Copper and zinc rebound after heavy losses

LONDON, Feb 5 - Copper and zinc bounced back on Monday, with falling stocks in London Metal Exchange warehouses underpinning prices after heavy losses in the previous session.
"We have to wait and see what New York thinks about it (the market), but at least stocks were down," an LME trader said.

Copper for delivery in three months ended the day up $10 at $5,340 a tonne, after shedding 4.8 percent on Friday.

In New York, copper for March delivery settled down 0.65 cent at $2.4165 a lb on the New York Mercantile Exchange's COMEX division, near the bottom of its session range between $2.4050 and $2.4535.

Sentiment was aided by a drop in LME stocks, down by 1,225 tonnes to 214,025. Last week, stocks rose by some 5,000.

Despite Monday's rise, the bigger picture looked less positive, analysts said. ADVERTISEMENT
 
 

Investment bank Merrill Lynch said the commodities bull run that propelled copper to an all-time high of almost $9,000 last year will pause in 2007 owing to slowing demand and a falling dollar. [ID:nL0537133]

Zinc lost 9 percent on Friday, with turnover on the LME's electronic trading system at the second-highest on record, a report from LME broker Triland said. On Monday, a reaction rally pushed prices to $3,100 versus $3,085.

"Zinc looks miserable on the charts," Man Financial analyst Edward Meir said and pointed to support at $2,990, with the next major support level at $2,800.

Talk of the $1.5 billion hedge fund Red Kite, which specialises in metals trading, triggered the sell-off on Friday after the fund had sent a letter to investors asking them to sign off on extending the notice period to 45 days from 15 days before the end of the quarter. [ID:nN02255203]

This raised concerns that if the fund suffers redemptions, it may be forced to liquidate large long positions.

Red Kite executive Oskar Lewnowski denied suggestions the fund is in trouble and that investors are rushing to get out.

Copper's fall below $5,430 triggered additional selling and the previous support was now the metal's new resistance level.

A pay deal at BHP Billiton's 115,000- tonne-per-year Cerro Colorado copper operation in Chile capped prices on Monday. [ID:nN04372772]

Copper has lost more than 15 percent and zinc has fallen by 27 percent so far this year.

FOCUS ON ALUMINIUM

LME aluminium finished trading down $8 at $2,712, with the premium for cash metal, known as backwardation, at $104/118.

Ahead of the option declaration on Wednesday, when holders can exercise their right to buy or sell the underlying metals future at a specified price at a fixed time, the market was likely to try and push aluminium prices higher, dealers said.

"There will probably be an attempt to push the market to the $2,850 strike price for February," the LME trader said.

Nickel was down $1,705 at $35,695.

Stocks in LME warehouses were at 3,222 tonnes, their lowest since 1991, while the backwardation was $3,206/3,3354.

Nickel hit a record $38,950 on Jan. 26.

Tin was higher at $11,895/11,900 against its last quote on Friday at 11,675/11,700. Lead was down $27 at $1,603.