U.S. copper futures closed up nearly 1 percent on Tuesday, albeit in extremely thin holiday volumes, with a return of London trading expected to offer further insight into market direction, traders said.

The London Metal Exchange (LME) was closed Tuesday for the Boxing Day holiday. Regular trading will resume on Wednesday.

"It was really quiet down here, with locals jobbing it around. We pushed to the upper end of Friday's range but could not muster any follow-through buys. We'll have to wait and see what London does overnight. Will they play catch-up or will last week's bearish trend continue?," one copper broker said.

Copper for March delivery settled up 2.40 cents, or 0.84 percent, at $2.8780 a lb on the New York Mercantile Exchange's COMEX division, after dealing in a tight 4-cent range between $2.8450 and $2.8840.

Spot December rose 2.05 cents on day to finish at $2.8505.

Volume just before the close was estimated at 2,000 lots.

Dealers said the market derived some of its early strength from the gains registered overnight in Asia, where Shanghai copper futures reversed earlier weakness to settle higher on Tuesday.

Expectations that China's economy would continue to grow at break-neck speed offered some support to the copper market, as demand for industrial metals like copper would grow as the economy expands.

China's State Information Centre said the country's economy would probably grow by around 9.5 percent in 2007 as anticipated rises in domestic consumption offset slowing fixed-asset investment and foreign trade.

However, official customs data from China over the weekend showed the world's leading consumer of the red metal imported 4.2 percent less refined copper at 66,345 tonnes in November compared with year-ago data.

Copper fell to an eight-month low in London after the U.S., the world's second-largest user of the metal, said its economy grew slower than projected in the third quarter.

Copper for delivery in three months on the London Metal Exchange declined $130, or 2 percent, to $6,400 a ton as of 2:01 p.m. local time. That's the lowest intraday price since April 21.

Copper fell to a fresh six-month low on Wednesday after a rise in inventories reinforced expectations that falling prices are likely to dominate the picture next year, analysts said.

Mining shares fell despite wider stock market gains. London-listed Xstrata, Kazakhmys, Rio Tinto and Antofagasta were all down around 0.3 percent.

Copper for delivery in three months traded down at $6,550 a tonne on the London Metal Exchange in official rings, from $6,640 on Tuesday. Prices have fallen by around 25 percent since the record high of $8,800 in May.

Stocks of copper at LME warehouses jumped 4,600 tonnes to 177,225 tonnes, In July 2005 copper stocks were little more than 25,000 tonnes.

The news sent copper prices tumbling to $6,510, the lowest since the middle of June. The previous six-month low of $6,618 was seen last Friday.

"(The fall) is on account of a ... rise in stocks and the announcement by workers at Chile's Altonorte copper smelter yesterday, that they have accepted an offer from Xstrata, said Man Financial in a research note.

Also under pressure was lead, down $5 at $1,630 after stocks rose 725 tonnes to 42,150. Earlier it fell to $1,590, matching the two-week low set last week.

Consultants think the rising stocks trend of recent weeks to continue and expect a lead surplus early next year.

Aluminium was down $46 at $2,764 after the stock data showed a rise of 1,600 to 685,450 tonnes.

CONTRACT DEALS

Analysts said the settlement of some crucial wage demands had taken away an important support for base metals prices.

Workers at two big unions at Chile's Codelco Norte, the largest division of the world's biggest copper miner, accepted a contract offer from the company on Tuesday.

The decision left union No. 1, the biggest and oldest at Codelco Norte, as the only one of the six unions at the division that has not reached an agreement with management. It said it would vote on the same offer on Wednesday.

Elsewhere in Chile, workers at the 300,000 tonne-per-year Altonorte copper smelter accepted an offer from owner Xstrata and ended their day-old strike on Tuesday.

However, opinion is split on whether the urbanisation of China, India and Brazil would boost metals demand to the extent that it offsets lower demand from the United States, where economic growth is slowing.

Many think it will be enough to support prices at current levels, others disagree.

"We are not particularly positive about 2007, you are going to see an increase in supply coming next year at a time when demand growth is likely to tail off a bit," Commerzbank analyst Peter Dixon said.

"Prices will remain fairly steady, but I think you will see the froth of this year taken away. I wouldn't be surprised to see falls of 10, even 20 percent."

Zinc was lower at $4,230/4,231 from Tuesday's $4,340 close, nickel gained $200 to $33,800 and tin traded down at $11,000 from $11,125/11,175.

Copper futures for March delivery gained 2.35 cents, or 0.8 percent, to $3.0295 a pound on the Comex division of the New York Mercantile Exchange today. Prices have dropped 25 percent from a record $4.04 a pound in May on speculation demand will ease.

On the London Metal Exchange, copper for delivery in three months gained $45, or 0.7 percent, to $6,680 a metric ton at 6:27 p.m. local time.

Copper prices in New York rose after workers walked off the job at a smelter in Chile owned by Xstrata Plc., the world's fourth-largest producer of the metal.

The strike at the Altonorte smelter, Chile's third-largest, occurred after negotiators failed to reach an accord on wages, union president Isidro Cabrera said today. Prices have gained 48 percent this year as labor disputes and mine accidents disrupted production in countries from South America to southeast Asia.

The strike is ``giving a small boost to prices,'' said Marc Kaplan, president of Mews Metals Trading LLC in Verona, New Jersey. ``It would really have to go on for two or three months to make any sort of impact'' on output, he said.


The Altonorte smelter in 2005 produced 297,567 metric tons of almost pure copper from copper concentrates, which is semi- processed copper, according to the Web site of its then owner, Falconbridge Ltd. Zug, Switzerland-based Xstrata purchased Falconbridge this year. The production accounts for almost 2 percent of world supply.

``The importance of this strike shouldn't be overstated,'' said Stephen Briggs, a London-based analyst at Societe Generale. ``The concentrate here can be diverted to other smelters. The bottleneck in copper is at the mine level, not the smelter level.''

Codelco

A strike at Codelco, the world's largest copper producer, would have a bigger impact on prices, Briggs said.

``We have to hear about how the Codelco negotiations are going and that could spur another sharp upside move if there are signs of trouble there,'' said Edward Meir, an analyst at Man Financial Inc. in Stamford, Connecticut, wrote in a report.

``Copper, therefore, looks like it could stabilize at current levels until the various strike and labor issues are resolved,'' he said.

Workers at the Codelco's Chuquicamata mine are seeking wage increases after soaring metal prices increased mining-company profits. The latest offer from Codelco, which is owned by the Chilean government, was ``too low,'' Jeremias Olivares, a union leader, said on Dec. 14. Chuquicamata is Codelco's biggest mine.

