Copper dips amid another large gain in LME inventories

Copper prices fell, extending Friday's falls, amid another large gain in LME inventories of the metal.

At 1.19 pm, LME copper for three-month delivery, which earlier hit a low of 5,650 usd a tonne, was at 5,660 usd against 5,750 usd at close yesterday.

The LME said in a daily report earlier that stockpiles held in its warehouses rose 2,600 tonnes to total 199,450.

Copper stocks are now nearly double what they were at the start of 2006.

Man Financial analyst Ed Meir said the market might get slightly rattled as copper stocks approach the 200,000 tonne level.

At that level, the copper market is no longer considered tight.

"We seem to be stalling as we approach the 6,000 usd a tonne mark," said Meir.

He added while most metals closed last week above significant resistance levels, he fears the weakness in oil will cap gains in metals this week.

Copper prices fell around 12 pct in the first week of the year amid a commodities wide price slump.

However, they staged a modest recovery towards the end of last week and are now down around 8 pct since the start of the year.

BaseMetals.com analyst William Adams said the fact that most metals remain below last week's highs suggests "the initial rebound has now run its course".

"The metals are waiting to see what follows," he said, but added overall he feels they could push higher as fundamentals remain tight in most metals.

Even copper, which has been the laggard of the complex since last summer, could recover as consumers start bargain hunting, said Adams.

Elsewhere, nickel surged to 33,400 usd a tonne against 32,445 usd at the close Friday amid another decline in LME stocks.

Nickel stocks are at critically low levels. UBS Investment Bank analyst Robin Bhar said he remains upbeat on the outlook for both nickel and zinc.

Zinc was up at 3,845 usd a tonne against 3,770 usd at the close Friday.

"Both metals (nickel and zinc) are characterised by low and falling stocks; further price strength look likely amid tight supply/demand," said Bhar.

In other metals, aluminium rose to 2,725 usd a tonne against 2,695 usd, tin was flat at 10,550 usd, while lead climbed to 1,625 usd against 1,610 usd.