LME Metals Up Sharply In Asia, May Correct S/T

SINGAPORE--Base metals on the London Metal Exchange rose across the board in Asia Tuesday as the market reacted to gains in other futures exchanges during its four-day Easter break.

A rally in copper to a seven-month high and record highs in nickel and lead raised the prospect of a short-term correction and some profit-taking in London trade, as the metals have risen too quickly and may be overextended, traders said.

Three-month copper rose 5.7% to $7,750 a metric ton after the four-day Easter closure, realigning with Comex's strong rally after the release of stronger-than-expected U.S. jobs data Friday.

Copper's bullish tone gave a boost to other metals; as of 0638 GMT, nickel had climbed to $50,150/ton, while lead regained the $2,000 it touched last Thursday and was last quoted at $2,040.

"I think the (copper) price is still trending upwards but it's been going up too fast," said a commodity analyst at one of China's largest copper importers. "It may need to retreat or take a rest," he added, suggesting a consolidation between $7,200-$7,600/ton before resuming its uptrend.

The copper market may get some support from new Chinese copper import data for March, which came out on the high side of expectations, traders said.

China's imports of copper and copper products reached 307,740 tons in March, up from 239,772 tons in February, according to customs. Imports for the January to March period were up 58% on year.

"The data indicate domestic market demand is strong, despite the rise of prices since February. We're likely to see LME three-month copper hit $8,000/ton soon," said Wang Zheng at Dalu Futures.

Traders said short covering by funds may also continue to push copper towards key resistance at $8,000, although since the LME does not provide a breakdown of long and short positions, it's difficult to gauge if the LME market is as short as Comex copper.

On Comex copper, the large non-commercials, or funds, trimmed their net short position to 12,891 lots as of last Tuesday, down from 15,790 the prior week, according to a report Friday from the Commodity Futures Trading Commission. This represents a decline of 41% from the peak of 21,898 as of Feb. 6, and the current net short is the lowest level since 10,943 back on Oct. 31.

Nickel and lead were less likely to experience a correction, as the fundamentals and technicals in both markets are clearly strong, traders said.

But with three-month nickel far above its cost of production, several traders said nickel is largely at the mercy of funds and speculators and limiting trading interest.

"It's trying to hit new highs and it's very ridiculous. From nickel's production cost, this is not the right price so it's hard to understand why people want to keep pushing it up," a trader said.

As of 0638 GMT, three-month tin was up $490 at $14,440/ton, though still below its March 27 high of $14,600. Zinc was up $162 at $3,592/ton, buoyed by three consecutive days of sharp gains on SHFE zinc.