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Base metals crumbled during Tuesday afternoon London Metal Exchange (LME) trading to end around the day's lows, pulled down by a slippage in the trend-setting copper market, traders said. Copper's losses were triggered by another failure to clear $3,300 a tonne and re-test April's all-time highs.
"There has been profit-taking and resistance after it failed there ($3,300) again. That is becoming a hurdle that it does need to overcome," one said.
Copper, which earlier moved above $3,300, tumbled during the late kerb to close at $3,242, a $34 loss from Monday's close.
"The spreads have also softened today - the backwardation is getting back towards $200," the trader added.
The benchmark cash/threes spread eased to around $205 from $230 on Monday, which was near the highest since November 1996, although earlier cash traded at $3,530, the highest ever price for the metal on the Exchange.
Traders said copper was establishing a range between $2,950 and $3,300/320 but business was likely to be volatile in coming weeks due to endemic technical tightness and low inventories.
This would prevent prices from falling too far from current levels, despite widespread expectations that the global supply/demand balance was heading for surplus.
Pressure points were likely to be the LME's "third Wednesday" monthly cash prompts - when daily open interest is at its largest, with July and August likely to be particularly acute.
Inventories in LME warehouses have fallen steadily since mid-May, having spent most of April rising. Stocks fell to 41,200 tonnes on Tuesday - their lowest in 31 years.
Total global inventories at producers, consumers, merchants and all exchanges are some 670,000 tonnes, equivalent to 2.9 weeks of demand. At the start of 2004, global copper inventories bulged at 1.5 million tonnes.
Copper's decline was replicated by aluminium, which eased to $1,752, down $21, while nickel shed $475 to $16,125.
Losses in other metals were not so large, due to mostly slack conditions. Zinc eased to $1,320, down $6, lead lost $3 at $964 and tin was $75 lower at $7,700.
In plastics, polypropylene (PP) and linear low-density polyethylene (LLDPE) futures were quiet. September LLDPE traded from $952 down to $948, up $3, having traded 10 lots, while PP for the same month was unchanged at $942 in volume of six lots.

Copyright Reuters, 2005

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