Metals range-bound but miners surge

Industrial metals hovered within recent ranges on Thursday as investors held back ahead of central bank interest rate decisions in Britain and Europe, while mining shares lifted the London stock market on fresh talk of a big merger, analysts and traders said. Copper futures at the London Metal Exchange, often considered a gauge of the real economy, were quoted at $7,210/7,230 per tonne, up $50 or 0.7 percent from Wednesday's close, while aluminium was down $1 at $2,442/2,446. Mining shares were among the biggest gainers on the London stock market, with Rio Tinto LME trader said. "The metals are stuck in ranges. Aluminium has only moved in a $25 range, and zinc $20, and turnover is very low," he said. By 0944 GT, less than 1,000 lots of aluminium -- the exchange's biggest contract by volume -- had been traded on electronic dealing system Select. At Thursday's prices, copper is up 14 percent on the start of the year and aluminium is down 14 percent. Metals in general were knocked in August when investors sold holdings to cover losses sustained in the wake of the collapse of the U.S. subprime mortgage market, but copper has since then partially rebounded. In broader terms, investors are waiting for the U.S. payrolls report on Friday following data on Wednesday that showed U.S. private employers likely added 38,000 jobs in August, the slowest rate of growth in four years., and beyond that for a meeting of the Federal Reserve on September 18, at which the central bank may cut interest rates. MERRILL UPS METALS OUTLOOK Investment bank Merrill Lynch upgraded its long-term price forecasts for aluminium, copper, nickel, zinc and lead, arguing that higher costs of production would lead to higher sales prices. "Of the major metals, our preferred commodities are nickel as we believe there will be a re-stocking starting in Q4, and aluminium, which has been the laggard in this cycle," the report said. Merrill forecast nickel prices would average $12 a pound in 2008 and $11 a pound in 2009. Merrill also upgraded its long-term average price forecast out to 2013 to $6.90 a pound from $4.77. It increased its 2008 outlook for aluminium by 12 percent to $1.18 a pound and its 2009 forecast by 21 percent to $1.15. Its 2008 copper forecast was raised by 25 percent to $2.50 a pound and by 14 percent in 2009 to $2.00 a pound. Aluminium was up $2 at $2,445. Stocks rose on Thursday by 4,925 tonnes to 858,925 tonnes and have climbed 2.3 percent since the end of August. Merrill also adjusted its ratings on several companies in the sector including Alcoa Inc, Alumina Ltd, Century Aluminum Co., Norilsk Nickel and Eramet to "buy." Zinc was up $25 at $2,840/2,860, lead was up $25 at $2,935/2,955 and tin was up $138 at $14,763/14,849 while nickel was down $53 at $27,247/27,449.