LME metals up, aluminium at record high

London Metal Exchange aluminium rallied Thursday, setting a fresh four-and-a-half month high on the back of speculative buying and short covering, traders and analysts said.

Analysts credited LME three-month aluminium's foray above the key trendline at $2,700 a metric ton with boosting sentiment for other metals.

Following its second consecutive close above $2,700/ton, aluminium is now well positioned for further strong gains, analyst Robin Bhar at UBS said.

"Aluminium closed above the important $2,700/ton level for the first time since late May 2006 and a second consecutive close above that level today could be the catalyst for further gains as many of the ingredients look to be in place for a squeeze in the short term," Bhar said.

A possible squeeze centers on the large open interest and large long and short positions for the December date.

Meantime, physical demand in Europe was brisk, underpinning the move, Triland Metals Ltd. said in a report.

While aluminium has less bullish fundamentals than copper or zinc, many analysts expect demand to remain strong until the end of the year. Prices are forecast to fall in 2007.

LME copper stayed rangebound Thursday with little fresh news to spark renewed fund interest.

"Unless the funds steam into copper again, it is going to be hard to get too bullish until there are some signs of the market tightening up again. We think this is bound to happen when destocking peters out, but until it does, there is little reason for prices to rally too much," analyst William Adams at BaseMetals.com said in a report.

LME nickel rose despite reports of workers returning to work at the Eramet SA's mine in New Caledonia in the South Pacific.

A 378-ton stock decline to 4,932 tons helped the market, as well as market talk that shipments into warehouses in Europe may now dry up until next month, Triland said.

Another large stock withdrawal of 1,700 tons to 123,975 tons boosted LME zinc, while nearly 30% of LME tonnage remains as canceled warrants. Prices nearly rose to $4,000/ton again and are well positioned to break to a new record high soon, traders said.

LME tin had another volatile day with a $9,100-$9,925/ton trading range.

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

Copper 7655.00-7660.00 Up 10.00
Lead 1495.00-1500.00 Up 2.00
Zinc 3940.00-3945.00 Up 59.00
Aluminium 2740.00-2714.00 Up 28.00
Nickel 31675.00-31700.00 Up 775.00
Tin 9900.00-9950.00 Up 200.00