Copper gains on bargain hunting but analysts doubt rally will last

Wed, 28 Mar 2007 – Copper prices rose in early afternoon trade as buyers capitalised on losses sustained by the metal earlier this week amid turbulence in oil prices and a weaker tone in equities.

At 1.55 pm, LME copper for three-month delivery rose to 6,725 usd a tonne, against 6,682 usd at the close yesterday.

'We are seeing investor demand (picking up) in the dips, given the 2.5 pct fall in prices yesterday,' said UBS analyst Robin Bhar. 'As we are moving into the peak demand season, consumers need to buy.'

Positive price movement in other commodities is also encouraging investors into the market, analysts said.

'The run in oil and bullishness in precious metals is encouraging some bargain hunting in base metals,' said BaseMetals.com analyst William Adams.

He added that he sees further downside potential for the metal going forward. Disappointing US economic data and concerns over the escalating geopolitical crisis over Iran have both weighed on copper in recent days.

The metal closed 170 usd lower yesterday after making a new high for the year, as the release of weaker than expected US consumer confidence data renewed concerns over the impact of slowing US growth on demand.

Standard Bank said copper is facing strong resistance at the 6,900-7,000 usd level and that, as a result, 'a period of corrective weakness is expected to come to the fore'.

Nickel was higher at 43,700 usd a tonne against 42,800 usd at the close yesterday with concerns over low inventory levels continuing to boost prices even though supplies of the metal are picking up.

The LME said today that nickel stocks held in its warehouses increased again, this time by 126 tonnes to 5,496 tonnes. However, on warrant or available stocks are still equivalent to only about a day's worth of consumption.

Tin was down at 14,010 usd a tonne after closing at a new contract high of 14,595 usd yesterday on continued concern over supply from Indonesia, the world's second largest tin producer.

A government crackdown on illegal mining in the country is still hitting production levels.

In other metals, aluminium was down at 2,740 usd a tonne against 2,750 usd at the close yesterday, while zinc edged up to 3,225 usd against 3,200 usd, and lead rose to 1,900 usd against 1,851 usd.