Copper on the London Metal Exchange ended firm on Tuesday, while nickel fell as pay talks continued at a major nickel operation, analysts said. Copper for delivery in three months closed up $50 at $5,640 a tonne, picked up by bargain hunters after dropping 3.8 percent in the previous session.
At the New York Mercantile Exchange's COMEX division, copper for March delivery settled up 1.95 cents at $2.5615 a lb, near the upper end of its $2.51 to $2.58 trading band.
Sentiment was aided by talk of rejection of a pay offer at BHP Billiton's 115,000-tonnes Cerro Colorado copper operation in Chile, which could lead to a possible strike. Falling LME stocks underpinned, down by 3,275 tonnes to 210,400, but available stocks or stocks on-warrant increased.
Inventories have doubled in the past 12 months with the copper price down by some 30 percent since it recorded a high of $8,800 per tonne on May 11, 2006. "Both the copper and zinc falls are justified on the fundamentals, and I believe there is further to go," analyst Nick Moore at ABN Amro said. Since the start of 2007, zinc has been the worst performer of the LME metals with prices down by over 18 percent.
Zinc ended at $3,390 against $3,505 on Monday. Barclays Capital said in a report it had adjusted its base metals forecasts for 2007, lowering those of copper and zinc, whilst marking up the nickel and tin forecasts. It now forecast copper at $6,025 a tonne in 2007, while before the revision the bank expected copper to trade at $7,550. Copper has fallen by over 12 percent since the beginning of January, whilst nickel has gained a similar percentage.
Nickel was down $1,750 or 4.7 percent at $35,650, off its record peak of $38,950 recorded on Friday. "The market is not expecting a big disruption even if they do go on strike," analyst David Thurtell at BNP Paribas said. A looming strike at Xstrata's Sudbury operations in Ontario, Canada, had been supporting prices last week, but news of talks progressing dampened sentiment.
Recent copper stock rises into warehouses in Europe and the United States have been partly offset by continuing drawdowns in Asian locations, where merchants are shipping LME metal to China to take advantage of a positive arbitrage and consumer buying.
"The Chinese are using the last of their stocks ahead of the New Year, but in two weeks time they will be back buying," a physical copper trader said. On February 18, the Chinese celebrate the Lunar New Year. Aluminium closed at $2,695 versus $2,710 on Monday when the metal dropped 3 percent. Lead was at $1,660 against $1,650, whilst tin was lower at $12,055 versus the last quote of $12,250/12,255.