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Friday, March 2, 2007

Copper gains as market recovers from this week's equities-led sell-of

Copper rose as the market recovered from this week's sharp declines, which were prompted by a global market sell off following the plunge in the Chinese stock market on Tuesday.

At 12.09 pm, LME copper for three month delivery was up at 6,130 usd a tonne against 6,015 usd at yesterday's close.

Tariq Salaria, an analyst at Standard Chartered Bank, said metals have recovered as the market realises the sell off in the Chinese market was simply a correction from overbought conditions.

He added copper was also benefiting from a trend towards falling inventories, which seem to indicate the Chinese have returned to the market this year as buyers.

The LME said in a daily report earlier copper stocks held in its warehouses dropped by 2,575 tonnes to total 205,400 tonnes. Stocks have now fallen for four days running.

Meanwhile, Chinese imports continue to rise. Data out in China yesterday showed imports of refined copper jumped an annual 86.3 pct in January to 131,851 tonnes.

"Stability is returning to the metals markets which, together with further falls in LME stocks this morning ... should see buyers nibbling away on the belief that current price levels are attractive," said UBS Investment Bank analyst Robin Bhar.

Aluminium edged up to 2,846 usd a tonne against 2,815 usd even as LME inventories rose by 550 tonnes to total 803,300 tonnes.

LME aluminium stocks have been rising steadily of late because the cash metal is still trading at a large premium to the three month price, attracting physical metal into warehouses.

The condition is known as backwardation.

"Although we are not long term fans of aluminium, in the short term the backwardation and dominant long position may well keep prices well bid," said BaseMetals.com analyst William Adams.

Nickel was up at 41,800 usd a tonne against 41,395 usd as the metal continued to benefit from critically low stocks and expectations demand will stay solid going forward.

"Nickel is likely to stay in high demand as steel demand and production world wide, especially in China, shows little signs of a slowdown," said Standard Bank analyst Michael Skinner.

In other metals, tin was up at 13,425 usd a tonne against 13,150 usd at the close yesterday, lead was up at 1,900 usd a tonne against 1,820 usd while zinc was up at 3,559 usd against 3,480 usd.

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