Base metals were mixed at the London Metals Exchange Tuesday with copper, zinc, and nickel posting the largest losses on long liquidation, but the metals should be supported in the short-term, said analysts.
LME three-month copper prices dipped below the key psychological $7,000 per metric ton price level and hovered near the 200-day moving average of $6,981.76/ton.
Long liquidation and the addition of short positions weighed on base metals prices, said UBS Robin Bhar. However, if copper does not fall too far from the $7,000/ton price level, there should be good scale-down buying, said Bhar.
Weaker-than-expected durable goods data weighed on sentiment, said Macquarie analyst Adam Rowley. But, copper prices should hover around the $7,000/ton price level for the short-term, he added.
Disappointing durable goods data for October initiated a drop in the U.S. dollar in afternoon trading. But the dollar recouped some of its losses after news that U.S. home sales rose for the first time in eight months.
Nevertheless, the euro remains above the $1.31 level against the dollar.
Meanwhile, zinc prices posted a correction from its recent highs falling from Tuesday's high of $4,550/ton to a PM kerb of $4,375/ton.
There were more participants long zinc so the potential for long liquidation was greater, said Bhar. Concerns about the U.S. economy and a look at the U.S. dollar has come back into focus for the markets, Bhar said.
A controlled dollar decline will be supportive to prices, Bhar said, leading to an increase in purchasing power of other currencies. However, if the dollar declines too abruptly it will hurt economic competitiveness, he added.
Three-month nickel prices traded to a session high of $33,575/ton, before dropping to a low of $32,250/ton just before the PM kerb. However, the metal remains well supported.
Calyon analyst Michael Widmer pointed to strong stainless steel production and nickel demand as providing underlying price support, eyeing between $32,000 and $34,000/ton in the short-term.
Moreover, supply fears continue to hang over the market in part due to the strike at Eramet's (13175.FR) New Caledonian operations where around 50 tons of metal have been lost a day since the action began on Sept. 25.
Also impacted by the strike is Brazilian mining giant Companhia Vale do Rio Doce's Goro nickel project. The manager of the project said Tuesday that the French Pacific territory has instructed it to continue work on a waste storage facility as it considers an appeal against a Paris-issued order to cease work.
CVRD Chief Executive Roger Agnelli was quoted last Friday as saying that the project's startup is estimated for late 2008 from mid-2008 previously.
Three-month aluminium traded to a high of $2,714.50/ton before retreating to $2,698.50/ton, while lead traded to a session high of $1,585/ton, the PM kerb.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Monday PM kerb
Copper 6970.0-6975.0 Dn 125
Lead 1585.0-1590.0 Up 7
Zinc 4375.0-4380.0 Dn 105
Aluminium 2704.0-2705.0 Up 6
Nickel 33050.0-33100.0 Dn 425
Tin 10245.0-10250.0 Up 95
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