Hedge Funds

Hedge-fund managers and other large speculators increased their net-short position in New York copper futures in the week ended Dec. 12, according to U.S. Commodity Futures Trading Commission data.

Speculative short positions, or bets that prices will fall, outnumbered long positions by 17,526 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report. Net- short positions rose by 444 contracts, or 3 percent, from a week earlier.

Copper futures fell last week, dropping 3.1 percent to 301.65 cents per pound on Friday. Miners, producers and other commercial users were net-long 20,983 contracts, down 235 contracts, or 1 percent, from the previous week.

Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.

Shanghai copper futures closed steady on Monday, recouping earlier losses as London prices rallied after workers announced a strike at a smelter in Chile.

Chinese copper futures were little changed, with the most active February contract 20 yuan weaker at 63,090 yuan a tonne.

The contract had earlier dipped one percent to 62,500 yuan, a one-month low.

At 0727 GMT, copper for delivery in three months on the LME was up $85, or 1.25 percent, at $6,720 a tonne from the close in London on Friday, when the market shed $145.

Turnover was 240 lots versus 100 lots around the same time on Friday.

Dealers said prices were supported after workers at the Altonorte copper smelter in Chile, which produced just under 300,000 tonnes of metal in 2005, rejected a final contract offer from owner Xstrata Plc

A strike is scheduled to start at 1100 GMT on Monday. "The story today is probably going to be Altonorte. There isn't much else out there and trade has not been especially busy," a U.S.-based dealer said.

"But once the market cracked $6,700, we saw a little more interest," he added.

China's domestic copper market could see support from declining treatment and refining charges -- fees to convert copper ore into metal.

"Traders are concerned about the production decline at Chinese copper refiners due to lower refining fees," said Yang Jun, an analyst at Dalian Northern Futures Agent Co. Ltd.

He added that Chinese smelters would have to accept fees of $60-70 per tonne, down from $100.

"The lower charge will drive some Chinese smelters, especially smaller ones, to cut production."

Copper stocks in LME warehouses at 174,100 tonnes on Friday have risen nearly seven-fold from a low of 25,525 tonnes in July 2005.

"The persistent stock increases are starting to weigh on sentiment," Macquarie Bank said in a weekly report.

"Particularly now that the SRB (State Reserves Bureau) is believed to have completed its sales, the inventory increases do appear to represent a real shift into surplus."

The most active February Shanghai aluminium futures contract lost 60 yuan to 20,510 yuan a tonne.

LME aluminium was flat at $2,800.

"In aluminium, there may be some value. We are 12 percent below the peak and trending higher. Inventories are falling. It may be worth a shot," Sean Corrigan, chief investment strategist at Diapason Commodities Management, told Reuters.

Nickel for delivery in three months hit a new high of $34,950 per tonne on the London Metal Exchange on Friday, before closing at $34,350.

By 0727 GMT, nickel was at $34,500.

"Producers are having trouble keeping up with demand. Stainless steel demand, for example, is sufficient to keep nickel producers busy for some time to come," Corrigan said.

"If China continues to grow, nickel miners will need to make sure the new sources that they have been promising to bring on actually arrive."

Copper edged up as the market recovered after falling some 2 pct yesterday amid yet another gain in LME inventories and concerns over global growth, but analysts warned the market looks weak as it heads into the year end.

At 12.33 pm, LME copper for three-month delivery was up at 6,795.00 usd a tonne from 6,715.00 usd at the close yesterday.

'Prices are likely to drift lower with only scaled-down buyers ... attracted to the weaker price levels while other consumer/merchants are in no hurry to buy,' said UBS Investment Bank analyst Robin Bhar.

Copper prices fell yesterday after LME stocks rose by 4,600 tonnes and after the World Bank said a slowdown in global economic growth is underway, led by the US.

The bank added that a cooling US housing market could intensify the downturn.

The LME said in its daily report today that copper stocks in its warehouses have risen by another 1,675 tonnes. Stockpiles are now more than 40 pct above levels seen in mid-October.

'With the relentless stock falls now no longer evident, it looks as though the dynamics of the market have changed,' said BaseMetals.com analyst William Adams.

He added while 'there are risks to supply from strikes and maintenance shutdowns, in this environment, buyers may feel in no need to restock. Until they do, prices are likely to drift'.

Chile's Codelco, the world's largest copper producer, is currently negotiating a new labour contract with workers at its Norte division, as the old one expires on Dec 31.

Although the market is unsure as to the progress of those negotiations, it looks like another potential strike, at Xstrata PLC's Altonorte smelter, might be averted.

Xstrata is due to present its new contract offer to workers today, and Bhar of UBS noted that a company source has said the miner is confident its new offer will be accepted.

Elsewhere, lead edged up to 1,650.00 usd a tonne from 1,640.00 usd. The metal fell nearly 5 pct yesterday as funds sold after the 10 and 30-day moving averages were breached.

Zinc rose to 4,370.00 usd against 4,275.00 usd, after it lost nearly 2 pct yesterday even as the International Lead and Zinc Study Group said the metal was in a deficit of 320,000 tonnes for the January to October period.

In other metals, LME tin for three-month delivery fell to 10,925.00 usd a tonne from 10,950.00 usd yesterday, nickel climbed to 34,400.00 usd from 33,250.00 usd while aluminium bounced up to 2,857.50 usd from 2,800.00 usd.

Shanghai copper futures dipped on Wednesday on fears of slowing economic growth, and dealers expect a softer start to 2007 with prices possibly picking up in the second half.

Chinese copper futures prices were lower, with the most active February contract down half a percent percent, or 330 yuan, at 63,830 yuan a tonne at the close of trade.

"We read various assessments and the view seems to be lower prices in the first half of next year and higher in the second," a dealer in Singapore said.

"Of course there is always room for the unexpected -- mine accidents and so on, but I think the market will track that consensus. We are taking the Swiss approach -- a neutral view is the way to trade these markets."

Copper for delivery in three months on the London Metal Exchange was flat at $6,850 a tonne by 0627 GMT from the close in London on Monday. Turnover was 192 lots.

"We have seen that copper has been weak in China since October due to a decline in the country's apparent consumption. I don't expect the market to recover next year," said Li Ke, an analyst at Jiangsu Holly Futures Brokerage Co. Ltd. in Nanjing.

Cash copper in eastern China eased 235 yuan to trade between 65,430 yuan and 65,800 yuan.

China's economic growth is likely to slow slightly to between 9.6 and 10.1 percent in 2007, a think-tank said last week.

RATE CUT?

The Fed on Tuesday left U.S. rates unchanged for a fourth straight meeting, renewing a warning on inflation but nodding to mixed economic signals and a "substantial" housing slowdown.

