SINGAPORE--A lack of momentum and an impending holiday season in major Asian markets damped trading activity on the London Metal Exchange Thursday, with copper and aluminum moving hardly a nudge.
In the absence of strong price cues, the market is awaiting U.S. first quarter GDP Friday and further reports on a possible strike in Peru, traders said.
Three-month copper was $10 higher from the London Wednesday afternoon kerb at $7,870 per metric ton as of 0617 GMT, after trading in a band of just $70. Aluminum climbed $12 to $2,834/ton. None of the other metals were traded in Asia.
"The market seems to be waiting for further news on the nationwide miners strike in Peru, and appears reluctant to take large bets ahead of U.S. 1Q GDP data at the end of the week," BNP Paribas said in a daily report.
Traders said copper remains firmly within its recent $7,700-$8,100 trading range, and is unlikely to break out ahead of the holidays in Asia.
China's markets will be closed from May 1-7, while Japan will be off three days next week. Other Asian markets will also be closed for one or two days next week.
An expected strike by union workers at Southern Copper in Peru that may begin Saturday is not a bullish enough factor to offset the weak technicals at the moment, said a trader at a Japanese commodity house. "I think it will support the market but I don't think it will push the market up."
The strike at Southern Copper will be part of a national mining sector strike called by the National Federation of Mining, Metallurgy and Steel Workers to pressure the government to meet a series of labor-related demands. That indefinite strike is to begin April 30.
Copper's struggle to break above $8,000 may be a sign that it is near its peak for the year, said Citigroup analyst Alan Heap. The two drivers behind its rally since the start of February - restocking by Chinese consumers and speculative short-covering - won't continue into the second half, he said.
However, short-covering may still have more room to go, he added. "It's likely that Chinese buying will dry up, but speculative short covering could continue."
Nickel was untraded in Asia but may be sensitive to Posco's (005490.SE) recent announcement that it has developed a nickel-free stainless steel. The company said it intends to begin sales at 2,000 tons per month before increasing it to 10,000 tons next year.
While Posco's product is not the first of its kind and may be similar to products in U.S. markets, it does represent the acceleration in substitution by consumers, said Heap.
"It's a trend towards low and no nickel content alloys and away from austenitic nickel steel that's being driven by high nickel prices and short availability."
Citigroup expects substitution will likely slow nickel consumption growth in 2007 to 7.5%, from 10.5% in 2006. However, it still expects a supply deficit of 9,000 tons.
As of 0617 GMT, nickel was quoted at $47,300/ton, up $5 on the London kerb; zinc was quoted at $3,678/ton; tin was quoted $1 higher at $13,501/ton, and lead was quoted $5 higher at $1,985/ton.
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