LME base metals end lower, but still up on year

Further technically-driven liquidation in London Metal Exchange copper capped the base metals Friday, although traders noted that all contracts are significantly higher on the year.

LME copper ended the kerb session at $6,320 a metric ton as illiquid conditions and some selling pressure from the hedge fund community in particular pushed prices lower.

This is still 46% up since Jan. 1 although a long way off copper's move to $8,825/ton in May, a 103% increase on the year at that time.

With a general lack of buying interest ahead of year-end, the market is looking technically weak and will enter 2007 under pressure, traders said.

"We could be about to enter a new chapter for copper," one broker said. "At the same time, I'm not entirely sure that copper's fundamentals justify a swift return to lower levels," he added.

Of more concern is the impact a sell-off in copper would have on the other markets, traders said, which have been relatively resilient so far in the face of copper's decline.

LME tin in particular may be vulnerable to a slide if fund participants decide to take profits and exit the market, which ended up 78% on the year at $11,510/ton. This is very close to the market's all-time high of $11,850/ton seen overnight, which comes on the back of persistent worries over production in Indonesia.

Although these concerns don't look set to vanish overnight, traders are wary that funds could call the top to the market early in the new year.

A similar picture is true of nickel and lead, whose positive fundamentals have attracted fund interest through the year and helped push prices to record highs in recent weeks.

Analysts said that given forecasts for a significant slowdown in most underlying demand growth rates next year, hedge funds and other investors may move out of the base metals as they revise their market expectations accordingly.

The LME will reopen for trade Jan. 2, although the New York Mercantile Exchange and Comex trading floors will be closed on this day in observance of a national day of mourning for former president Gerald Ford. Nymex and Comex pit trade will reopen Jan. 3.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Thursday PM kerb
Copper             6320.0-6330.0      Dn 59
Lead               1665.0-1666.0      Unch
Zinc               4230.0-4235.0      Dn 15
Aluminium          2801.0-2803.0      Dn 29
Nickel            33300.0-33325.0     Up 50
Tin               11510.0-11520.0     Dn 65