SINGAPORE--Base metals on the London Metal Exchange were mixed Wednesday as sentiment toward recently bullish copper and nickel was cautious, traders said.
Both metals were relatively unchanged in Asia. The Asian market seemed undecided about whether it would continue to build on its recent gains or pull back.
Three-month copper eased from its earlier high to $7,225 a metric ton as of 0640 GMT, down just $5 from the London Tuesday afternoon kerb. Nickel was up $115 at $48,700, still within striking distance of $50,000.
Traders said funds were buying and shorts covering despite a lack of fresh supply-side news. But few were willing to bet against more gains, given the surprising strength of fund buying, they said.
"The market is just crazy," said a Hong Kong-based trader at an international commodity house. The trader said LME copper should be weighed down by the less bullish performance of Shanghai Futures Exchange copper, but at the moment, it isn't having an impact on the LME.
"I think everybody expected that but it never happened. In the last two or three weeks, Shanghai hasn't followed the LME."
Three-month copper has risen 5.5% in the past two weeks and took out the previous four-month high overnight, which some traders said was a key resistance.
A Shanghai-based trader at one of China's largest metal trading houses said he wasn't surprised by copper's rally because demand has been stable and concerns about supply disruptions have resurfaced with the recent strike at the Doe Run Peru metallurgical plant in central Peru.
"If we have better demand or lower than expected supply-side output, the market could be balanced or even in deficit."
Citigroup, in a copper report, said the current rally is being driven by a pickup in Chinese demand and should get added support once U.S. demand recovers and a short-covering rally occurs.
That support may not emerge immediately, though. While the U.S. is showing signs of bottoming, its macroeconomic outlook has deteriorated, Citigroup said.
"Our economic expectations are for a delayed recovery in the housing cycle and we have pushed back the timing of a return to positive growth in copper demand."
Nickel seemed likely to continue its rally towards $50,000, but few traders expect it to consolidate at those levels.
"The metal should be seeing a cap near $50,000 from a physical point of view," said a trader at a major Japanese commodity brokerage in Tokyo.
Aluminum was relatively unchanged in Asia, shedding $20 to $2,825/ton, but volumes were almost double their normal amount, which may provide a cue to traders in London, said the Tokyo-based trader.
"I think people will be looking at the turnover done (in Asia). If it turns out that this was profit-taking, we might see another day of disappointing selling."
However, he thinks the larger volumes may have been a mixture of profit-taking above $2,840, a bit of short-covering and possibly some unwinding of LME-SHFE arbitrage plays (buying LME and selling SHFE).
As of 0640 GMT, zinc was up $5 at $3,260/ton, lead was $1 higher at $1,959/ton, and tin was untraded in Asia and last quoted at $14,045/ton.
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