LME Metals Mixed In Asia;Copper Weakness May Weigh

SINGAPORE--London Metal Exchange copper continued to slide in Asia Wednesday, raising expectations of further liquidation that could weaken sentiment toward the base metal complex.

Short-term direction on copper will largely be shaped by U.S. new home sales figures for March, following the pattern seen Tuesday, when bearish existing home sales numbers for March triggered a selloff in copper and nickel, traders said.

Three-month copper had fallen $25 from the London Tuesday afternoon kerb to $7,775 a metric ton as of 0615 GMT. Aluminum gained $1 to $2,840/ton, while zinc lost $35 to $3,735/ton.

Traders said copper is already being weighed down by China's weak physical copper market and the lack of bullish technicals.

Cash copper prices in Shanghai are at a discount to the Shanghai Futures Exchange spot contact, possibly because consumers have finished building stockpiles to last them through next week's week-long holiday, traders said.

"I don't think (Shanghai Futures Exchange) copper will go up quickly before the holiday," said a Shanghai-based copper trader. "After the long holiday, it will be better." However, he added that Shanghai is also dependent on the LME and fund activity there for price direction.

A Tokyo-based trader said more bearish housing data would trigger additional selling in the commodity market, although he doesn't expect copper to break below $7,500/ton. "It should discourage speculators from putting more money into commodities," the trader said.

Analysts say further liquidation in copper could induce spillover losses across the complex. A lack of fresh fundamentally supportive news in zinc makes it vulnerable to a retreat, despite its recent strength, said a Tokyo-based trader.

HARBOR Intelligence, in a daily report, said copper's inability to take out $8,150 despite repeated attempts could trigger profit-taking in the coming days that would exert downward pressure on aluminum.

However, market chatter that China may cut or eliminate tax rebates on aluminum products and refined zinc exports could add a spark of bullish news. Analysts believe these measures would help reduce Chinese exports and thereby give a lift to prices outside of China.

The possibility of a strike at Southern Copper in Peru on Monday also should provide some underlying support to copper, traders said.

As of 0615 GMT, nickel had dropped $100 from the London kerb to $47,500/ton, tin was up $150 at $13,800/ton and lead was last quoted at $1,980/ton, down $5 on the kerb, but had yet to trade in Asia.