Copper falls again as LME inventories strengthen further

LONDON (AFX) - Copper slid lower amid further rises in inventories held by the LME at a time when demand levels look shaky.

'LME stocks were up again today, bringing the four-day total to about 17,000 mln tonnes,' said Edward Meir at Man Financial.

While supply may be plentiful, demand has yet to pick up.

'That, coupled with the fact that Chinese import demand has yet to fire up, makes us slightly cautious about the short-term outlook,' Meir added.

He believes renewed Chinese demand is crucial in keeping copper above the 7,000 usd/tonne threshold.

Copper miner Phelps Dodge Corp, meanwhile, said its production will rise by 300,000 tonnes a year as new projects in the US, Peru, and the Democratic Republic of Congo come online.

It conceded that Chinese copper consumption growth has slowed but that European and Japanese demand remains strong.

Elsewhere, nickel suffered a steep fall despite concerns about supply. Its falls come after a climb to a record high above 32,000 usd recently, however, and renewed gains may well materialise over the coming days.

'The change in nickel was quite pronounced though we doubt this signals an end to nickel market tightness or an easing of upside price risk in this market,' analysts at Barclays Capital said.

At 4.49 pm, LME copper for three-month delivery edged down 15 usd to 7,485.00 usd a tonne while nickel fell 250 usd to 32,000 usd.

Zinc was up 230 usd at 4,135 usd, aluminium rose 70 usd to 2,765 usd and tin was flat at 10,200.

Markets will next focus on the US Federal Reserve's interest rate verdict and accompanying statement tonight. No change is predicted in the benchmark rate which now stands at 5.25 pct but the statement may be a hawkish one.

Higher interest rates may work to dampen economic activity and reduce demand for industrial metals.