02/27/07 02:08 pm (GMT) – Base metals prices were lower as the market consolidated following recent strong gains and as the shock slide in the Chinese stock market sparked worries over near-term demand growth.
The Shanghai Composite dropped 9 pct overnight, its steepest fall in a decade, on fears parliament will hike rates next week in an effort to cool the booming economy.
"This morning's weakness in metals has been triggered by the steep slide in the Chinese stock market," said Man Financial analyst Ed Meir, adding he expects the weakness to persist throughout the day.
At 1.43 pm, LME copper for three month delivery was down at 6,210 usd a tonne against 6,290 usd at the close yesterday.
"Prices seem to be retracing following the market's inability to push through 6,400 usd resistance last week," said Meir.
He also noted the overnight fall in Chinese equities had knocked down not only copper prices but had also hit top mining equities traded on the London stock market.
Meanwhile, daily LME inventory data showing a hefty 2,400 tonne fall in copper stocks is doing little to stem the selling, he noted.
By contrast, today's hefty 12,475 tonne increase in LME aluminium stocks has put aluminium prices under pressure today.
LME inventories have risen for seven consecutive days, and overall stock levels have climbed nearly 20 pct higher since November last year.
"It is clear the physical market is running in a fairly significant surplus at present. It is only the strong interest from investors that is keeping aluminium near its 12 month highs," said Sempra Metals analyst John Kemp.
He added the aluminium market is heading for trouble.
"Prices are rising even as stocks held on the (LME) exchange, in private storage, and by producers are steadily increasing. Investors' resolve will be severely tested unless the physical market turns round soon," he said.
Aluminium was down at 2,855 usd a tonne against 2,895 usd at the close yesterday.
Tin bucked the trend to edge higher on news that the Indonesian government has rejected seven applications for export licenses by privately owned smelters.
The metal has surged to fresh highs in recent weeks on worries the Indonesian authorities' clamp down on illegal tin mining will lead to more supply disruptions from the world's biggest tin exporter.
Tin was up at 13,600 usd a tonne against 13,475 usd at the close yesterday.
Nickel was down at 41,245 usd a tonne against 41,300 usd, as the market retreated after climbing to a fresh all time high of 41,500 usd a tonne yesterday.
Lead was down at 1,900 usd a tonne against 1,940 usd after hitting a fresh contract high of 1,955 usd a tonne yesterday against a backdrop of low stocks and production problems in Australia.
Zinc was down at 3,520 usd a tonne against 3,600 usd.
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