LME Metals Up; Copper, Tin Hit New Highs

Base metals on the London Metal Exchange are continuing to track the euro higher Wednesday, with copper breaking through $8,000 a metric ton for the first time since April. 

The LME three-month copper contract peaked at $8,035/ton at 1047 GMT. By 1136 GMT, it was at $8,025/ton, up 0.9% on the day. 

The EUR/USD meanwhile was up 0.2% at $1.3612. Weakness in the greenback often propels the dollar-denominated metals higher as it makes them cheaper for holders of other currencies. 

Commerzbank analysts said news that Chile's copper output rose slightly in August, to about 468,000 metric tons, was also being offset by reports of capacities at some smelters being reduced "or even shut down completely." 

On Tuesday, the Madras High Court in the southern state of Tamil Nadu ordered Vedanta Resources PLC's (VED.LN) to close a copper smelter owned by its unit Sterlite Industries (India) Ltd. (500900.BY), citing violation of environmental rules. The smelter produced 334,000 metric tons of copper cathodes in the last fiscal year ended March 31. 

"Such news, coupled with an ongoing weak U.S. dollar, should ensure that copper prices continue to rise for now," they said. 

However, at current price levels--particularly with ongoing fears around the U.S. economic recovery--Commerzbank said the "air will get thinner" for further rallies. 

Three-month tin, while thinly traded, also continues to outperform, climbing to a new two-and-a-half year high of $24,390/ton. 

BaseMetals.com analyst Will Adams said the metals generally look well placed to extend their gains, with short-lived dips suggesting keen underlying demand. 

"Again it does seem as though the driving force will be the dollar, and how the market plays the tradeoff between the weaker dollar, which is bullish for metal prices, and the factors that are weakening the dollar that are generally negative for the big picture," he said.

Low inventory levels should also continue to underpin buying interest, despite marginal increases in some LME inventories Tuesday. 

According to a daily LME report, lead stocks rose 300 tons, to 191,925 tons, nickel increased 450 tons, to 122,658 tons, and tin was up 15 tons to 13,515 tons.

Copper stocks, however, fell again Tuesday, dropping 175 tons to 375,100 tons. Aluminum also saw drawdowns, falling 3,350 tons to 4.358 million tons and zinc stocks declined 675 tons, to 616,525 tons. 

At 1136 GMT, three-month aluminum was 0.8% higher at $2,327/ton, three-month zinc was 0.1% higher at $2,221.75/ton, three-month nickel was down 0.1% at $23,150/ton, and three-month lead was 0.9% higher at $2,301/ton. Three month tin was still at its high of $24,390/ton, up 1.6% on the day.Source: Dow Jones