LME nickel stocks hold at record levels
Pratima Desai
LONDON — Reuters
Published on Tuesday, Jan. 05, 2010 8:38AM EST
Copper slipped on Tuesday as a threat to supplies from Chile ebbed, but analysts say strong manufacturing data from the United States and China, the world's largest consumer of industrial metals, will buoy prices.
Benchmark copper on the London Metal Exchange traded at $7,485 (U.S.) a tonne in official rings from $7,500 a tonne at the close on Monday when the metal used extensively in power and construction touched $7,536, the highest since August 2008.
Chilean mining giant Codelco on Monday made an improved wage offer to workers at its large Chuquicamata complex, which could defuse a day-old strike.
“It looks like we could get an agreement at Chuquicamata,” said Dan Brebner, analyst at Deutsche Bank. “We've had a nice run up in copper and I suspect profit-taking on that kind of news is a possibility.”
The prospect of a prolonged strike at Chuquicamata – the world's second-biggest copper operation, accounting for about 4 per cent of world output – has helped copper in recent days.
But news that workers at Chile's Altonorte copper smelter on Monday reached a new wage deal with owner Xstrata and will end a week-long strike weighed on prices.
A rise in LME inventories to above 505,000 tonnes, nearly double the level seen in July and the highest since March reinforced negative sentiment in the copper market.
Record high nickel stocks – 158,424 tonnes – in LME warehouses also hit prices of the stainless steel material, which was at $18,700 a tonne from $18,950 on Monday.
Harsh Winter
Copper and aluminum (AL-FT) prices also came under pressure from commodity index rebalancing. Both metals will be sold to cut their weightings in the Dow Jones UBS Commodity Index to lower levels.
“There is some selling going on, ahead of the rebalancing next week,” a London-based trader said.
But despite all the negatives, there was an underlying mood of optimism after strong manufacturing data from top economies the United States and China.
Later on Tuesday the market will see U.S. factory goods orders, pending home sales and vehicle sales data, which will be particularly relevant for aluminum.
The metal used in transport and packaging was at $2,280 a tonne from $2,266 on Monday. It has been supported by financing deals which have tied up LME stocks.
“The recent rally can only be maintained as long as the huge amount of metal tied up within these deals is kept off the market,” Standard Chartered said in a note.
The threat of power supply disruptions in China, the world's largest producer of energy-intensive aluminum, because of harsh winter conditions, is also a support.
“It could constrain aluminum production,” Deutsche's Mr. Brebner said. “We understand cold weather conditions in China could be impacting zinc and lead production.”
Battery material lead was at $2,480 a tonne from $2,515 on Monday, zinc at $2,555 from $2,570 and tin at $17,545 from $17,440.
