LME lead, nickel up; Further price volatility seen

London Metal Exchange lead rebounded from its lows while nickel hit a fresh record high Thursday as market players refocused on supply and demand fundamentals, but traders expect price volatility to continue as jitters remain in the global equity markets.

Three-month lead rebounded off the lows triggered by Tuesday's sharp fall in global equity markets as the market refocused on the decline in LME inventories, said Michael Widmer of Calyon.

LME lead inventories have fallen roughly 23% from the start of 2007, and the refocus helped lead jump over 4% to a PM kerb of $1,915 a metric ton.

Critically low LME nickel inventories also kept prices well supported with the metal hitting a fresh record high of $42,000/ton earlier Thursday. Unlike the other base metals, nickel didn't succumb to major bouts of selling during the global equity markets shakeout because of its strong fundamentals, traders said.

With LME nickel canceled warrants – or material accounted for and to be drawn down at a later date – at 40%, available LME warehouse stocks comprise less than one day's worth of global nickel consumption.

Three-month copper also climbed Thursday as copper stocks posted a sharp drawdown of 2,575 tons Thursday to 205,400 tons.

In addition "the strength in China's refined copper imports reflected in Chinese metals trade data for January released Wednesday should provide underlying support to copper prices...and allay fears about demand, with refined copper net imports coming in at their highest level since May 2005," said Kevin Norrish of Barclays Capital.

However, the base metals markets should expect to see further price volatility until the equity shakeout concludes, said one New York based analyst.

"Many metals traders are focusing on the equities at the present with trading levels in line with the Dow Jones Industrial Average futures," the analyst added.

European stocks tumbled Thursday, but lifted off intraday lows, while gold also succumbed to selling pressure as fears about slowing U.S. and Chinese growth continued to rattle investors.

Both base and precious metals prices took a knock after concerns China was about to hike interest rates to cool its economy forced a slump in global stock markets. U.S. Federal Reserve Chairman Ben Bernanke's testimony to the House Budget Committee Wednesday temporarily pacified the markets.

The DJIA declined but pared earlier losses following a positive manufacturing report.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Wednesday PM kerb
Copper           6110.0-6115.0       Up 95
Lead             1915.0-1920.0       Up 95
Zinc             3470.0-3475.0       Dn  9
Aluminium        2795.0-2796.0       Dn 15
Nickel          41500.0-41505.0      Up 110
Tin             13325.0-13350.0      Up 200