The Fed departed from its last statement in October by noting the scope of the housing downturn and cross-currents in recent data -- shifts which financial markets took as hints the central bank's focus on inflation was softening.

A Reuters poll conducted on Tuesday after the Fed released its post-meeting statement showed that 13 out of 18 U.S. primary bond dealers believed the Fed was done raising rates, and that its next policy action will be to cut them.

A cut in U.S. interest rates would weigh on the dollar, making base metals more attractive for holders of other currencies, but a slowdown in U.S. growth could depress demand.

LME aluminium was down $4 at $2,806.

The most active February Shanghai aluminium futures contract gained one percent, rising 240 yuan to 20,560 yuan a tonne.

"Shanghai aluminium looks strong due to firm cash prices. For the January contract, we see it touching 21,000 yuan soon," Li said.

The January contract was at 20,870 yuan, versus 20,680 yuan on Tuesday.

Aluminium in eastern China for immediate delivery was quoted at 21,450 yuan to 21,470 yuan a tonne on Wednesday.

London zinc futures ticked $10 lower at $4,370.

Australia's Zinifex Ltd., which is merging its zinc assets with Belgium's Umicore, said its Century zinc mine in Australia had resumed operations and production losses were less than originally forecast.

Output at the mine was halted for four days due to mechanical problems with a concentrator, and would result in the loss of 5,600 tonnes of zinc production, down from an original estimate of 8,300 tonnes, it said.

Zinc prices have rallied 130 percent this year and touched a record $4,580 in November. The metal is also tipped as one of the strongest performers in 2007.

"We're not seeing a slowdown in demand for zinc, which is very strong," Australia & New Zealand Banking Corp. commodities strategist Andrew Harrington said. "The markets are very sensitive to the supply side."

Copper edged lower as the market consolidated after posting gains yesterday and as traders reacted to news a potential strike at Xstrata's Altonorte smelter will be held off for 5 days amid requests for government mediation.

At 1.06 pm, LME copper for three-month delivery had edged down to 6,855.00 usd a tonne from 6,930.00 usd at the close yesterday.

Copper edged up yesterday amid concern over a potential strike at Chile's Altonorte smelter and on news Chinese copper imports rose 6 pct in November, bringing an end to the declining import trend seen since the start of the year.

The metal has come under slight pressure today, however, amid news Xstrata has requested Chilean government mediation in contract talks with unions at its Altonorte smelter, holding off a potential strike for 5 working days.

Further, UBS Investment Bank analyst Robin Bhar noted that while today's LME report showed copper stocks actually edged lower, reversing a recent rising trend, the number of cancelled warrants have fallen to a very low level.

Cancelled warrants represent warehouse stocks booked and due for delivery. According to Bhar, they have now fallen to just 1.6 pct of total LME copper stocks, suggesting the amount of metal due to leave the warehouses is pretty low 'as demand is currently slack because of seasonal considerations'.

'Copper prices still look likely to head lower unless the 7,000 usd a tonne level is regained,' said Bhar.

Elsewhere, LME tin for three month delivery edged down to 10,850.00 usd a tonne after touching a new contract high of 11,250.00 usd yesterday as traders eyed a crackdown by the Indonesian government on illegal tin mining.

LME lead for three month delivery was also lower, trading at 1,760.00 usd after it also touched a new contract high yesterday, of 1,775.00 usd, amid a continuing fall in LME stocks and a rise in cancelled warrants.

In other metals, three month LME zinc bucked the trend to edge up to 4,395.00 usd against 4,350.00 usd yesterday, while nickel fell to 33,700.00 usd against 34,000.00 usd and aluminium dipped to 2,795.00 usd against 2,800.00 usd.

Copper futures firmed in Shanghai after better-than-expected U.S. employment data helped to ease concern that slowing economic growth in the U.S. and China might translate into reduced demand for the industrial metal.

U.S. employers added more jobs than predicted in November, showing the economy's resilience as housing and manufacturing slump, a government report showed last week. Copper has been under pressure from signs of slowing growth in the U.S. and China, the world's biggest users of the metal used in wires and pipes.

``Any good sign in the U.S. economy may lend strength to copper,'' Wu Bowen, a trader at Shanghai Jinpeng Futures Co., said today.

Copper for delivery in February fell as much as 130 yuan, or 0.2 percent, before recovering to settle 60 yuan up at 63,690 yuan ($8,129) a ton on the Shanghai Futures Exchange. The contract has dropped 23 percent since May 15 when it touched record high of 84,100 yuan.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, traded little changed between 65,200 and 67,400 yuan a ton today.

Investment growth in China's power sector, which accounts for half of the country's copper consumption, has slowed for the third consecutive year this year, Wu said, citing official statistics he obtained. House-building, which accounts for half of U.S. copper consumption, dropped to a six-year low in October, U.S. data shows.

Copper for delivery in three months on the London Metal Exchange traded $10 up at $6,890 a ton at 3:23 p.m. Shanghai time.

Copper was down nearly one percent on the London Metal Exchange (LME) on Friday ahead of U.S. payrolls data and on concerns about a slowing U.S. economy, analysts said.

"In 2007, most of us expects the economic headwinds to get worse -- not better," analyst Nick Moore at ABN AMRO said.

A string of weak U.S. economic data has traders eyeing falling demand for base metals such as copper, with many investors now bracing for the Federal Reserve to cut interest rates from 5.25 percent as many as three times next year to try to bolster growth.

U.S. non-farm payrolls data for November due at 1330 GMT is in focus, giving clues about the state of the U.S. economy.

"The payroll numbers are absolutely crucial," Moore said, adding that if the financial investor -- who has been driving the commodities prices higher -- is influenced more by the macro environment than by fundamentals then prices will go lower from here.

Copper for delivery in three months was quoted at $6,845/6,846 a tonne in the open outcry trading session, against $6,890 on Thursday when it hit a two-week low at $6,806.

LME-monitored copper stocks have steadily swelled to around 166,000 tonnes, the highest level seen in two years, from little more than 25,000 tonnes in July last year, dampening sentiment.

BHP Billiton, the world's biggest miner, said its Spence copper mine in Chile produced its first cathode this week, about three weeks ahead of schedule.

"There is a convoy of copper mines due on stream," Moore said and forecast the copper price to fall in 2007 and 2008.

Mining stocks on the London Stock Exchange were found among the top ten losers, down around one to four percent after Merrill Lynch cut its rating on the sector to neutral.

"Sector downgrade is based on concerns about the impact of a slowing global economy in 2007 on metals consumption and our view this will impact stock performance in Q1/Q2.," Merrill said in a note.

But the metal prices would be underpinned short-term by potential supply disruptions, analyst William Adams at BaseMetals.com said in a note.

