LME base metals dip; Copper at six-month low

London Metal Exchange base metals were lower Friday, with copper tumbling to its lowest level since June following poor U.S. economic data, with traders likely to keep a sharp eye on inventory levels next week.

Copper prices fell to $6,622.50 a metric ton after weak industrial production data for the European Union during early trade combined with a poor reading with the U.S. in the afternoon, Sempra Metals analyst John Kemp said.

Moreover, LME copper stocks rose by 1,675 metric tons to 172,975 tons, according to LME data, which added pressure to prices earlier in the day.

U.S. industrial production increased 0.2% in November, the Federal Reserve said Friday, while industrial production in the euro zone was once again weaker than expected as production of energy stifled growth in October.

Elsewhere in the base metals complex, LME nickel soared to a new record high of $35,000/ton, extending Thursday's gains. However, the metal retreated from those highs on profit-taking to an afternoon kerb of $34,345/ton.

Still, "critically low LME nickel inventories, positive demand from the stainless steel sector, in tandem with supply side disruptions and delays to upcoming nickel projects, provide underlying strength to prices and serve to highlight nickel market tightness," according to Barclays Capital.

News Thursday that PT Inco will likely lower nickel-in-matte output from Dec. 20 if low water reservoir levels persist, reignited concerns in an already tight market.

PT Inco said it was still calculating the extent of a planned cut in output. The company's 2006 production target is 71,000 tons, down from an original 76,000 tons.

Aluminium prices also fell sharply after LME inventories rose by 3,100 metric tons to 664,650 tons Friday, following five days of consecutive drawdowns in stocks. Aluminium fell to an afternoon kerb of $2,802/ton, down from Friday's high of $2,863/ton.

However, LME data shows a single customer or consortium of customers holds 50%-80% of live warrants.

In news, a European Union official said Friday that the E.U. Commission will formally adopt a proposal on changes to the E.U.'s 6% aluminium import duty, likely to be for a halving of the tariff, "in the near future."

Following an internal consultation process, many expected the Commission to formally adopt the proposal Tuesday, but that deadline has now passed.

The proposal, which, if adopted will undermine primary metal producers in the E.U., will then pass to the member states' Council of Ministers and will be decided on early next year.

The duty may eventually be reduced to zero, with reports of trade commissioner Peter Mandelson pushing for a more extensive reduction of the duty sparking market speculation of the future of the motion.

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

Copper 6630.0-6635.0 Dn 140
Lead 1650.0-1655.0 Dn 15
Zinc 4315.0-4320.0 Dn 30
Aluminium 2802.0-2803.0 Dn 61
Nickel 34345.0-34350.0 Dn 380
Tin 11025.0-11050.0 Dn 25