SINGAPORE --Base metals on the London Metal Exchange were little changed in Asia Friday, following the lead of copper as it looked set to consolidate ahead of the weekend, traders said.
Three-month copper edged higher on Chinese consumer buying, but expectations of a short-term consolidation and some profit-taking overnight capped it at about $7,700 a metric ton. As of 0600 GMT, three-month copper was trading at $7,680/ton, unchanged from the London Thursday afternoon kerb.
Other metals were little changed. Aluminum was up $11 at $2,841/ton, zinc was down $25 at $3,475/ton and lead was unchanged. Tin and nickel were untraded.
Traders said copper's pullback overnight was a sign it was catching up to the softness in other base metals.
"I think the copper run was a bit exaggerated and a little bit out of sync with the metal complex," said a trader at an international commodity house in Hong Kong.
Most expect copper to consolidate around $7,600-$7,800/ton ahead of the weekend, with a ceiling around $7,900. However, with the technical uptrend still intact and more short-covering possible, copper should retest $8,000 next week and may break above it, traders said.
The bullish short-term outlook on copper should also continue to provide support to other base metals as it did earlier this week, said the Hong Kong-based trader. "I think that a little dip across the board will be seen as buying opportunities."
Support for aluminum is likely to be near $2,830/ton and for zinc around $3,400/ton, traders said. The contango on zinc's spot to three-month spread may limit zinc's upside, as the three-month contract appears to be running into resistance between $3,600-$3,700/ton, said a trader at a major Japanese commodity brokerage.
Traders said speculative short-covering has been playing a large role in copper's rally this week, as copper rose 8.5% to its overnight high of $7,970/ton. While more short-covering is expected in the short term, the extent to which players are short is difficult to estimate for the LME, said Gerard Burg, a commodity analyst at the National Australia Bank.
"We can only tell in hindsight. The China (March copper import) data should have reinforced in people's minds the strength of Chinese demand," Burg said, adding that this is what drove the short-covering in copper.
Burg said the latest market talk of a possible slowdown in Chinese copper imports in the second quarter could be bearish for copper, but at the moment, the underlying fundamentals appear strong. "Given the strength of the construction sector, especially the electrical industry, you just have to consume copper."
BNP Paribas analyst David Thurtell, in a daily report, noted that China's industrial productivity has sharply diverged from the OECD Leading Indicator recently, and warned of a jump in Chinese productivity in the next few months. At the same time, BNP said it expects China's copper consumers have had their "fill" for most of the second quarter.
While the pickup in Chinese industrial productivity should be bullish for base metals, slowing industrial productivity in the West and in some other Asian countries flags a potential slowdown in consumer growth, said Burg.
"There's been a very China-centric view that as long as China keeps growing, everyone will be all right," said Burg. "The potential of a slowdown in the U.S. is a major concern. I think that's one of the risks traders are downplaying at the moment."
However, given that U.S. economic data has been mixed for quite some time, the market has to look other indicators for price direction, he added. To that extent, strikes at a Codelco mine in Chile and a possible strike at Freeport McMoRan Copper & Gold's (FCX) Grasberg mine in Papua New Guinea could trigger fresh buying.
As of 0600 GMT, nickel was last quoted at $46,399/ton, up $99 on the London PM kerb, lead was unchanged at $
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