Copper and zinc off highs

Base metals eased back from their earlier highs during Thursday afternoon London Metal Exchange (LME) trading, as high-fliers copper and zinc encountered some profit-taking, traders said.
"It is pretty much what you would expect in markets like these. The volumes are not that great, and copper in particular will probably need a couple of tries to get through $3,900," one said. Last business copper for three-month delivery was at $3,883 a tonne, against the previous day's close of $3,885.
Earlier, copper homed in towards the $3,900/4,000 band, hitting a fresh record high of $3,894 a tonne, against the background of continued supply problems and falling inventories.
Supply disruptions, with falling exchange stocks, have helped copper rally 18 percent since the start of July.
On the LME, copper stocks fell 3,475 tonnes to 71,500 on Thursday, down 15 percent from 11-month highs in late September. But the pace of the price rise is giving some cause for concern.
"The higher it goes, the more sharply divided becomes opinion over when, rather than if, the bubble will pop," the latest Fortis Bank-Virtual Metals joint venture report said.
It said that demand for copper had been so strong in the first six months, that it encouraged the wave of hedge fund money to remain longer than anticipated at the start of 2005. "Yet we think the party has reached the stage where the guests have run out of conversation and the sandwiches are curling at the edges," it added.
Zinc at one point hit its highest levels for eight years on investment fund buying sparked by demand from galvanises and nearby date tightness. After peaking at $1,475 three-month zinc was last at $1,459, down $3.
"From a fundamental view, the steel producers are coming in and buying zinc for galvanising," a trader said.
"We hear producers are shifting more metal than expected and galvanised sheet de-stocking seems to have halted," he said.
Inventories were also falling - on the LME they stand at 520,275 tonnes, close to summer 3-1/4 year lows of 500,000 tonnes.
"Zinc has been getting a life since it got back through $1,400/1,420. The spreads have tightened up because of the New Orleans situation - there is less metal in the mix," another trader said.
In other metals, aluminium was supported by tightening spread, and gained $14 to $1,889. Other metals in the complex slipped back.