Copper edges up as LME stocks fall for third day

Copper edged up as LME stocks fell for the third straight day and as some of the selling associated with rumoured losses at hedge fund Red Kite began to fade.

At 1.10 pm, LME copper for three-month delivery was at 5,400 usd a tonne against 5,340 usd at the close yesterday.

RBC Capital Markets analyst Alex Heath said in spite of today's recovery, the copper market still appears to be apprehensive after last week's falls, with some players betting on further losses and others expecting demand to rebound.

Copper plunged nearly 5 pct on Friday following reports Red Kite, a big player on the LME, lost 20 pct at the start of January and was trying to stall investors from pulling out their funds.

Zinc also plummeted on the news Friday, although it has since started recovering. It was trading up today at 3,174 usd a tonne against 3,100 usd yesterday.

"(Copper and zinc) prices have now fallen significantly since the end of last year, with copper falling over 14 pct and zinc almost double that at 25 pct," said Standard Bank analyst Michael Skinner.

He added, however, the declines have come against the backdrop of last year's rapid price appreciation, and will likely serve to build more stability in the longer term with prices remaining at historically higher levels.

Separately, copper was steadying after the LME said in a daily report earlier that stocks of the metal held in its warehouses declined by 1,450 tonnes to total 212,575 tonnes.

Copper stocks have now declined for three days running, although they remain healthy overall at more than double the levels seen at the start of last year.

In other metals, aluminium was steady at 2,709 usd a tonne against 2,712 usd ahead of tomorrow's options declaration, when holders of options can buy or sell the underlying metals future at a specified price at a fixed time.

UBS Investment Bank analyst Robin Bhar said all eyes are on the 2,850 usd a tonne strike level or specified option price.

Separately, aluminium is still being underpinned by a market player who is holding a dominant position that could potentially see the withdrawal of nearly all the LME's inventory.

As a result of the unnamed player's position, the premium for the cash metal over the benchmark three-month forward price remains strong today, at around 118 usd.

Three weeks ago the, cash premium hit 120 usd – the highest since 1990.

In other metals, lead was down at 1,577 usd a tonne against 1,600 usd yesterday while tin was down at 11,725 usd a tonne against 11,900 usd.