Copper recovers from last Friday's slump amid decline in LME inventory

Copper recovered from last Friday's 4.6 pct slump as a large decline in LME inventories boosted sentiment.

But gains were limited by reports that workers at BHP Billiton (nyse: BBL – news – people )'s Cerro Colorado mine in Chile have called off their planned strike.

At 12.36 pm, LME copper for three-month delivery was up at 5360.00 usd a tonne against 5,345 usd at close yesterday.

'Metals are oversold and are due a corrective bounce,' said UBS Investment Bank analyst Robin Bhar.

He added, however, that he remains wary of recent increases in LME copper stocks, which have more than doubled since the start of the year.

The LME said earlier in a daily report that copper stocks held in its warehouses fell by 1,225 tonnes to total 214,025 tonnes, reversing the recent rising trend.

While this boosted sentiment in copper, news that workers at Cerro Colorado accepted a contract offer from management Sunday kept gains in check.

Copper prices plunged Friday as fund money exited the metals complex following reports of heavy losses at hedge fund Red Kite.

The fund is rumoured to have lost 20 pct at the start of January and has reportedly asked investors wishing to withdraw their money to give it a longer notice period.

'After Friday's sell-off the markets are likely to be increasingly nervous over the next few days but it will be interesting to see if these weaker prices prompt more trade buying,' said BaseMetals.com analyst William Adams.

He added that he would 'be surprised if the buying does not turn up'.

Elsewhere, zinc was up at 3,150 usd a tonne against 3,080 usd, recovering from Friday's 9 pct slump.

'Both copper and zinc were unnerved (Friday) by talk of looming surpluses in 2007 and easing tightness,' said Bhar.

He added the premium for cash zinc over the benchmark 3 month futures prices has narrowed sharply in recent weeks, indicating supply of the metal has improved.

Nickel was up at 37,900 usd a tonne against 37,400 usd, still supported by critically low stocks and robust demand.

Nickel was the only metal to close higher on Friday as the selloff in copper and zinc pressure the rest of the base metals complex.

LME stocks of nickel are at 3,222 tonnes, with only around 2,000 tonnes available to the market – equivalent to less than half a day of global consumption.

Nickel stocks are at their lowest levels since 1991.

In other metals, aluminium was up at 2,725 usd a tonne against 2,720 usd; lead was down at 1,620 usd against 1,630 usd while tin was up at 12,050 usd against 11,700 usd.