LME nickel falls on profit taking

Profit taking ahead of the year-end and stock increases weighed on lead and nickel Tuesday, while analysts expect year-end positioning to remain a key feature in the base metals market going forward.

"It's been a pretty quiet trading day, to be honest, typical of pre-holiday trading," said a base metals trader. "Not much turnover and it generally looks to be staying this way with traders keen to square positions."

LME lead fell over 2% due to year-end profit taking, an increase in LME stocks Tuesday morning, and poor technicals, said William Adams of BaseMetals earlier. "The metal is looking vulnerable on the charts," he added.

Lead should be well supported around the $1,580/ton area with trend-line support around $1,550/ton, while the metal would need to get above $1,700/ton to resume its previous uptrend, Adams said.

Meanwhile, nickel prices fell due to year-end profit-taking and a rise in nickel stocks, said Michael Widmer of Calyon. According to LME data, nickel stocks rose 60 metric tons to 7,242 tons Tuesday morning.

Elsewhere, LME copper prices fell modestly despite ongoing supply concerns.

"Copper prices really shouldn't have fallen because of the ongoing strike concerns at Altonorte," said Widmer. However, the U.S. economic data released earlier just wasn't good enough to push prices higher, Widmer added.

According to the U.S. Commerce Department, home construction climbed during November yet rebounded only partially from a sharp drop the month before, while permits for future building fell a 10th consecutive month.

Housing starts increased by 6.7% to a seasonally adjusted 1.588 million annual rate, the U.S. government said.

In Chile, striking workers at Xstrata PLC's (XTA.LN) Altonorte copper smelter rejected a sweetened offer by the company Monday evening, the union said.

The smelter employed 500 workers and produced 297,567 metric tons of copper anodes in 2005.

Also in the news, aluminium stocks increased by a net 17,525 metric tons to 683,850 tons, according to the LME, and was thought to be partly the result of Chinese exports to Busan and Singapore.

Nevertheless, aluminium prices stayed within a tight range between $2,777 and $2,817/ton all day. The trader said he wasn't surprised by the stock increase as "a lot of metal moves in and out of stocks at the end of the year." Another trade source said the market failed to respond because it was largely anticipated.

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

Copper 6644.0-6645.0 Dn 21
Lead 1633.0-1635.0 Dn 41.5
Zinc 4310.0-4311.0 Dn 30
Aluminium 2803.0-2805.0 Up 16
Nickel 33600.0-33700.0 Dn 425
Tin 11125.0-11175.0 Up 15