LME metals steady, growth fears weigh

LONDON, Nov 20 (Reuters) - Base metals traded slightly higher in the official open outcry session at the London Metal Exchange on Monday, but longer-term fears about slowing economic growth still weighed on the market.

Benchmark futures contract three-months copper was at $6,870 per tonne, up $80 from Friday's close, while aluminium was up $27 at $2,620/2,625.

News that FreeportMcMoRan has agreed to pay $25.9 billion for much larger copper miner Phelps Dodge [ID:nL20659525] supported copper futures, analyst Edward Meir at Man Financial said in a note, describing the price as a "surprisingly rich premium."

"As this news wears off, we expect the market to focus once again on rising copper stocks, (up by another 2000 MT today), and a slowing US macro environment. We still maintain that copper has lower to go, while facing resistance at the $7000 level," he said.

Copper, for some time favoured by the investment community as the metal most likely to provide good returns as demand remained high, has now lost around $2,000 since peaking in May this year.

"The base metals markets complex has sold off since the end of October, which we believe reflects market concerns as economic data continues to confirm the global industrial deceleration," Goldman Sachs said in a report.

It cited Chinese industrial production softening, among other figures.

China, the world's biggest consumer of copper, is crucial for the metals markets.

MOVE INTO SURPLUS?

Stocks of copper in warehouses reporting their positions to the LME rose again on Monday, as they have almost consistently since July 2005.

"It does appear that copper has moved into a small surplus, and we expect that situation to continue through much of 2007," said Macquarie Bank in a report.

"As a result, we do expect copper prices to come under further downward pressure."

Though copper price movement often determines the way other metals move, Macquarie said that metals which remain in deficit were likely to outperform the market.

"We believe that zinc stands out as having the most bullish fundamentals over the next few months," it said.

Zinc was up 2 percent or $110 at $4,140, with stocks extending their 17-month fall to 90,400 on Monday.

Norilsk Nickel , the world's number one nickel producer, said it was buying OM Group's nickel business for $408 million [ID:nL20505704].

Nickel was indicated up $600 at $30,200/30,300.

Lead was at $1,515, up $35, and tin was unchanged at $9,800.