Base metals close firmer on LME

Short covering firmed base metal prices slightly Monday during a quiet trading day using revised kerb and ring trading times for the afternoon open outcry session, traders said.

High profile merger and acquisition activity in the mining industry continued, with Freeport-McMoRan Copper & Gold Inc. announcing a $28.9 billion cash and stock bid to acquire U.S. copper producer Phelps Dodge Inc. to form the world's largest listed copper producer.

"The market went home short Friday and had a constructive close, so we benefited from some profit taking in form of short covering today (Monday)," a trader said.

Analysts viewed the deal, if approved by shareholders and regulators, as a positive signal for the copper market. "The offer is an indication of strong supply and demand fundamentals. Freeport wouldn't have made this offer if they didn't believe the market to remain strong," analyst Robin Bhar at UBS said.

The Thanksgiving holiday in the U.S. Thursday would likely keep the latter part of the week quiet, but the largest short position since 2002 on Comex copper could provide fuel for a squeeze as traders seek to square up positions ahead of the long U.S. weekend, a trader said.

In the news, smaller unions at Codelco's Norte division in Chile accepted a new three year contract, but larger unions are still in negotiations for a new pay deal.

LME zinc reversed from a near one-month low of $4,002.50/ton to rise to a intra-day high of $4,175, up 3.8%.

"As long as we don't break the $4,000/ton level, the market looks good technically. Fundamentally it remains tight, so any dips do attract buying interest," a trader said.

There's still concern for a further liquidation pressure, particularly for the copper market, where inventories continue to rise. LME copper stocks were up 2,025 tons at 158,025 tons.

Weaker housing data from the U.S. has continually fanned the market's wariness for a worsening fundamental outlook.

Meantime, during a conference call for further information on Freeport's offer for Phelps Dodge, company officials outlined their enduring bullish price outlook on the basis of historically low inventories and China's unbroken drive for industrialization.

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

Copper 6839.00-6840.00 Up 39.00
Lead 1515.00-1520.00 Up 31.00
Zinc 4169.00-4170.00 Up 149.00
Aluminium 2654.00-2655.00 Up 29.00
Nickel 30250.00-30300.00 Up 350.00
Tin 9845.00-9850.00 Up 195.00