"Given the... supply disruptions from labour renegotiations at Codelco's Norte Division, Xstrata's Altonorte smelter and at BHP Billiton's Cerro Colerado mine, as well as the maintenance shutdowns at Collahuasi, there is a lot of risk potential."

Zinc fell to $4,268, down 0.5 percent. On Thursday, zinc slipped more than 3 percent to a two-week low of $4,240 as stocks at LME warehouses rose for the third consecutive day.

Together with nickel, zinc has been the best performer this year on the LME -- and they could, together with lead, continue to outperform copper and aluminium, JP Morgan said in a report.

Lead firmed to $1,731 from $1,708, supported by falling inventories, down to the lowest level this year at 39,400 tonnes.

Aluminium was lower at $2,815 against $2,820.

The metal has to close above $2,830 in order for it to break higher, an LME floor trader said.

"Aluminium looks good on the charts... people talk about it going up to $3,000 ahead of New Year...funds keep pushing it."

Aluminum returned to trade in backwardation, at a premium of $7/11 to the benchmark futures contract after trading at a discount - contango - of $8/6 in the previous session.

Tin was trading at $10,925, up against its last quote at $10,725/10,750 on Thursday.

Copper fell, extending yesterday's declines, as participants worried demand for the metal might slow next year as the slowdown in US economic growth starts to impact other economies, specifically in Europe

Falls were limited, however, by the prospect of impending strike action at Xstrata, the world's fourth largest copper producer, and by ongoing labour negotiations at Chile's Codelco, the largest

At 1.20 pm, LME copper for three month delivery edged down to 6,875.50 usd a tonne against 6,990.00 usd at the close yesterday

"Although recent economic data from Europe suggest a robust growth trend, the economies can not stay away for long from the double whammy of strengthening domestic currency and slowing US (growth)," said Standard Bank analyst Michael Skinner. The euro last week rose to 20 month highs against the dollar and while it has given back some of those gains this week, its overall strength against the greenback could adversely impact European exports going forward

Copper fell almost 3 pct yesterday after a lacklustre options declaration and on the back of a slight pick-up in the dollar. Copper is traded in dollars so a stronger US currency makes the metal more expensive

BNP Paribas analyst David Thurtell noted the strong fall in copper came despite worries over reports that a union leader at Xstrata's Altonorte smelter in Chile said workers will vote to strike on Dec 8-9 amid a wage dispute

"The move in cancelled warrants and warehouse stocks were both bearish on this metal too," he added. Cancelled warrants represent warehouse stocks booked and due for delivery

Copper has been under pressure recently from worries over slowing US economic growth and rising inventories, which have increased about 40 pct since mid-October

Elsewhere, aluminium remained under pressure after closing nearly 2 pct lower yesterday as hopes that the December options expiry would be accompanied by volatile prices were dashed, said UBS Investment Bank analyst Robin Bhar

Aluminium for three month delivery fell to 2,776.50 usd from 2,780.00 usd at the close yesterday

The metal rose to a six month high on Tuesday as traders noted a large amount of option contracts to buy aluminium at 3,000 usd a tonne -- significantly above the metal's recent trading range -- were still outstanding

An options expiry refers to the final date by which holders of options can buy or sell a futures contract at a pre-specified price

"We suspect there was never the intention to exercise the options but to keep the market tight and support prices. A similar ploy might be instigated next month," said Bhar

Shanghai copper prices rose over 1.5 percent on Wednesday, tracking modest gains in London Metal Exchange prices, while aluminium softened a touch after hitting a six-month peak the previous session.

Nickel was mostly unchanged after touching a record high on Tuesday due to low levels of global stocks, while lead was untraded after also hitting a peak the previous session.

Chinese copper futures prices rose, with the most active February contract ending the morning session up 980 yuan at 64,920 yuan per tonne.

Copper for delivery in three months on the London Metal Exchange fell to $7,110 a tonne by 0400 GMT, against $7,175 at the London close on Tuesday, when it had posted earlier gains above $7,200 and much firmer from under $7,000 during Asian trade.

"The fact that prices failed to break lower suggests a certain amount of underlying buying and then Tuesday's rebound also suggests buyers, or short-covers, were prepared to chase the market higher too," said William Adams, an analyst at Basemetals.com in a daily note.

Movements in copper prices have been mostly restrained in recent weeks in comparison to other metals such as aluminium, as the market ponders how a slowing U.S. economy will impact demand.

"At least this is a sign of some strength returning to copper, even if it still ran into overhead supply above $7,225/t," said Adams.

Aluminium for three-month delivery was a little softer at $2,833 against the close of $2,841 a tonne on Tuesday, when it earlier had surged to a six-month peak of $2,851 a tonne, the highest since May.

A large amount of outstanding December call option contracts to buy three-month aluminium futures at $3,000 a tonne on the LME will mature at 1130 GMT.

Some in the market feel the gains could be due to holders of these positions ramping up prices before that time.

"After seeing such large gains, people feel there are some longs out there that are pushing the prices higher," said Wang Zheng, an analyst at Shanghai Dalu Futures.

Wang said easing tightness could stymie significant gains above $3,000.

Option holders can exercise their right to buy or sell the underlying metals future at a specified price at a fixed time.

The cash-to-threes on three month aluminium fliped to contango of $1 from backwardation of $10 on Monday, indicating additional supply.

The most active February Shanghai aluminium futures contract closed the morning session slightly firmer at 20,250 yuan a tonne, compared with Tuesday's finish of 20,180 yuan.

Nickel was mostly steady at $34,200 against $34,250 at the London close, following a surge to a new all-time high of $34,500 on low LME stocks.

Lead was untraded at $1,730 after also hitting a new high of $1,758 a tonne on Tuesday before closing at $1,735.

Gold mining stocks headed south as prices for the metal cooled Tuesday, while copper miners followed the price of copper higher.

Barclays Capital analyst Kevin Norrish told clients in a report Tuesday that "some profit-taking has emerged overnight and early this morning" in the gold market, which has driven prices lower.

Gold for February delivery dipped $2.40 to $648.50 an ounce in midday trading on the New York Mercantile Exchange.

Shares of gold miner Barrick Gold Corp. fell 60 cents, or 2 percent, to $30.90 on the New York Stock Exchange. Newmont Mining Corp. shares edged 26 cents lower to $46.93, while Goldcorp Inc. shares shed 59 cents to $30.59.

March copper picked up 7 cents to $3.25 a pound.

Copper miners Phelps Dodge Corp. and Freeport McMoran Copper & Gold Inc. -- which have agreed to merge -- both saw their shares tick higher. Phelps Dodge gained 15 cents to $122.30 on the Big Board, while Freeport added 77 cents to $61.70. Peru's Southern Copper Corp. saw its shares lose 20 cents to $55.30.

