Copper and nickel higher

Copper and nickel ended higher on the London Metal Exchange (LME) on Tuesday, supported by falling inventories in very thin trade, analysts said. "I think most people are holding back...volumes have been very thin recently," analyst John Kemp at Sempra Metals said. Trade was scarce given the US Independence Day holiday, but the end of the week might bring more activity, traders said.
Fund managers typically allocate new tranches of cash in the first few days of the month, but Kemp said the historically high prices might deter some investors from going into commodities. "There is more caution around and investors are asking if they are putting money in at the top, so I wouldn't expect a huge allocation of new fund money," he said.
Copper closed at $7,400 per tonne, up $125 from Monday's kerb close, supported by LME stocks falling by 100 tonnes to 93,400. Global demand for base metals remained strong with supply struggling to keep up, a Citigroup weekly report said on Monday.
"In our view, supply side disruption and above trend consumption levels could keep the metals markets in significant deficits over the next few years," Citigroup said.
However, Kemp noted that even if global GDP growth persistently increased, the demand per unit of GDP for base metals had experienced a sharp drop during the past year. "This has been masked by relatively strong global growth, but it is a fairly unimpressive performance on behalf of the base metals," Kemp said.
He believed substitution had resulted from relatively high prices. Nickel was well supported, with LME stocks declining by 588 tonnes to 9,402, their lowest since September 2005. "Nickel has been relatively steady and towards the end of the week it might go up to the recent record of $23,000 per tonne," a trader said. Nickel closed at $22,550, up $750, while aluminium was at $2,590, down $15.
"There is a bigger supply response in aluminium than in most other markets so it continues to lag behind," analyst Adam Rowley at Macquarie Equities said. Zinc gained $100 at $3,300. LME stocks fell to a fresh five-year low of 213,200 tonnes, down by 1,725. Lead was at $1,014/1,015 against $1,000 and tin rose to $8,325/8,350 from $8,200.