LME Trade Quiet As Fund Allocations Awaited

LONDON--The base metals are watching Monday for the weight of fresh fund allocations for the second quarter, although traders said volumes may be reduced given the storm clouds gathering over the U.S. economic outlook.

London Metal Exchange price activity is subdued accordingly, with little direction forthcoming from the other financial and commodity markets.

Now the end-of-first-quarter window dressing has been completed, brokers said the base metals are waiting to see whether the U.S. hedge fund community will return to the markets later in the session.

There's little direction forthcoming from other markets, however. Oil market participants are cautious a selloff from current highs above $65 a barrel may be in the offing if Iran releases 15 U.K. personnel it has seized, while the U.S. dollar is slightly softer but failing to provide fresh impetus.

"The global markets are generally volatile and the base metals are following in the same vein," one LME broker noted.

BaseMetals analyst Will Adams said even if there is growth in other parts, a significant slowdown in the U.S., the world's largest economy, "will no doubt dent base metals demand."

Fundamental news for base metals is similarly thin on the ground, with the main event being a strike by unionized technical and office workers at CVRD's (RIO) Sudbury operations. Although unlikely to impact nickel production, brokers said some LME players are seizing on the strike in an attempt to drive nickel higher, despite the fact mining operations continue as normal.

As of 0940 GMT, LME nickel is up 2% at $46,000 a metric ton.

Aluminum market participants are waiting for an official response from Alcan Inc. (AL) to news a referendum over an expansion at its 180,000 tons a year Isal smelter in Iceland received a 'no' vote over the weekend.

The expansion would boost output by 280,000 tons annually and comes as U.S. Century Aluminum (CENX) expands its Nordural smelter near the Isal plant, and U.S. Alcoa Inc. (AA) prepares to bring is Fjardaal smelter online. Alcoa is also looking at three options for a new smelter in the north of Iceland.

LME aluminum has failed to react so far and is holding around $2,750/ton, but brokers said a response from Alcan and an indication of its next step in Iceland could bring fresh momentum.

LME copper is meanwhile steady above $6,800/ton with the $7,000/ton level targeted, and LME zinc and lead are both lower with supports at $3,200/ton and $1,900/ton holding firm.