London Metal Exchange nickel hit a new record high, copper approached its seven-month peak and zinc hit a three-month high on Tuesday on concerns about supply disruptions and persistently strong demand, analysts said.
The plan by Peruvian miners to launch a strike on April 30 to demand the country's president improve pension benefits and eliminate outsourcing, supported prices. "There is potential for further upside if the Peru nation-wide strike by miners comes to fruition," analyst David Thurtell at BNP Paribas said.
Copper for three-months delivery on the London Metal Exchange touched $8,095 a tonne earlier in the session, slightly below the seven-month high of $8,100 it hit last week.
It slipped in later trading to end the day at $7,820, down $190 from Monday's close. "The market is very jittery at the moment, with the prices so high any news coming to the market is moving the prices drastically," an LME floor trader said.
LME nickel hit a new high of $50,200 before closing at $48,000. In the longer term, low stocks would support nickel, analysts said. "In the base metal sector, we are most bullish on nickel as we believe that the commodity reflects one of the tightest markets," J.P. Morgan said in a report.
Stocks of available nickel in LME registered warehouses currently stand at 2,958 tonnes - less than one day of global consumption. "We have therefore increased our position, finding relatively cheap companies with long term growth prospects. We remain slightly underweight in copper and zinc as we expect inventory to rise in the short term," J.P. Morgan added.
A widespread strike in Peru could create significant shortages of metal concentrates for Chinese and Japanese smelters and could cause panic buying of metals, analyst John Meyer at Numis Securities said in a report. He said Peru represents some 7.1 percent of global copper mine production annually, citing Bloomsbury Mineral Economics.
Peru is also a major zinc supplier. Three-month zinc hit $3,830, the highest since January 15, before closing at $3,720 against Monday's $3,730. Supply disruptions and strong Chinese demand have been supporting metals prices, Goldman Sachs said, despite slower economic growth in the United States. The bank forecast copper would cost $7,500 per tonne at this time next year.
Barclays Capital revised its average cash price for copper, zinc and lead upwards. For zinc Barclays forecast an average of $3,800 a tonne for the second quarter and $3,490 for 2007.
Dwindling copper stockpiles, expectations of strong demand from China and a market wary of supply disruptions underpinned prices, which have risen by 28 percent this year. Copper stocks in LME-warehouses fell by 2,025 tonnes to 166,125, just over three-days of global consumption, and stocks have dropped by some 25 percent since the start of February.
In March, China's refined copper imports hit the highest level ever, with total imports over 200,000 tonnes. In industry news, BHP Billiton Ltd/Plc said it pushed for record output levels for many of its minerals this year, after reporting a surge in output in the third quarter to meet rising global demand.
Aluminium was at $2,840 versus Monday's $2,865. Lead has gained some 18 percent during 2007 and ended the day at $1,995, close to its all-time high of $2,045. Tin was unchanged at $13,800.
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