Base metals up on LME; Lead drops

London Metal Exchange copper, nickel and tin made strong gains Thursday due to tightening fundamentals, with the markets keeping a close watch on whether copper's rise will be extended, said traders.

Three-month nickel hit a fresh record high earlier Thursday at $43,261 a metric ton, before retreating to a PM kerb of $42,845/ton.

A fall in LME nickel stocks by 222 tons to 3,426 tons Thursday helped trigger speculative buying. With canceled warrants – or material accounted for and to be drawn down at a later date – at 35% of global LME inventories Thursday, available nickel stocks comprise less than one day's worth of global consumption.

Three-month copper neared its 2007 high of $6,374/ton before retreating to a PM kerb of $6,270/ton.

LME copper inventories have fallen over 5% on the month, further fueling copper's price rise.

Also, in a bullish move, copper canceled warrants rose by 2,100 tons to 18,800 tons Thursday, said Kevin Norrish of Barclays Capital.

"It's quiet in the aluminium market as many market participants are in a wait and see mode," said an aluminium trader. "We're looking to the copper market and seeing if it will be able to hold the $6,300/ton price level," said the aluminium trader, adding if it pierces that level, prices could easily run up towards $7,000/ton.

Three-month tin also neared its recent record high of $13,975/ton amid declining LME stocks and ongoing supply concerns. Overall, LME inventories have fallen over 20% since the start of 2007.

"The key driver behind the current rally in prices continues to be the tenuous supply situation stemming from Indonesia's Bangka island while positive demand conditions and declining LME tin inventory provides further price support," said Norrish.

Last October, Indonesia, which supplies about one third of the world's tin, closed dozens of small-scale smelters that together produce about half the country's annual tin output on allegations they were purchasing tin ore illegally, damaging the environment and evading taxes.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Wednesday PM kerb
Copper          6270.0-6275.0       Up  130
Lead            1839.0-1840.0       Dn  11
Zinc            3370.0-3371.0       Up  15
Aluminium       2745.0-2746.0       Up  16
Nickel         42845.0-42850.0      Up  845
Tin            13750.0-13775.0      Up  150