LONDON -- Base metals prices fell after key aluminium contracts matured quietly on Wednesday and the market turned its attention back to global economic slowdown and falling demand, analysts said.
Nickel however was seen supported by tight supplies
Copper for three month delivery on the London Metal Exchange changed hands at $7,020 a tonne in official rings, from $7,175 on Tuesday and zinc slipped to $4,430 from $4,505.
"We've had a number of data points out of the U.S. indicating weaker growth," Jim Lennon, analyst at Macquarie Bank said, adding that last week's survey of U.S. manufacturing activity showing a contraction was one of them.
"The market probably wants to go lower, but it can't (because) there is strong concern about potential (production) delays," he said.
Story Continues Below
Aluminium for three-month delivery traded lower at $2,780 a tonne below the session peak of $2,847 and down from $2,841 on Tuesday, when it hit a six-month high of $2,851.
A large number of outstanding call options to buy three-month aluminium futures at $3,000 a tonne expired on Wednesday without a fight by the holder to push prices up, traders said.
These contracts - nearly 10,000 - have been under the spotlight in recent days and traders had expected the holder to try and ramp up the price of aluminium futures to bring it nearer to the strike price.
"It was always so well flagged, very often when something becomes as public as that it ends up being a bit of non-event, Stephen Briggs, economist at SG Corporate and Banking.
"The option story added an extra piquancy. (But) the supply side of aluminium has been growing pretty rapidly. The aluminium industry today is only operating at about 90 percent capacity."
NICKEL STRENGTH
Nickel was quoted lower at $34,005/34,100 a tonne, from an earlier session high at $34,450 and compared with Tuesday's close at $34,250.
Traders expect nickel to rise further, beyond Tuesday's record high of $34,500, as the market frets about production delays and low available stocks at LME warehouses - around 4,100 tonnes and little more than one day's global consumption.
Stock worries have been reinforced by news that production at Inco's Goro nickel project in New Caledonia, expected to produce 60,000 tonnes at full capacity, is now expected be delayed until the end of 2008.
"Physical shortages are getting more acute in certain commodities, despite the fact that growth is weakening," Lennon said "You are seeing inventories continue to run down."
Lead traded a touch lower at $1,720 a tonne from $1,735 a tonne on Tuesday, when it hit a new contract high of $1,758 a tonne on rising winter demand for use in batteries.
"For lead ... the market's fundamentals do not look particularly compelling next year, so from a supply/demand perspective, it is hard to see the latest rally continuing beyond the short term," Standard Bank said in a Research Note.
Tin was quoted at $10,650/10,660 from $10,600.
Copyright Reuters 2006. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters.
Editor's note:
Jim Rogers Predicts Huge Profits in Commodities -- Click Here