Copper fell below the key 7,000 usd a tonne level after London Metal Exchange (LME) stocks rose again and as the market remained pressured by concerns about contracting demand in the US following Friday's much weaker than expected manufacturing data.

At 12.57 pm, LME copper for three month delivery edged down to 6,987.50 usd a tonne against 7,000.00 usd at the close Friday.

'Copper is still under pressure, we've fallen below the key 7,000 usd level, certainly the initial indication suggests the weak manufacturing data is still casting a shadow,' said UBS Investment Bank analyst Robin Bhar.

US data out Friday showed the Institute for Supply Management's index of manufacturing fell to 49.50 in November from 51.2 in October, falling below the 50 mark to indicate contraction in the sector.

A contracting manufacturing sector does not bode well for metals demand, especially as it comes amid an already contracting housing sector in the US, another key driver of demand, analysts noted.

BNP Paribas analyst David Thurtell said while the weaker US dollar partly offset the impact of the poor ISM data on Friday, it cannot make up for a decline in demand.

'The bottom line is that if copper etc. isn't needed in construction and manufacturing, modestly cheaper yen or euro prices won't make enough difference to demand,' he said.

'Besides, the metals are only 'cheaper' outside of the US: the US is still a big -- direct and indirect -- consumer of these trends,' he added.

Copper was also under pressure from yet another gain in LME stockpiles. Data out earlier showed LME copper stocks rose by 4,500 tonnes to total 161,225 tonnes. Stocks have now risen around 40 pct since mid-October.

Elsewhere, nickel edged lower after hitting a new all-time high of 34,300 usd on Friday, with analysts saying the fall in nickel prices was just a correction.

'We would look to buy into weakness those metals that are tight from a supply/demand perspective such as zinc, nickel, tin and lead where stocks are low as well,' said Bhar.

Aluminium edged lower after spiking more than 1 pct on Friday ahead of the December options expiry this Wednesday. An options expiry refers to the date when options holders can buy or sell a futures contract at a specific price.

'Aluminium is in the grip of a technical squeeze ... it's not (moving) on a fundamental basis,' said Bhar.

LME nickel for three month delivery edged down to 33,650.00 usd from 33,900.00 usd at the close Friday, while aluminium fell to 2,809.50 usd from 2,818.00 usd.

Other metals were up.

Three month zinc was up at 4,440.00 usd against 4,400.00 usd, tin was down at 10,675.00 usd against 10,700.00 usd, while lead rose to 1,732.50 usd from 1,695.00 usd.

Copper may rise next week because of a shortage of concentrate, the raw material used by smelters, and after inventory of the finished metal fell, reducing supply.

Mine production lagged behind smelting capacity in the first eight months of the year, the International Copper Study Group reported earlier this month. Stockpiles monitored by commodity exchanges in London, New York and Shanghai have dropped 3 percent this week to 213,570 metric tons, according to data compiled by Bloomberg.

``Copper prices in the near term might yet climb as we understand that inventories downstream may be low,'' said John Meyer, a London-based analyst at Numis Securities Ltd. ``A shortage of concentrate supply is expected to continue.''

Ten of 17 analysts, investors and traders surveyed by Bloomberg yesterday forecast copper will gain next week. Three expected a decline and four little change.

Copper for delivery in three months on the London Metal Exchange dropped $95, or 1.3 percent, to $6,985 a ton as of 4:43 p.m. local time. A close at that price would mean a 2.4 percent decline this week. Prices gained 5.2 percent last week.

On the Comex division of the New York Mercantile Exchange, copper for March delivery fell 1.1 percent to $3.16 a pound. Copper for delivery in January on the Shanghai Futures Exchange slipped 0.6 percent to close at 66,030 yuan ($8,434) a ton. Chinese prices include 17 percent tax and 2 percent duty.

Mine Disruption

Disruptions at mines including Chile's Escondida, the world's largest for copper, resulted in ``essentially unchanged'' production growth during the eight months, the Lisbon-based ICSG said last month. At the same time, demand for the metal to make wires and plumbing expanded.

Mine output is trailing smelting capacity growth in China and India, said BHP Billiton, the world's largest miner and Escondida's owner.

``The expectation is that the copper-concentrate market will be tight,'' BHP Billiton Chief Executive Officer Charles ``Chip'' Goodyear said on Nov. 29 at a shareholders meeting in Brisbane, Australia. ``Part of it is lower production from copper-concentrate producers.''

Stockpiles tracked by the LME rose 0.9 percent to 156,725 tons, the exchange said today in a daily report. Exchange data showed that 12,475 tons, or 8 percent of total stockpiles monitored by the exchange, may be due for delivery and aren't freely available. Those so-called ``canceled warrants'' have more than doubled since the end of October.

`Supporting Factor'

The gain is ``a supporting factor'' for prices, said Catherine Virga, a New York-based analyst at CPM Group. Still, any advance will be limited by declines in imports to China, the world's largest copper user, she said.

China's copper-concentrate imports tumbled 46 percent in October from a year earlier, and copper purchases dropped 0.9 percent, the Beijing-based Customs General Administration said Nov. 27.

Imports fell mainly because there wasn't much material to be bought, said Adam Rowley, an analyst at Macquarie Bank Ltd. in London.

Copper steadied above 7,000.00 usd per tonne, having posted gains yesterday on a stronger than expected revision to US third quarter GDP data and on rising oil prices, but analysts said with volumes thin they see choppy trading conditions ahead.

At 1.05 pm, LME (London Metal Exchange) copper for three month delivery was unchanged from yesterday's close at 7,020.00 usd.

'Over the last three days copper's been swishing around quite wildly, a reflection of illiquid markets. It's been pretty barren ... and markets are inching in either direction,' said Standard Bank analyst Mike Skinner.

Copper was boosted yesterday by gains in oil prices and data showing US GDP grew by 2.2 pct in the third quarter against a previous estimate of 1.6 pct growth. It was also boosted by the possibility of supply disruptions at Codelco.

Codelco, the world's largest copper producer, is negotiating a new labour contract with workers, as the old one expires on Dec 31, but the talks have dragged and there has been little news about their progress.

Analysts said while the Codelco talks are limiting the downside today, copper remains under pressure fron concerns over slowing US growth, notwithstanding yesterday's slightly stronger numbers.

Specifically, traders are concerned about the US housing sector, which has seen its biggest decline in over 15 years. They are also eyeing a near 40 pct rise in LME stockpile levels since mid-October.

'People know that next week could be more choppy for copper, it has not really moved that much today. Copper has been dormant for the last couple of months so other metals have caught the eye more,' said Skinner.

