Base metals close higher on LME

London Metal Exchange nickel and tin extended their recent gains to hit fresh all-time highs Tuesday, with traders expecting the high prices to hold in the near-term until supply side problems are resolved.

Three-month nickel soared to a fresh record high of $38,300 a metric ton, extending earlier gains, on follow-through speculative buying, said Michael Skinner of Standard Bank. Low inventories, a large canceled warrant, and threats of a strike at Xstrata's Sudbury operations are supporting the tight market, Skinner said.

More than 1,000 unionized workers at Xstrata's Sudbury, Ontario, nickel mine have voted 98% in favor of a strike if a new labor agreement isn't reached by the end of the month.

Meanwhile, LME nickel stocks rose 12 metric tons to 5,064 tons Tuesday, with canceled warrants at roughly 25%. But, LME nickel stocks are down over 80% from year-ago levels.

In addition "the nickel cash to three-month backwardation has also widened over the last few days and is now over $2,500/ton," said Barclays Capital in a report.

Three-month tin surged to a fresh all-time high of $12,249/ton, before retreating to an afternoon kerb of $12,140/ton.

Technical momentum buying as well as Indonesian supply problems continue to bolster the market, analysts said. Indonesia is the world's largest tin producer.

In October, Indonesia's government shut down about 20 small-scale independent smelters more or less overnight, citing lack of proper licensing. Adding to price volatility has been the release of conflicting new reports over if and when some of these smelters will be re-opened.

So far, no official word has come from the central government.

In other metals, three-month aluminium extended its recent rally as stops were triggered, driven by options-related and momentum buying, says Michael Skinner of Standard Bank. Prices are heading towards the $2,900/ton strike price, Skinner noted.

Speculative and momentum buying has also led to very volatile trading in copper prices, said a trader. But the metal remains within its recent range of $5,450 and $5,500/ton.

In news, unionized workers at BHP Billiton Ltd.'s (BHP) Cerro Colorado copper mine in Chile are likely to turn down the company's wage offer, a union spokesman said Tuesday.

Cerro Colorado produced 90,464 tons of copper in 2005, according to data provided by the Consejo Minero mining trade group.

The Cerro Colorado union negotiating the contracts represents about 535 of a total of 700 workers. Current contracts expire Jan. 31.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Monday PM kerb
Copper            5650.0-5660.0      Up  30
Lead              1673.0-1675.0      Up  28
Zinc              3695.0-3700.0      Up   5
Aluminium         2810.0-2815.0      Up  53
Nickel           37750.0-37800.0     Up 455
Tin              12140.0-12150.0     Up 365