Copper slipped to a six-week low and nickel to a new 10-month trough on Wednesday as inventories jumped and the market worried about falling demand after the US Federal Reserve left interest rates on hold. Copper for delivery in three months fell $165 to $7,580 a tonne on the London Metal Exchange, compared with an earlier $7,531, the lowest since June 29.
On Tuesday the metal used widely in power and construction closed at $7,745. "There were some big stock moves, that explains prices," John Reade, analyst at UBS, said.
Stocks of copper in LME warehouses jumped 8,675 tonnes to 114,275 tonnes, the highest in six weeks, while nickel stocks rose 1,152 to 17,826 tonnes, the highest since May 2006 and a gain of nearly 500 percent since last February. "If this rise is just a one-off thing and we don't see anymore coming then the market is very bullish," an LME trader said, referring to copper.
The Federal Reserve on Tuesday held benchmark US interest rates steady at 5.25 percent and said that while tightening credit conditions had increased downside risks facing the economy, inflation was still its main concern.
"People who were expecting a rate cut or signs that the (US Federal Reserve) was getting worried, were disappointed," Reade said. Bearish news also included China's pledge to curb inflation by tightening monetary policy while the market shrugged off news on 3,000 workers, who went on a strike 10 days ago, defying an order to return to work at Mexico's top copper mine.
London-listed miners like Rio Tinto, Anglo American and BHP Billiton rose by between 1.7 to 3 percent alongside the broader market. Nickel closed at $28,150 from $28,900 on Tuesday. Earlier it hit $28,000, the lowest since September 27.
Prices of the metal have collapsed by more than 40 percent since a record high of $51,800 a tonne on May 9, as production cutbacks at stainless steel mills were priced in and speculators sold their holdings.
"Although prices could drift over the remainder of the third quarter, we see good reason to remain cautiously bullish for the fourth quarter when stainless production and nickel demand are poised to rebound," Standard Bank said in a note. Tin finished at $16,700 a tonne, $50 softer than Tuesday, when it hit a contract high of $17,050.
Prices have gained nearly 50 percent since January on worries about supplies from Indonesia, the world's second largest producer, after a government crackdown on illegal mining in the Bangka-Belitung islands last October.
Indonesian refined tin exports dropped by nearly 80 percent in July to 2,274.62 tonnes and analysts say China, the world's top producer, would not be able to make up the difference.
"With unreported stocks now run down, the price is going north. The next plaything of the funds? Good fundamentals, small market, easily cornered," BNP Paribas said in a note. Aluminium eased to $2,658 from $2,664, zinc was $10 firmer at $3,440 and lead was $50 lower at $3,100.
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