Trade in aluminium was choppy on Tuesday while copper prices were underpinned by a drop in London Metal Exchange stocks, but economic growth and demand worries capped prices, analysts said. Aluminium for delivery in three months closed at $2,681 a tonne on the LME, down from Monday's $2,700 close.
However, the aluminium price was supported by a large position, which has left the market tight ahead of Wednesday, January 17, when investors have to decide whether to take or make delivery or roll the monthly positions forward.
The reshuffling of positions made trading very volatile. "This situation should be cleared up tomorrow and we'll know which way aluminium is heading," an LME trader said. "It's made the market very volatile." Copper ended up at $5,715 a tonne from $5,630.
Stocks of copper in LME warehouses came in lower at 196,900 tonnes, down by 2,550, underpinning prices, but stocks have almost doubled since the start of the year. Copper has fallen about 10 percent since January 2 and more than 30 percent since May's record high of $8,800 on worries of an economic slowdown in the US and rising stocks.
"In copper we are seeing justifiable reaction to weaker demand and continuing inventory build," Adam Rowley, analyst at Macquarie Bank, said. Dealers expect trade to slow ahead of mid-February and the Lunar New Year celebrations in China, but activity could pick up afterwards as a lower copper price gives incentive to buy.
Zinc ended down at $3,720 a tonne versus $3,780. Stocks of zinc in LME warehouses rose by 1,225 tonnes to 94,600, but that is only three days of global consumption. The International Lead and Zinc Study Group said the global zinc market from January to November 2006, showed a year-to-date deficit of 377,000 tonnes.
The dominant long position in aluminium held more than 40 percent of the open interest or outstanding contracts, and a second long held 10-20 percent, economist John Kemp at Sempra Metals said in a report. The squeeze had caused the backwardation, the premium paid for cash metal over the three-months contract, to hit $120 on Monday, the highest since 1990. It was around $95 on Tuesday.
The high premium attracted more metal into warehouses with stocks rising by 10,050 tonnes to 701,400 and there was talk of more metal coming into warehouses on Wednesday.
Nickel added $400 to $33,600, aided by news that labour talks between Xstrata Plc and the union at its Sudbury, Ontario, operations have slowed. Stocks came in at 5,406 tonnes of which just a bit more than one day of global consumption, or 4,176 was available to buy. The premium for cash nickel above the benchmark futures contract was at $2,000/2,150, trippling since the start of 2006. Lead fell to $1,585 against $1,615, while tin ended at $10,625, up from Tuesday's last bid at $10,545.
Comments
Comments are closed.