Base metals rally further, tin joins in lead and copper as star performers
By Perrine Faye - Correspondent, <mailto:[EMAIL PROTECTED]> [EMAIL PROTECTED] (+44(0)20 7929 6339) <http://premium.basemetals.com/news/editorial.aspx?GUID=3107100316455392&V=0 ##> Printer friendly version London, 03 October 2007 - Base metals prices rallied strongly again on Wednesday on the LME, with lead and tin as the front runners, buoyed by massive investment fund buying in the absence of China and ahead of next week's industry gathering in London. "They all look good except aluminium, which is struggling a bit at the moment. The Chinese are away this week -- that's helping the market go up ahead of LME week," a floor trader said. "The next move is still up I think." LME week kicks off next Monday, centred around the annual dinner of the global base metals industry on Tuesday. As it is tied with the release of fresh price forecasts and supply/demand outlooks from major players in the industry, it has the potential to set the mood for the rest of the year. "The market certainly feels more optimistic this week with levels continuing to attract investors and unearthing stops along the way," another trader said. "One reason for this is that the LME dinner next week historically adds a bullish tone to the market." Week-long holidays in China, as well as some daily closures elsewhere in Asia throughout this week, mean that interest from this region remained light, while the October traded options expiry passed rather routinely today. As in recent days, activity picked up during early afternoon trade with markets breaking above key levels -- $8,300 a tonne to five-month highs for copper, $3,600 to fresh all-time peaks for lead and $16,000 to nearly two-month highs for tin. Aluminium was the only metal closing in the minus column. "We feel with four out of the six base metals gunning higher, the whole complex is likely to see further gains and that in itself could even attract more investment money into the market, especially if investors are looking to diversify away from equities that are close to record highs," William Adams of BaseMetals.com said. Global equities rose and the dollar recovered further ground after reports reflected modest growth in the US labour market in September -- the ISM service-sector index eased to 54.8 but remained above the 50 growth mark while private employment increased. This fed hopes of a limited impact from the troubled housing market ahead of Friday's all-important payrolls data -- expected to rise by 94,000. LEAD RECORD RUN CONTINUES, TIN JOINS IN Lead broke above the key $3,600 level, with speculative stops triggered up to a fresh all-time peak of $3,645 a tonne, before the market settled at $3,640, up $130, or 3.7 percent from Tuesday. "Lead has outperformed all, gaining a massive 114 percent (since the start of the year) as supply fears in the grey metal are causing it to 'do a nickel'," a third trader said. Despite a 25-tonne stock increase, stockpiles are scarce at 22,350 tonnes, just above their lowest since March 1990, which caused increased market tightness. The cash/threes spread flared out by a third to $95/100 backwardation from $75 overnight. "Although we would be surprised if there were many outright shorts in lead, the tighter spread does suggests a pick-up in nearby interest, which could drive prices higher still," Adams said. Fundamentally, current gains were ignited by the pre-weekend fire at Xstrata Zinc's Mount Isa zinc-lead concentrator, with 15,000 to 20,000 tonnes of lead likely to be affected as repairs will take four to six weeks. After weeks of sideways trading around the key $15,000 level, tin finally broke higher today, to hit its best since August 10 at $16,201 during after-market hours. Earlier, it closed at $16,175, up $525 or 3.4 percent, with the market building on a 22-percent recovery from mid-August lows of $13,250. Gains are being buttressed by a tight tin concentrate market, reduced supplies from China and Indonesia, a potential tin export quota in Indonesia and declining LME stocks -- they fell 135 tonnes today to 13,685 tonnes. COPPER FLIRTS WITH YEAR HIGHS ON PERUVIAN STRIKES Copper, as high as $8,315 a tonne in after-market trading, its highest since May 4, settled at $8,300, up $140, or 1.7 percent. The next objective is the 2007 peak of $8,335, which was also copper's best since May 2006. "Technical buying on a break of $8,250/8,300 a tonne resistance would see a test of the all-time highs at $8,800 a tonne," Robin Bhar of broker UBS said. The market was supported by the start Tuesday of a strike at the Peruvian operations of Southern Copper that could cut output for 2007 by 10 percent. Workers at Southern Copper Corp.'s Ilo smelter and Toquepala and Cuajone mines are staging their third strike this year for higher wages. Some support also came from October's traded options expiry today, as a small amount of $8,300 calls were exercised. In other metals, nickel climbed nearly four percent to $31,900 at one stage before settling at $31,525, still up $825, or 2.7 percent. Inventories rose 54 tonnes to 32,964 tonnes, the highest since March 2006, but the pace of stock increases this week has not been as large as anticipated, so the market has maintained a recovery from last week's lows near $30,000. According to industry consultancy MEPS, nickel, which has been rallying for two months, will not rise much further in the short term but could climb towards the $40,000 mark during the first half of 2008 as demand from the stainless steel sector recovers. Zinc regained $3,100, closing $50 higher at $3,110 as stocks fell by 450 tonnes to 60,275 tonnes, the 16th successive daily decline and a fresh low since March 1991. Aluminium was the exception to today's across-the-board rally, as it bumped into strong resistance around $2,500, with business ending at $2,482, down $6. (Additional reporting by Martin Hayes) <http://www.basemetals.com> BaseMetals.com <mailto:[EMAIL PROTECTED]> [EMAIL PROTECTED] 12 Camomile Street London EC3A 7PT t: +44(0)20 7929 6339 f: +44 (0)20 7929 2369
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