End-of-month book squaring pared some of London Metal Exchange copper gains but prices held steady amid news that Teck Cominco Ltd.'s Highland Valley Copper mine was preparing to shut down production, traders said.
Sentiment on the LME was nervous before the end of the month, expecting volatility at the start of the fourth quarter and a week-long holiday in China next week.
LME three-month copper lifted from Thursday's lows on a mix of speculative and consumer buying after a large LME stock drawdown of 3,800 metric tons to 117,575 tons boosted sentiment, traders said.
Prices traded up to an intraday high of $7,680/ton before paring gains to little changed levels of around $7,500.
However, expectations of stronger physical demand during the fourth quarter, end-of-month window dressing and anticipation of fresh fund money allocations kept sentiment firm, traders said.
In the news, members of the United Steelworkers union at Teck Cominco's Highland Valley Copper mine in Canada have been instructed to shut down production lines at the mine, a union official said late Thursday.
The mine produced 179,000 tons of copper in 2005.
Deutsche Bank upgraded its cash copper price forecasts for 2006 and 2007 by 7% and 13% respectively, noting an expected increase in domestic demand in China.
"Our price forecasts are now $3.10/lb in 2006 and $3.00/lb in 2007," the report said.
In other supply related news, the five unions representing some 6,000 workers at the Norte division of Corporacion Nacional del Cobre de Chile, or Codelco, have threatened to strike unless Norte Chief Executive Sergio Jarpa leaves, newspaper La Tercera reported Friday, citing a union leader.
Codelco is the world's largest copper producer.
LME aluminium was more subdued Friday after decoupling from copper Thursday to surge 3%.
Aluminium Thursday hiked in spite of copper price falls, which is usually the dominant driver, triggering market talk of a macro fund being forced to stop out of a short position, turning short-term sentiment jittery for further volatility.
Triland Metals Ltd. noted talk of a shift of some funds' attention from copper into aluminium that lead some shorts to cover Thursday, "triggering substantive upside stops, driving prices to new highs," Triland said in a report.
LME nickel rallied after a subdued morning session, rising to an intra-day high of $29,400/ton.
LME lead was also firm before succumbing to profit taking in the afternoon. Lead's fundamentals have steadily improved during the course of the year due to unexpected delays for mine ramp ups and production disruptions.
This has seen LME lead stocks halve since mid-year to 60,725 tons and down 1,775 tons on the day.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Thursday PM kerb
Copper 7544.00-7545.00 Up 84.00
Lead 1375.00-1380.00 Dn 13.00
Zinc 3330.00-3340.00 Dn 19.00
Aluminium 2584.00-2585.00 Dn 21.00
Nickel 29395.00-29400.00 Up 445.00
Tin 8825.00-8850.00 Dn 200.00
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