LONDON (AFX) - Copper prices were lower after the LME reported a strong jump in inventories held in its warehouses. Other base metals were also lower ahead of the US rate verdict tomorrow and third-quarter GDP numbers on Friday.
The LME said today copper stocks rose by 7,750 tonnes to 120,825 tonnes. Although overall stocks are still equivalent to less than three days of global consumption, the rise came on top of two days of fairly large gains.
'A sharp rise in copper stocks set up the negative tone early on in copper,' said Man Financial analyst Ed Meir.
He added that news that unions from Codleco Norte had begun early pay talks with management was also depressing sentiment as it increases the chances of a settlement and decreases the chances of supply disruptions.
'We reiterate being cautious on copper at this stage, as it is still not behaving that impressively given the recent surge in the balance of the group,' said Meir.
Last week, all-time and multi-year highs were seen in nickel, lead, tin and zinc, while even aluminium, which has under-performed the market recently, crept steadily higher.
Meir said the weaker tone today was likely due to the fact that 'metals are moving away from focusing on their own internals, and are instead nervous ahead of the upcoming US stats and the Fed meeting,' he said.
The US Federal Reserve has begun its two-day meeting on interest rates today, at which it is is widely expected to keep rates unchanged at 5.25 pct for a second time.
However, analysts also expect the statement accompanying the rate verdict to signal the Fed's willingness to lift interest rates in order to dampen inflationary pressures.
Higher interest rates work to dampen economic activity. Prior to its last meeting, the Fed had raised rates by a quarter point for 17 consecutive sessions in a bid to curb inflation.
The impact of those rate hikes should be reflected in Friday's third-quarter GDP data. Meir said the data 'is the most important to watch, as it will provide a snapshot of just how sharply (US) growth is decelerating'.
At 3.46 pm, LME copper for three-month delivery edged down to 7,460.00 usd a tonne against 7,545.00 usd at the close yesterday, while nickel fell to 32,350.00 against 32,400.00 usd.
Zinc dipped to 3,880.00 usd against 3,930.00 usd, aluminium was down at 2,690.50 usd against 2,710.00 usd, tin was lower at 10,100.00 usd against 10,400.00 usd, while lead crept up to 1,525.00 usd against 1,512.00 usd.
Copper was lower even after BHP Biliton, the world's largest miner, said output of the metal fell 19 pct to 249,900 tonnes in the quarter ended Sept 30, having been affected by industrial action at the Escondida mine in Chile.
The miner also said aluminium output, at 337,000 tonnes, was 1 pct higher than a year earlier, with production at a record level. Aluminium has been a poor performer this year as its stocks are not as tight as the other metals.
Nickel, which is plagued by critically low stocks and ongoing supply disruptions, edged lower but still managed to hold close to recent all time highs above 32,000.00 usd.
Nickel is used in stainless steel and other metals as an anti-corrosive additive. Outokumpu Oyj, the world's second largest stainless steel maker, has warned high nickel prices could cause instability in the stainless steel market.
It said in its third quarter report yesterday stainless steel demand continues to be strong, its mills are running at full speed and it has achieved small base price increases for January and February deliveries in Europe.
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