Nickel, for example, has been benefiting from critically low stocks and an array of supply problems, with today's announcement from BHP Billiton lifting the metal once again, he said.

BHP said earlier the start-up of its Ravensthorp project in Western Australia has been delayed until the first quarter of 2008 from an original schedule of mid-2007.

'Implications of this news is that the deficit we had for 2007 of 5,000 tonnes is now likely to increase to about 30,000 tonnes,' said UBS Investment Bank analyst Robin Bhar.

He added news earlier this week that CVRD-Inco's Goro nickel project has been delayed until 2008 is also boosting nickel, as are rumblings from Xstrata that its Koniambo project is likely to slip further down the timescale.

LME nickel for three month delivery edged up to 33,500.00 usd against 32,750.00 usd at the close yesterday.

Other metals, except for aluminium, were also up.

Three month zinc was up at 4,375.00 usd against 4,340.00 usd, tin was up at 10,550.00 usd against 10,350.00 usd, aluminium was down at 2,699.50 usd against 2,701.00 usd, while lead was up at 1,650.00 usd against 1,640.00 usd.

Copper prices fell back below 7,000 usd, having traded up earlier in the session, as traders weighed concerns that the US economic growth slowdown will crimp demand against worries over potential supply disruptions in Chile.

At 3.07 pm, LME copper for three month delivery was down at 6,947.50 usd a tonne against 6,975.00 usd at the close yesterday.

Copper prices rose earlier after BHP Billiton, the world's biggest metals miner, said it sees strong demand for copper going forward and after Japanese data showed a higher than forecast 1.6 pct rise in industrial production.

Prices have since retreated, however, as concerns over the slowdown in the rate of US economic growth continued to weigh on the market despite a stronger than expected upwards revision to third quarter US GDP growth.

'We're in a holding pattern right now. The weakness in the US (economy) is really exerting pressure on the downside and the upside is lifted by uncertainty about labour talks in Chile,' said Man Financial analyst Ed Meir.

Chile's Codelco, the world's largest copper producer, is negotiating a new labour contract with workers, as the old one expires on Dec 31. However, the talks have dragged and there has been little news out about their progress.

'I'm kind of surprised the market is not a bit more nervous given that we have not heard anything,' on the talks, said Meir.

Elsewhere, nickel was lower even after LME data released earlier showed nickel inventories, which are already at critically low levels, fell by another 96 tonnes to total 6,9564 tonnes.

The metal traded up earlier, boosted by comments from BHP Billiton that cost pressure and low labour productivity has impacted progress at its Ravensthorpe nickel mine in Western Australia.

LME nickel for three month delivery edged down to 32,800.00 usd against 33,500.00 usd at the close yesterday.

Other metals were mixed.

Three month zinc was down at 4,325.00 usd against 4,375.00 usd, tin was up at 10,300.00 usd against 10,150.00 usd, aluminium was down at 2,683.00 usd against 2,704.00 usd and lead was up at 1,617.50 usd against 1,590.00 usd.

Copper futures in New York slipped nearly 2 percent in early business on Tuesday, after a sharper than expected drop in U.S. durable goods orders raised concerns over slowing demand for industrial metals, sources said.

"The durable good number was negative. It kind of confirms what we have been talking about in terms of questions over the durability of demand," said Steve Platt, an analyst with Archer Financials in Chicago.

"With that in mind, the recovery rally, which we saw last week, was probably overdone and it narrowly was a correction in a market that seems to be suffering from weak demand," Platt added.

Copper for March delivery fell 6.05 cents, or 1.88 percent, at $3.1550 a lb by 11:01 a.m. EST (1601 GMT) at the COMEX division of the New York Mercantile Exchange, near the lower end of its early $3.1375-$3.2310 trading band.

December copper , which goes into delivery on Thursday, lost 5.75 cents at $3.13 a lb, dealing from $3.11 to $3.2030.

Estimated COMEX copper futures volume at 10:00 a.m. reached 5,000 contracts, with 973 lots in switches.

Speculative players will continue to roll out of the December contract, repositioning their holdings in futures to avoid taking actual physical delivery of the metal when delivery begins on Thursday, Nov. 30.

New orders for U.S.-made durable goods tumbled much more than anticipated in October on a big drop in civilian aircraft but were also down unexpectedly when transportation was stripped from the total, a government report suggesting economic weakness showed on Tuesday.

Durables goods -- big-ticket items expected to last three years or longer -- fell 8.3 percent, the biggest drop since July 2000. The decline was propelled by a 21.7 percent fall in transportation orders, the Commerce Department said.

Despite a slight uptick in the pace of U.S. existing home sales, analysts were still doubtful of how healthy the housing market will be heading into 2007.[ID:nN28239734]

Investor concerns over the slowdown in the U.S. economy and softer demand growth from China, the world's largest consumer of the red metal, have placed a limitation on the market's upside potential.

The latest weekly Commitments of Traders report issued by the Commodity Futures Trading Commission reflected the market's limited interest after the data showed the net speculative short position in COMEX copper futures rose 6 percent to 18,102 contracts from 17,010 the previous week.

Fundamentally, the constant threat of supply disruptions in the market would continue to underpin copper prices.

Copper may drop next week on speculation that demand will keep slowing in China and the U.S., the world's two largest consumers of the metal.

Thirteen of 23 analysts, investors and traders surveyed by Bloomberg yesterday and Nov. 22 forecast copper will decline next week. Nine expected a gain and one little change.

Consumption in China fell 6.9 percent in the nine months to September, the World Bureau of Metal Statistics said Nov. 22. Usage in the U.S. is ``depressed,'' the Lisbon-based International Copper Study Group said last week.

``The demand just isn't there,'' said Warren Gelman, president of Kataman Metals Inc., a trading company in St. Louis. ``With the lack of any major business going on between now and the end of the year, this market has to come off.''

Housing starts in the U.S., the second-biggest copper user after China, fell to a six-year low in October as falling home sales and swollen inventory discouraged construction. The building industry is the nation's largest consumer of copper, with the average house containing about 400 pounds of copper.

Copper has declined 20 percent since trading at a record $8,800 in London May 11. Chinese copper imports were 1.7 million tons in the first 10 months of the year, 22 percent less than a year earlier. Imports have been falling since October 2005.

Chinese reliance on copper imports will drop as domestic production rises 12 percent this year, China Minmetals Corp., the nation's largest metals trader, said earlier this month. Declining demand in China and the U.S. tipped the global market into a surplus of 228,000 metric tons in the nine months to September, the Hertfordshire, England-base WBMS said.

Housing Slowdown

Copper for delivery in three months on the London Metal Exchange gained $90, or 1.3 percent, to $7,070 a metric ton as of 7:24 a.m. local time. It has risen 4 percent this week.

