Base metals close higher in London on late short covering

Base metals prices rebounded from earlier lows Wednesday at the London Metals Exchange to push back towards key technical levels on a combination of short covering and fund buying, traders and analysts said.

LME three-month copper fell to a low of $6,765 per metric ton, but rebounded to above the 200-moving average to trade at $6,910/ton.

A combination of short covering has pushed the base metals back up from their lows so that prices are now more-or-less back into neutral territory, said a LME trader. Friday, however, will be critical to indicate which way the trend will go as market participants take end-of-the-week positions, the LME trader added.

However, Bart Malek of BMO Capital Markets Corp. in a note earlier said that rising supplies will pull the price of copper and other metals lower.

According to LME warehouse data, copper stocks rose by 150 metric tons to 152,075 tons Wednesday morning.

In news, a strike by hundreds of workers on the Tanzanian-Zambian railway that began Wednesday could be harmful to the copper mining sector if it continues, an industry official told.

The bulk of Zambia's global copper exports go via the Tanzania Zambia Railway Authority to the Tanzanian port of Dar es Salaam. Zambia has a number of mining projects currently under construction and mining companies are transporting machinery by rail to developments including the $762 million Lumawana copper project.

Meanwhile, LME three-month nickel prices traded to a low of $28,700/ton, but gained midway through the day to trade at $29,650/ton, near the key technical price level of $30,000/ton.

"Nickel prices have been very volatile as of late," said a LME nickel trader, but the metal climbed from earlier lows on fund and consumer buying.

However, traders have maintained that zinc prices should resist the downward price trend, owing to supply shortfalls.

Three-month zinc was trading at $4,200/ton, up from Wednesday's low of $4,039/ton. According to LME warehouse data, zinc stocks fell by 275 metric tons to 93,575 tons.

Sister-metal lead rose from its low of $1,445/ton to a high of $1,520/ton.

The International Lead and Zinc Study Group said Wednesday that the global zinc market was in a deficit of 304,000 metric tons between January to September, while the lead market was nearly balanced.

Zinc production rose to 7.904 million tons during the first nine months of 2006, up 3.7% on the same period last year, while consumption rose more strongly to 8.208 million tons, up 4.3%, according to the ILZSG. In the lead market, global production stood at 5.992 million tons, up 7.3% on January-September during 2005, while consumption rose to 5.991 million tons, up 261,000 tons or 4.5%.

3 months metal (prices in dollars a ton)
Bid – Ask, Change from Tuesday PM kerb

Copper 6905.0-6910.0 Up 60
Lead 1515.0-1520.0 Up 30
Zinc 4180.0-4190.0 Up 45
Aluminium 2699.0-2700.0 Up 13
Nickel 29875.0-29925.0 Up 675
Tin 9600.0-9700.0 Dn 200