LME Metals Ease In Asia Amid Consolidation

SINGAPORE--London Metal Exchange copper eased in Asia Friday on follow-through selling and concerns a large jump in China's copper stocks may weigh on sentiment, traders said.

However, trading was thin and price movements narrow as the complex continued to consolidate last week's gains before making its next leg up, they said.

Three-month copper was trading at $7,815 per metric ton, down $65 from the London Thursday afternoon kerb.

Copper's overnight dip below $8,000 raised some concerns the price may collapse if it continues to retreat, although traders said they expect it to hold above $7,800.

"Sentiment itself is in a correction against last week's gains, it's not bearish yet," said a trader at a Japanese commodity brokerage.

However, a widely expected sharp jump in copper stocks at the Shanghai Exchange warehouses may damp sentiment further. Physical traders in China said copper stocks may rise 10,000-17,000 tons, reflecting the market's lack of appetite for copper at current prices.

"With massive imports in the first three months of this year, the local market is clearly oversupplied and I personally estimate the surplus is something between 100,000-150,000 tons," said the head of a large metals trading firm in Shanghai.

SHFE copper futures closed limit-down as result of the market talk, and traders said LME could feel a slight spillover effect.

"We may see some pressure (on the LME) because of that," said a Hong Kong-based trader at an international commodity brokerage.

Aluminum lost 50 cents to $2,837 in Asia, but volumes were thin. Buying interest from Japanese consumers remained low because of a weak yen, although China's domestic aluminum market is stronger than some expected, traders said.

Aluminum stocks at SHFE warehouses were expected to have declined by about 12%-17%, partly because of substitution. "It's interesting that aluminum stocks are going down because we believe there's a lot of substitution with copper, especially in the power sector," said the head of an international metals trading house in Shanghai.

Zinc was mostly flat in Asia, and was quoted at $4,000/ton at 0600 GMT, unchanged on the kerb. Analysts said zinc is mostly taking its cues from copper at the moment.

"With prices above $4,000, the zinc market feels similar to copper, whereby it probably needs a clear out before fresh buying emerges," said BNP analyst David Thurtell in a daily report.

Nickel was untraded in Asia and was last quoted at $49,850/ton, down $50 from the kerb. In news, Australian nickel producer Minara Resources Ltd. announced a "major shutdown" of operations in October and November 2007, although it said it still expects to improve production this year. In 2006, Minara produced 31,524 tons.

As of 0600 GMT, tin rose $5 to $13,800/ton and lead was $3 higher at $2,043/ton.