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LME copper extends rally, buoyed by stock falls

LONDON: Copper ended the week with impressive gains on the London Metal Exchange (LME) as prices rose strongly on cash buying, firming spreads, hefty short-covering and against a background of falling stocks.

But despite the explosive blend of bullish factors, many traders and analysts are still viewing the latest move as a correction within a longer term bearish trend.

"These are short-term factors superimposing themselves on a basically bearish scenario," said Angus MacMillan, analyst at LME ring dealing member Billiton Metals.

Other metals ended the day slightly weaker on profit-taking.

Three months copper, the market's bellwether contract, gained $16 to finish the afternoon kerb at $2,560. Values hit $2,570 at one stage as pre-set buy orders above $2,560 were triggered. But end-week profit-taking pared the gains.

The market rose four percent from low to high this week.

Many players in the market, particularly U.S.-based funds and speculators, had sold copper in anticipation of falling prices. But when the rally started early in the week they were forced to pile in and cover their positions.

"This rally has just fed on itself," MacMillan said.

Copper may now test the recent $2,594 high, chartists said.

Friday's stock fall of 12,325 tonnes fuelled bullish sentiment, with Chinese buying behind at least part of the 10,500-tonne withdrawal out of Singapore warehouses.

Premiums for LME material in Singapore rose this week, reflecting stronger physical demand in the Far East. The U.S. physical market also showed signs of strength, traders said.

They also noted delays in transportation of Zambian copper to ports because of a rail strike in the region.

Aluminium prices fell on Friday, knocked lower by a big rise in stocks of 21,050 tonnes. Values remained stuck in a narrow range, ending the day down $8.50 at $1,625.

Traders said a break below chart support at $1,623 could prompt a test of $1,600/05.

Lead prices finished $6 weaker at $812 as nearby spreads eased. Traders said physical demand had softened, and conditions in the lead market were likely to slow over the next few weeks.

But tightness around the June pricing date was still a cause for concern. Some people caught short of nearby spreads during severe tightness in March rolled positions forward by three months, pointing to a flare-up in values in June.

Lead stocks fell 325 tonnes.

Nickel fell $20 to $8,340 after stocks fell 858 tonnes.

While LME stocks continued to fall, traders noted sizeable stocks of stainless steel scrap and Russian off-grade material yet to be worked off.

Zinc fell $3 to $1,086, depressed by a stock increase of 4,300 tonnes.

Tin edged back $10 to $6,460 as the market consolidated before a likely test of resistance at $6,500, traders said. Stocks fell 125 tonnes.

Alloy was mostly sidelined, ending at $1,390/93 from $1,390/400 after stocks were unchanged.-Reuter