LME base metals mostly higher; could retreat next week

London Metal Exchange base metals pushed generally higher across the board Friday, but prices could retreat on profit-taking and seasonal weakness early next week, said market participants.

A broker said speculative buying and short-covering have largely been behind the support seen Friday, but "whether this will be a lasting trend into next week is really a question."

The first week of June is seasonally a weaker time because of speculative liquidation and thin trading liquidity, said metals analyst Jorge Vazquez of Harbor Intelligence. Recent strength in the U.S. dollar and bearish technicals may pressure base metals prices early next week, he added.

Three-month copper traded up to a high of $7,528 a metric ton before retreating to a PM kerb of $7,440/ton. A drawdown in Shanghai and LME copper inventories Friday, combined with supply concerns in Chile, provided strong underlying price support, brokers said.

Chile's state copper giant Corporacion Nacional del Cobre de Chile, or Codelco, will begin negotiations with outsourced workers June 1 over pay and conditions, in hopes of avoiding a potential strike scheduled for June 8.

Over the longer-term, LME copper should find strong support due to low inventories and substantial supply side risks, said Deutsche Bank. Adding to copper price support, Chinese copper demand growth continues to be underestimated, it said.

Three-month lead extended recent gains to hit another record high of $2,395/ton earlier Friday, due to speculative and fund buying triggered by a drawdown in LME lead inventories, brokers said.

Ongoing supply concerns also provided solid underlying support. Around 9,000 tons of lead in concentrate at Australia's Port of Esperance will stay stranded for at least another month pending approval from the Western Australian Department of the Environment and Conservation, or DEC.

The metal has been stranded since March 12 when the DEC revoked the port's export license after thousands of birds died in the area as a result of lead poisoning, with dust emissions from the port thought to be the source.

Adding to price support, China said last week that from June 1 it will add export tariffs to lead, among other metals. Analysts said this is bullish for prices as the profitability of exporting will decline, raising the possibility of fewer exports and therefore higher prices in the West.

Furthermore, an ongoing force majeure at Xstrata's U.K.-based Northfleet refinery since Feb. 12 has compounded supply side pressure in a world market already in deficit.

Elsewhere, three-month nickel climbed to above $50,000/ton due to medium-sized fund and speculative buying, said a broker, despite an increase in nickel stocks Friday.

In metal news, Xstrata said Friday it was on track to convert its McArthur River zinc mine in Australia into an open-pit operation. However, the company said it launched an appeal to clarify a court ruling that suspended development at the mine in April. Current capacity at the mine is at 160,000 tons of zinc, or about 2% of global output.

Prices in dollar a metric ton.

3 Months Metal Bid-Ask Change from

Thursday PM kerb

Copper 7440.0-7450.0 Up 65

Lead 2371.0-2372.0 Up 41

Zinc 3760.0-3770.0 Up 65

Aluminium 2787.0-2788.0 Dn 2

Nickel 47400.0-47500.0 Up 1400

Tin 13900.0-13905.0 Dn 195

– Hoovers

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