On the Comex division of the New York Mercantile Exchange, copper for March delivery rose 2 percent to $3.197 a pound in after-hours electronic trading. Copper for delivery in January on the Shanghai Futures Exchange added 2.8 percent to close at 65,690 yuan ($8,363) a ton. Chinese prices include 17 percent tax and 2 percent duty.

The U.S. house market is slowing after the Federal Reserve raised borrowing costs for two years through June, lifting the target rate for overnight loans between banks to 5.25 percent

``It's very difficult for copper to rise in an environment where interest rates are higher and there are slower economic factors,'' said Ron Goodis, retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey.

Global demand for copper still rose 2 percent in the first nine months of 2006, according to the WBMS. The metal's rally may not be over because of tight supply, Richard Adkerson, Chief Executive Officer of New Orleans-based copper miner Freeport- McMoRan Copper & Gold Inc., said Nov. 20.

Analysts at Citigroup Inc., the biggest U.S. bank, said the same day that the ``super cycle'' in metals is still intact, with the so-called fundamentals of supply and demand keeping prices for copper above historical averages.

Investors surveyed by Bloomberg who expected prices to rise cited gains in the amount of LME copper stockpiles bought and due for future deliveries, known as canceled warrants. Canceled warrants have tripled to 21,025 tons in the past week, the highest level since June 8. That metal is in South Korea and Singapore, in the nearest LME-registered warehouses to China.

Copper rose to $7,000 a metric ton on the London Metal Exchange for the first time since Nov. 10, after stockpiles declined for two straight days, suggesting demand for the metal is picking up. Zinc jumped 3.3 percent.

Inventory monitored by the exchange fell 0.4 percent to 157,250 tons, the LME said today in a report. The stockpiles booked and due for future deliveries to buyers, known as ``canceled warrants,'' jumped to the highest in five months.

``The rise in canceled warrants is very important and the stockpile data are positive,'' said Martin Squires, an analyst at JPMorgan Chase & Co. in London.

Copper for delivery in three months on the LME gained $70, or 1 percent, to $7,050 a ton as of 10:03 a.m. local time. Prior to the LME stockpile report at 9 a.m., the contract dropped as much as 0.8 percent to $6,925 a ton. Prices have dropped 20 percent from a record $8,800 a ton on May 11.

Prices of copper, used in electrical wires and air conditioning tubes, advanced 71 percent in the past 12 months as supplies are below four days of global consumption, fuelling speculation that demand may exceed production this year. A slowdown in U.S. housing and lower imports of the metal to China triggered declines in prices in the past five months. Both countries are the world's largest users of the metal.

``China isn't a worry,'' said Squires, who last week visited the world's most populous country. More construction of buildings and infrastructure in the nation will continue to spur demand for copper, he added.

Copper production exceeded demand by 84,000 metric tons in the first eight months of the year, the Lisbon-based International Copper Study Group said this week in a report. World usage expanded by 3 percent in the period as growth in Europe, Japan and India offset declines in China and the U.S., the group said.

Zinc gained as much as $140, or 3.3 percent, to $4,430 a ton as inventory was at the lowest in 15 years. The exchange-monitored stockpiles declined 0.6 percent today to 88,950 tons, a level last seen in April 1991. The contract has more than doubled in the past year, trading at record $4,580 a ton Nov. 10.

Aluminum added $27, or 1 percent, to $2,705 a ton, nickel increased $170, or 0.5 percent, to $31,470. Lead rose 2.1 percent to $1,575 a ton and tin advanced $50 to $10,000 a ton.

Copper declined on speculation a U.S. housing slowdown has created an oversupply of the metal used in wires and pipes.

Copper production exceeded demand by 84,000 metric tons in the first eight months of the year, the Lisbon-based International Copper Study Group said yesterday in a report. Consumption in the U.S., the world's second-largest user of the metal, was flat in the period, and ``depressed'' in August, the group added.

``The copper market will continue easing in the next few years as the U.S. housing market is going to impact prices,'' David Thurtell, a London-based analyst at BNP Paribas, said today.

Copper for delivery in three months on the London Metal Exchange fell as much as $75, or 1.1 percent, and traded at $6,830 a metric ton as of 10:19 a.m. local time. The contract has fallen 22 percent from the May 11 peak of $8,800 a ton as higher U.S. interest rates hurt demand for industrial metals.

China, the world's largest copper user, used 6.9 percent less copper in the first eight months, the ICSG said. Still, demand growth in Europe, Japan and India helped world usage to expand by 3 percent in the period, it added.

The number of U.S. housing starts in October was the weakest since July 2000 and was down 27 percent from a year earlier, the Commerce Department reported Nov. 17. Building permits dropped to a 1.535 million annual pace, a record ninth straight decline and the lowest since December 1997.

Stockpiles of copper monitored by the LME fell 100 tons to 157,925 tons, the exchange said today. Inventory has increased 76 percent this year, to the highest since April 2004.

Copper Surcharge

Codelco, the world's largest copper producer, raised the surcharge it's seeking from Chinese buyers of the metal next year by $5 a ton to $130, according to Huang Xiaotian, general manager of copper at Golden Dragon Precise Copper Tube Inc. in Shanghai. The surcharge, or premium, is the sum added to the LME copper price for immediate delivery and includes shipping and insurance costs.

``The small rise reflects Codelco's expectations that China's demand will remain strong,'' Thurtell said.

Freeport-McMoRan Copper & Gold Inc. Chief Executive Officer Richard Adkerson said yesterday that this year's record rally in copper may not be over because demand for the metal has grown and major new supplies are getting harder to find.

``There's nothing to say that we've seen the peak of copper prices,'' Adkerson said. Freeport, based in New Orleans, yesterday agreed to buy copper producer Phelps Dodge Corp. for about $25.5 billion.

Supply Fundamentals

Copper prices will be buoyed by ``strong fundamental supply and demand factors,'' Adkerson said. ``Inventories have risen, somewhat, but fundamentally, supplies are very tight. When you look at the demand factors, the way that copper is used, the need for urbanization and industrialization around the world, the outlook remains strong for the metal.''

Citigroup Inc., the biggest U.S. bank, said yesterday the ``super cycle'' in metals it forecast more than 18 months ago is still intact and the so-called fundamentals of supply and demand will keep prices for copper, zinc and nickel above historical averages.

Citigroup analysts led by Sydney-based Alan Heap boosted their 2007 average copper-price forecast by 7.3 percent to $2.95 a pound, or $6,503 a metric ton. Prices will average $2.50 a pound in 2010, more than double a previous forecast, they added.

Heap's 2007 copper forecast is 7 percent higher than the median $2.75 prediction of nine analysts surveyed by Bloomberg News as of last week. Copper averaged $1.03 a pound in the past 10 years, according to data compiled by Bloomberg.

