Base metals mostly higher

23 May, 2006

Base metals maintained a recovery from early sessions lows on the London Metal Exchange (LME) on Monday, ending higher on covering, although market sentiment was tilting towards a more sober view of longer-term trends.
Some industry specialists said the recent bull trend might be slowly ending, but others saw the prospect of further strength later in the year.
Late on Monday, the chairman of Anglo American Plc, one of the world's top miners, said prices might be peaking but could stabilise above long-term averages.
Mark Moody-Stuart said the British-based mining group had always been more cautious than some of its rivals about the bull run that had taken prices to record peaks.
"When we've now got almost to the point that everyone agrees that this is something extremely unusual, that's perhaps about the time when it is going to start unravelling, which is maybe what we are seeing," he told Reuters.
Three-months copper finished at $7,590 a tonne, against a previous $7,550, having ranged between an early low of $7,245 and an afternoon high of $7,675.
Monday's activity followed a Friday session that saw prices fall $540 or 6.7 percent. That decline was the biggest percentage drop since January 4 last year and coincided with a fall in European equity markets that continued on Monday.
European stocks skidded to their lowest in five months, dragged down by miners and oil producers as commodity prices sank and investors tracked sharp losses in Asia.
"There is a more balanced view after recent US economic data that economic growth and metal demand will not be as red hot as they were six months ago and the market is bound to be cooling off in the second half of 2006," Jon Bergtheil at J.P. Morgan said.
"In the meantime supply will keep on growing, we will see persistent inventory growth, but it will be at a snail's pace, so we should not expect too much," he added.
However, a Barclays Capital report said there was a strong probability the weak longs were getting out, helping to create a strong overall uptrend once current nervousness settled.
"Our view is that demand could deteriorate a great deal before harming the underlying fundamentals, characterised by low inventories and continued large risks to strong supply growth."
Aluminium was at $2,760 versus Friday's $2,720, while nickel rose $375 to $20,875.
"We still expect funds and investors to buy the dip once this correction has finished, with consumers purchasing on a scaled-down basis," a UBS daily report said.
The investment bank pointed to under-performance in aluminium and nickel and potential for price spikes with labour contract expiries at the end of May at Inco and Alcoa.
Zinc was up $90 at $3,320, while tin rose $50 to $8,150. Lead was a sluggish exception, falling $10 to $1,140.

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