Metals mixed as economic risks weigh

VOLATILE copper fell more than 2 per cent before turning positive on the weaker US dollar but economic concerns curbed greater gains.

A softer US currency makes metals cheaper for other currency holders - and the greenback hit a six-week trough against the euro.

"We are rallying a bit today but not going very far," said Mo Ahmadzadeh, president of Mitsui Bussan Commodities in New York. "The dollar is assisting but the prognosis is ugly for the illness,"  he said referring to recent negative economic data.

London Metal Exchange copper fell to a low at $US3230 a tonne but was traded at $US3320 in LME rings, against $US3305 yesterday, when the metal rose 4.5 per cent at one point.

Nickel traded at $US11,105 after rising 10.7 per cent to a high of $US11,399 against $US10,300 at the close yesterday.

The weaker US dollar and technical buying offset a jump in inventories, up 2424 tonnes to 68,640 - with LME stocks rising 30 per cent so far this year.

"Nickel rallied 10 per cent yesterday and today it is more of the same -- short-covering after breaking through certain technical levels," said one LME ring dealer.

Lead hit a high of $US1045, up 4 per cent. It was traded at $US1020 in rings versus $US1005 yesterday.

Prices of copper, used in power and construction, have fallen more than 60 per cent since a record high of $US8940 in July. Last week it hit $US2991, the lowest since May 2005.

"The metals are under pressure and it will get worse before it gets better," Mr Weinberg said.

Analyst Andrew Keen at Sanford C. Bernstein said in a report the worst of the commodity cycle would be experienced in the fourth quarter of 2008 and the first quarter of 2009.

As a result of the rapid deterioration in the global economic outlook the research firm cut 2009 copper forecasts to $US3675 a tonne from $US4200 previously.

Aluminium was revised down to $US2290 from $US3000, it said.

LME aluminium gained $US40 to $US1565 despite another hefty rise in stocks, which brought the total amount to 1.9 million tonnes - having doubled since the start of the year.

Copper stocks are up more than 50 per cent in the year to date.

Further production cuts had little effect on prices in the short term, but some analysts said the cuts would help build a price floor in zinc, lead, nickel, tin and aluminium.

Rio Tinto said it will cut aluminium output in France.

FNX Mining said it will suspend its remaining nickel ore production and lay off 307 employees at operations in Canada.

Demand for exports from China shrank precipitously last month, pointing to an economic slowdown in the world's largest copper consumer.

"The signs of economic slowing in China are becoming more visible," said Barclays Capital analyst Yingxi Yu.

"We don't think a rally in metals can be sustained in the near term and even though we are seeing a rapid response from producers, it's hard to see prices recover on a sustained basis for the next three to six months."

China's economy could grow by 8.0 per cent next year, a Reuters poll of economist suggested, down from 9.0 per cent in the previous quarterly poll.

Tin rose was last bid at $US12,100 versus $US11,850 a tonne in LME rings, while zinc gained $US3 to $US1107 a tonne.

information from www.theaustralian.news.com.au