Aluminium hits 5-wk high on fund buying

Aluminium rose to a five-week high on technical fund buying on Friday, while copper eased on profit-taking despite strike threats. On the technical charts aluminium broke above the 100-day moving average at around $2,790 a tonne, which attracted plentiful follow-through fund buying, traders said. "Aluminium looks comfortable at current levels and it looks as if one or two big players want to keep it up here," a London Metal Exchange trader said. Three-months aluminium futures closed at $2,813 a tonne from $2,790 on Thursday. Earlier it touched $2,820, the highest since June 5. "Aluminum has broken out of the pack and looks set to move higher," Man Financial said in a report. Copper ended slightly lower at $7,840, down $20. Earlier it hit an eight-week high of $7,880. Supplies of the metal used extensively in the power and construction industries have been threatened by a strike in Canada and potential strikes in Chile. The market has been pricing in output losses over the past couple of weeks and some now think the worry has been overdone. "When the outlook is a bit uncertain, it's a good time to take profits," said Peter Dixon, analyst at Commerzbank, adding that the copper market will be less tight during the second half of this year. "The impact of strikes tends to be greatest when stock levels are fairly low." Stocks of copper in LME warehouses have fallen over the last two weeks to around 105,475 tonnes, little more than two days of global consumption and the lowest since last August. "While a strike premium has probably been priced into the market, the persistent decline in LME stocks is what many investors are carefully monitoring," Deutsche Bank said in a research note. Scanning below the headline inventory data is the fact that only about 80 percent of LME copper stocks are available to the market. "The primary factor behind ... (this) is that consumers are seeking to secure more material than usual in an effort to hedge against greater supply volatility," Deutsche Bank said. Also weighing on the market is a potential squeeze by one large holder with claims on up to 90 percent of copper in LME warehouses, reflected in the premium for cash metal over material for delivery in three months time. The backwardation, as it is known, has eased a little to around $112 a tonne from around $123 earlier this week, but it is still around the highest since last July. Expectations that generally tight supplies of copper and other base metals will bolster prices and news that investment bank Credit Suisse had raised price forecasts boosted sentiment for London-listed miners. BHP Billiton, Vedanta Resources and Xstrata closed up over 3 percent. However, Rio Tinto was unchanged after a report that the world's second-biggest miner is drawing up plans to gatecrash Alcoa Inc's $28 billion hostile bid for North American rival Alcan Inc. Nickel slid to $35,300 from $36,000, zinc shed $5 to $3,425, tin was up $50 at around $14,150 and lead closed at $2,850/2,860, up $5. Lead, used mainly in batteries, hit a record high of $2,912 on Thursday, a gain of around 70 percent since January, as worries about supplies from China and Australia rumbled on. Metal prices 1606 GMT Metal Last Change Pct Move End 2006 Ytd Pct.