LME base metals end mixed; Trading volumes low due to US holiday

London Metal Exchange copper fell over 2% on rising inventories Monday, with trading volumes in base metals likely to pick up Tuesday when the U.S. returns after a holiday Monday.

The addition of new shorts into the market continues to weigh on copper prices, said Michael Widmer of Calyon. With inventories rising, copper prices have little incentive to push higher again, Widmer said, adding "technically the market looks poor with no real support until the $5,000 per metric ton price level."

Copper traded to a PM kerb of $5,615/ton, down over 2% from Friday, triggered by rising inventories. According to LME data, copper stocks rose 2,600 tons to 199,450 tons Monday.

But, the copper market could get "slightly rattled" if London Metal Exchange stocks move up above the 200,000 metric tons level, said Man Financial's Ed Meir.

Pit trading in the U.S. was closed Monday due to the Martin Luther King Day holiday, but electronic trading remained open on the CME Glomex platform.

Comex copper has seen virtually no trading Monday because of the holiday, said a broker.

Market participants said trading volumes on LME copper was thinner than usual as the U.S. was out on holiday and the market will await the return of the U.S. markets Tuesday for further price direction.

Chinese demand for copper remains "pretty buoyant" but a slowdown in the U.S. housing sector and new copper supplies counters that demand, said Peter Dixon of Commerzbank.

In news, Chile's copper exports totaled $2.15 billion last month, up 16.8% from $1.84 billion in December of 2005, the central bank reported Monday.

The figure took the annual export total to $33.34 billion, a surge of 82.1% from the $18.31 billion of 2005, reflecting the ongoing boom in the metal on world markets.

Elsewhere, three-month nickel remained well-supported rising over 2% on declining inventories. According to LME data, nickel stocks fell 240 tons to 5,676 tons Monday with canceled warrants at 26%.

"There appears to be no imminent easing of the tight nickel supply situation following delays and disruptions to upcoming nickel projects," said Kevin Norrish of Barclays Capital.

In news, Inco Ltd. (N) will hear on Feb. 2 if its appeal to overturn a French court ruling that requires the company to stop clearing land at part of its Goro nickel mining project in New Caledonia, a company spokeswoman said Monday.

Meanwhile, market participants continue to watch the spreads, particularly in aluminium which continued to tighten.

"Monday is cash trading for the 'third Wednesday' prompt day and the focus will remain on the nearby spreads, particularly on aluminium," said Robin Bhar of UBS. "Aluminium's nearby backwardation is likely to get worse before it gets better, but more noteworthy will be to see whether the long position is rolled forward," Bhar added.

Three-month aluminium fell roughly 0.1% to a PM kerb of $2,685/ton from Friday.

LME warehouse data show aluminium stocks increasing 3,125 tons to 691,350 tons Monday.

In news, Russia produced in 2006 3.718 million tons of primary aluminium, 1.9% more than in 2005, according to the Aluminy lobby group, which acts on behalf of the Rusal and Sual aluminium groups.

Alumina output during the period increased by 0.2% on the year to 3.265 million tons.

In other metal news, the International Lead and Zinc Study Group said Monday that the global zinc market deficit widened further in the January-November period and stood at 377,000 tons, up from 320,000 tons in the January-October period. Meanwhile, global lead production stood at 7.351 million tons, a rise of 6.2% on the year, during the same time frame, the organization added.

Prices in dollar a metric ton.
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