LME copper closes slightly lower

London Metal Exchange copper reversed off a fresh five-month low, ending the week on a steadier-than-expected note following recent heavy liquidation and loss of key technical support lines, analysts said.

Weaker oil prices during the morning session weighed LME three-month copper to a fresh five-month low of $6,655 metric ton, down 2.3% on the Thursday PM kerb and also compounded by a stock inflow of 4,025 tons, taking LME inventories to 155,975 tons.

Copper prices nearing support at $6,600/ton fanned participants' concerns for a retreat below $6,000/ton, in spite of ongoing labor talks at Chilean copper producer Codelco.

However, the market's current bearishness would likely be only a short-term feature, Deutsche Bank said.

Global exchange stocks were still low despite a rapid build in inventories in recent weeks, leaving stocks at 2.4 weeks of consumption, still the lowest in 20 years, Deutsche Bank said.

Also, data outlining falling Chinese copper demand was distorted by China State Reseve Bureau stock releases while copper concentrate output was down on the year, leaving the market tight and vulnerable to further supply disruptions.

"The stock increases over the past 15 months have been all about SRB releases. We don't know how much they sold but estimates are in the region of 150,000 tons during 2005 and 200,000 tons in 2006," Stephen Briggs at Societe Generale said.

Friday's respite from much lower prices could offer an opportunity to assess fundamentals for certain metals, he added.

LME lead was unlikely to rechallenge its recent record high of $1,755/ton as more mine supply becomes available, Briggs said.

Copper and particularly zinc remain tight, but, he added, forecasting an average copper price of $6,300/ton for 2006.

LME zinc came under pressure from fund liquidation Friday, falling to a near one-month low of $4,015/ton, down 4.8%. The retreat would likely draw bargain hunters next week, traders said.

3 months metal (prices in dollars a ton)
Bid – Ask, Change from Thursday PM kerb

Copper 6800.00-6810.00 Dn 10.00
Lead 1484.00-1485.00 Dn 51.00
Zinc 4020.00-4030.00 Dn 200.00
Aluminium 2625.00-2626.00 Dn 43.00
Nickel 29900.00-29950.00 Up 300.00
Tin 9650.00-9700.00 Dn 100.00