LME copper falls 3% on technical selling

London Metal Exchange copper fell sharply late Tuesday on technical selling, but trades said market players should view the lower prices as a good buying opportunity.

Three-month copper traded to a high of $6,895 a metric ton Tuesday before retreating roughly 3% to a PM kerb of $6,678/ton.

A fall below $6,800/ton triggered an initial round of technical selling further exacerbated by long liquidation ahead of the PM kerb, according to a London trader, sending prices sharply lower.

The long liquidation was triggered by disappointed market players after the metal couldn't push towards the key psychological $7,000 a metric ton level, the trader noted. Since the start of March, LME copper has jumped roughly 10%.

However, market players should see lower metals prices as a good buying opportunity, the LME trader said.

Bearish U.S. economic data also weighed on price sentiment. The Conference Board consumer confidence index for March slipped to 107.2, from a revised 111.2 in February, its weakest reading since November 2006 and below expectations of 108.0.

Moreover, "the steady downtrend in LME copper stocks continues to provide support to prices," said Barclays Capital in a daily note. "Also positively, copper open interest has been rising steadily for the last few days... all this suggests fresh buying interest in copper."

In other metals, three-month lead was under pressure after an easing in supply concerns from Australia. The metal rose to a high of $1,910/ton before retreating some 3% to a PM kerb of $1,850/ton.

Ivernia Inc.'s wholly-owned Magellan Metals said Monday it is pursuing alternative shipping arrangements after the Western Australian port of Esperance canceled lead shipments March 14 when abnormally high levels of lead and nickel were found in surrounding waters.

Meanwhile, three-month tin pushed to a fresh record high of $14,600/ton, up 0.4% from Monday, before retreating to a PM kerb of $14,590/ton.

LME tin continues to make fresh highs amid very little buying interest with momentum firmly on the upside and $15,000/ton the key overhead target, a London broker said.

"Price gains in tin continue to be underpinned by the supply side problems from Indonesia in an environment characterized by strong tin demand and low LME tin inventory," said Barclays.

Last October, Indonesia closed dozens of small-scale smelters that together produced about half the country's annual tin output on allegations they were purchasing tin ore illegally, damaging the environment and evading taxes.

Meanwhile, LME tin supplies have fallen some 6% from month-ago levels and some 26% from the start of 2007.

Traders and analysts said they will keep a close watch on Federal Reserve Chairman Ben Bernanke's testimony Wednesday for further indications of the health of the U.S. economy. Bernanke will testify at 1330 GMT before the congressional Joint Economic Committee on the outlook for the U.S. economy.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Monday PM kerb
Copper           6678.0-6682.0     Dn  173
Lead             1850.0-1851.0     Dn   40
Zinc             3190.0-3200.0     Dn   51
Aluminium        2747.0-2750.0     Up   22
Nickel          42795.0-42800.0    Up  300
Tin