LME Metals Mixed In Asia; Copper Sentiment Firm

SINGAPORE--London Metal Exchange copper pared losses in range trade Tuesday and may continue to recover in London trade as sentiment remains firm amid solid fundamentals, traders said.

The steady drawdown of non-warranted copper stocks at LME warehouses and a possible strike at Southern Copper in Peru next Monday have raised expectations that copper may rally toward $8,200 a metric ton, they said.

Three-month copper had recovered to $7,980/ton as of 0607 GMT, up from the day's low but still down $29 on the London Monday afternoon kerb. Aluminum had lost $5 to $2,857/ton, while zinc had gained $40 to $3,775/ton and nickel was up $150 at $49,500/ton.

The contango on nearby copper contracts on the Shanghai Futures Exchange was likely behind LME copper's weakness at the start of the day, said a Shanghai-based trader at one of China's biggest copper traders.

"I think there was some short-term speculative (short) selling from retail investors because of the physical market weakness (in Shanghai)."

Given that technicals indicate LME copper is close to overbought, this may give some traders reason to go short, he added.

However, traders said dips are being well-supported, and bulls may focus on the Peru strike as a possible reason to make fresh buys.

Peru's National Federation of Mining, Metallurgy and Steel Workers is threatening to begin an indefinite national strike April 30 if the government doesn't meet a series of demands, the head of the federation said Monday.

Technically, LME copper looks likely to consolidate between $7,800-$8,200/ton short-term, traders said. A trader at a Japanese commodity house said a break above or below will likely be needed to establish a new trend.

Zinc gained in Asia and looks among the stronger base metals at the moment, said traders. The decline in China's zinc exports in March, after jumping over 400% on year in January and February, is improving the outlook for zinc as the physical market tightens, the Commonwealth Bank of Australia said in a daily note.

"Given the supply-demand balance prevailing in zinc markets, we still believe that there is scope for zinc prices to spike higher this year before falling back again as the gap between zinc consumption and production narrows."

As of 0607 GMT, tin had risen $150 from the kerb to $13,850/ton. Lead remained untraded in Asia and was last quoted at $1,965/ton, up $5 from the kerb.