Base metals close mostly higher; LME tin down

Short-covering and position squaring amid illiquid conditions helped lift base metals higher Thursday although traders and analysts said end-of-quarter Friday could strike some more movement amid a lack of other fundamental news.

Three-month tin continued to plummet southward on the London Metal Exchange as buyers locked in profits, falling 4% on the day and some $1,500, or 8%, from record highs this week.

Earlier Thursday, ITR analyst Peter Kettle said a rise in LME tin stocks Wednesday by 200 tons to 9,695 tons triggered the recent correction in prices.

Supply constraints from Indonesian smelter closures have helped boost prices by 35% since Jan. 9. Traders said prior to booking 1Q results, some profit taking was to be expected.

Provided the tin contract holds above $13,000 a metric ton support, its uptrend should remain intact, a broker said.

And Kettle insisted tin's supply and demand fundamentals remain strong, with expectations for a 30,000-ton deficit in 2007 to continue.

As of 1756 GMT, LME tin traded at $13,250/ton.

Meanwhile, the rest of the LME metals performed well, with most contracts up more than 1% on the close. Three-month copper, which brokers said was looking technically weak, was supported as bargain hunters came in on dips, which then triggered a short-covering rally, said Standard Bank analyst Michael Skinner.

News from the CESCO copper conference underway in Chile suggests copper prices will remain well supported going into 2008, with European refiners turning away buying orders due to full capacity, according to UBS.

Analysts said, for now, continued stock drawdowns from LME inventories are adding to price support.

The three-month copper contract finished 1.5% higher on the day, at $6,760/ton as of 1728 GMT.

Similarly, the market viewed well a 700-ton zinc drawdown from LME warehouses, as zinc rose more than 2.5% before retreating to $3,260/ton at 1737 GMT.

"The market is seeing a shift in the inventory pattern," said Barclays analyst Sudakshina Unnikrishnan, with "consecutive drawdowns in the last three days in contrast to the rises that we've seen for the rest of this year."

Going forward, volatility is to be expected as market participants refrain from fresh risk exposure before quarter end, Standard's Skinner noted.

Data wise, Friday will see personal income and spending, and the Chicago PMI numbers.

In other metals, lead finished 1% higher at $1,920/ton, nickel was up 1.2% at $43,950/ton and aluminium was $2,786, up 1.5% on the day.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Wednesday PM kerb
Copper          6755.0-6760            Up 5
Lead            1914.0-1915.0          Up 15
Zinc            3250.0-3251.0          Up 60
Aluminium       2780.0-2781.0          Up 37
Nickel        43,850.0-44,000.0        Up 500
Tin           13,250.0-13275.0         Dn 550