Copper falls as LME stocks reverse three-day fall

Copper fell in London after LME inventories reversed a three-day downward trend to turn sharply higher, increasing traders concerns about possible surpluses in the market this year. At 1.13 pm, LME copper for three-month delivery was down at 5,366 usd a tonne against yesterday's close of 5,470 usd.

Man Financial analyst Ed Meir said today's hefty 3,175 tonne rise in LME copper stocks was weighing on the metal.

LME data put total copper stocks at a total of 215,750 tonnes – more than double levels seen at the start of last year.

"Prices seem to be heading towards the lower part of the trading range after failing to take out 5,500 usd resistance on a closing basis" yesterday, said Meir.

He added that while the mood in the metals over the past few days has been one of "guarded bullishness", there is not the same "broad-based buying conviction" that was seen last year. "Instead participants are casting a weary eye on a number of issues on the horizon, namely, prospects for US economic growth, the strength (or weakness) in Chinese metals demand and the easing in tight supply/demand balances in a number of complexes," said Meir.

Nickel was down at 35,450 usd a tonne from 35,800 usd at close yesterday, after LME inventories, which are at critically low levels, rose for the first time in two weeks.

According to LME data, stocks rose by 138 tonnes to total 3,120 tonnes. This rise still leaves available nickel stocks equivalent at less than half a day of global consumption. BNP Paribas analyst David Thurtell said nickel had been poised to turn lower ever since news broke last week that the possible strike at Xstrata's Sudbury smelter in Canada had been averted.

He added, however, that continued declines in LME inventory had kept a floor under prices. As a result, an increase in LME inventory is significant, especially given that stocks have not risen for weeks, he said. Meanwhile, aluminium was lower at 2,658 usd a tonne, against 2,705 usd a tonne, after the February options expiry, when holders of options can buy or sell the underlying metals future at a specified price at a fixed time. Analysts said there was not the same volatility ahead of today's options expiry as there was over the last couple of months and noted aluminium prices are starting to pull away from the 2,700 usd level.

Tin was down at 11,800 usd a tonne against 11,925 usd after news reports from Asia said Indonesian officials had allowed five small tin smelters to resume operations.

Elsewhere, lead was down at 1,551 usd, against 1,571 usd, and zinc was off at 3,135 usd, against 3,220 usd.