reports of reduced mine output at PT Freeport Indonesia's Grasberg mine in Papua because of a labor protest failed to give a lift to copper and the rest of the complex.

Indonesia's Minister of Mineral Resources and Energy Purnomo Yusgiantoro said open-pit mining at Grasberg had slowed to 20% of its normal output and underground mining to 60%.

Purnomo's comments appeared to be at odds with an earlier statement Thursday from a PT Freeport spokesman, who said mining operations had been unaffected by a protest and labor strike by Tongoi Papua, a group that is demanding better wages and benefits for Papuans working at the mine.

However, the market was still awaiting more clarification on production because there have been "various conflicting reports," said a Hong Kong-based trader at an international commodity house. "We may well see new high numbers on a confirmation from the company."

Tin was untraded in Asia but may experience further profit-taking in London, traders said.

Now that more Indonesian companies have obtained export licenses, the supply conditions that had supported tin's rally to a 25-year high overnight have changed and tin may be near at a turning point, said Standard Bank in a daily note. "We believe that a move lower should be expected, however the downside is well supported and thus any move will be constrained with the $12,500 level well protected."

As of 0615 GMT, tin was at $13,600/ton, down $100 from the London PM kerb; nickel was $600 lower at $47,300/ton and lead was down $30 at $1,950/ton.