Among other LME-traded metals, aluminum fell $19, or 0.7 percent, to $2,636 a ton and zinc slipped $59, or 1.4 percent, to $4,110 a ton. Lead fell $3 to $1,517, while nickel gained $250 to $30,500 a ton. Tin was unchanged at $9,850 a ton.

Copper gained most in more than a week in London on speculation the metal may attract investors amid increased demand from China, the world's largest consumer.

China's demand may double to a rate of 8 percent next year, Credit Suisse Group said in Nov. 2 report. The growth will create a supply shortfall of 252,000 tons in 2007, the bank said.

``Some people still buying into super-cycle see this decline as a good buying opportunity,'' Neil Buxton, managing director of GFMS Metals Consulting Ltd., said today by telephone. He referred to forecasts by banks including Citigroup Inc., the world's largest, that commodities including copper will stay near multiyear highs on demand from China.

Copper for delivery in three months on the LME rose $100, or 1.5 percent, to $6,900 a metric ton as of 1:07 p.m. local time. That's the largest intraday gain since Nov. 9. The contract fell 1.7 percent to $6,800 a ton last week, the lowest closing price since June 27. The metal has fallen 20 percent from its all-time high of $8,800 a ton on May 11.

The contract for delivery in March gained 1.65 cents, or 0.5 percent, at $3.0525 a pound on the Comex division of the New York Mercantile Exchange. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

LME copper's so-called relative-strength index registered a reading of 34.75 on Nov. 17, indicating the contract was due for a rebound. The index, or RSI, identifies possible turning points for a commodity by calculating the degree by which gains outpace losses in a given time period. Readings at or below 30 suggest to chart watchers that a commodity or stock is poised to rise.

The Reuters/Jefferies CRB index, which tracks prices of 19 commodities including industrial metals and energy products, rose from a four-week low today to 305.79.

More Consolidation?

Copper production will rise in the next few years, increasing supplies of the metal used in wires and pipes. Freeport McMoRan Copper & Gold Inc. agreed today to buy Phelps Dodge Corp. for $25.9 billion in cash and stock to create the world's largest publicly traded copper producer. The combined company will expand copper production by 25 percent over the next three years.

``With metal prices fueling strong cash flows and the expectation by companies that prices will stay stronger for longer, more miners would want to acquire to add value,'' said Tim Barker at BT Financial Group, which manages $54 billion of assets including mining stocks, in Sydney.

Buxton said copper probably will decline in the next 12 months as demand from the U.S., the world's second-largest user, has weakened due to a slowdown in the residential housing sector. An average U.S. home contains 400 pounds of copper. The analyst maintains his price forecast for 2007, saying the metal for immediate delivery will average $6,000 a ton. The contract has averaged $6,727 a ton this year.

The number of housing starts in October was the weakest since July 2000 and was down 27 percent from a year earlier, the Commerce Department reported Nov. 17. Building permits dropped to a 1.535 million annual pace, a record ninth straight decline and the lowest since December 1997.

Among other LME-traded metals, aluminum fell 45, or 0.2 percent, to $2,620 a ton and nickel gained $400, or 1.3 percent, to $30,300 a ton. Lead added $6 at $1,490, tin advanced $100 at $9,800 and zinc rose $55 at $4,080 a ton.

Copper prices rose as the market recovered from last week's slump, aided by news Freeport-McMoRan will acquire Phelps Dodge for approximately 25.9 bln usd in cash and shares.

However, with stockpiles still rising and recent US economic data providing fresh cause for concern over growth prospects in the world's largest economy, analysts warned copper's gains might be limited.

At 1.15 pm, LME copper for three-month delivery rose to 6,900.00 usd a tonne against 6,800.00 usd at the close yesterday, and aluminium climbed to 2,647.50 usd against 2,625.00.

Other base metals were also higher.

Nickel rose to 30,400.00 usd against 29,900.00 usd, lead climbed to 1,512.50 usd against 1,484.00 usd, zinc was up at 4,145.00 usd against 4,025.00 usd, while tin was up at 9,850.00 against 9,700.00 usd.

'The big story of the day giving the copper complex somewhat of a boost is news that Freeport-McMoRan Copper & Gold has agreed to buy Phelps Dodge Corp. for 25.9 bln in cash and stock,' said Man Financial analyst Ed Meir.

The merger will create the world's largest publicly traded copper company and represents the world's biggest mining takeover.

Meir added, however, that 'as this news (merger) wears off, we expect the market to focus once again on rising stocks and a slowing US macro environment'.

The LME said today copper stocks monitored in its warehouse rose by another 2,050 tonnes to total 158,025 tonnes. LME copper stocks have now risen 44 pct from a recent low of 109,600 tonnes.

'Copper looks like it will be in a small surplus next year and we expect more downward pressure on prices. We see prices closer to 6,000 than 7,000 over the next few months,' said Adam Rowley, an analyst at Macquarie Research.

Copper closed slightly lower on Friday after data showing a very sharp decline in new home construction in the US sparked concerns that slowing US growth could crimp demand for metals.

However UBS Investment Bank analyst Robin Bhar said the metal's performance was 'better than expected given the negative macro (US and Chinese economy) and micro (rising stocks, easing spreads) background'.

Copper futures in New York ended in positive territory on Friday after an early test below $3.00 a lb failed to attract further long liquidation, leaving traders to ponder the market's next move.

"The market is still consolidating its recent move from last week, and until it decides on which way it wants to go, we'll continue to be stuck in rangebound dealings," said one broker at a New York trading house.

Copper for December delivery settled up 1.65 cents at $3.0575 a lb on the New York Mercantile Exchange's COMEX division, after dealing from an overnight ACCESS low at $2.9750 to $3.0650.

Floor dealers noted the market's failure to break below the overnight low in early COMEX trade, prompted a late bout of covering.

"Locals drove it down to a low of $2.98, not even through the overnight low. We bounced on either side of $3.00 for the remainder of the morning, and then all of a sudden, at around noon, a late flurry of buying came in ... probably some shorts covering into the close," said one.

The now most-active March contract rose 1.75 cents to settle at $3.0925. Spot November gained 1.65 cents to $3.0525, and back months closed with gains ranging from 1.70 to 1.85 cents.

COMEX final copper volume was estimated at 15,000 lots, compared with Thursday's official count at 11,058 lots.

Broad-based liquidation in commodity markets on Friday, led by sharp declines in the energy markets, pressured COMEX copper futures at the open, with additional weakness stemming from a weaker-than-expected report on U.S. housing starts in October.

The U.S. Commerce Department reported the pace of U.S. home building fell sharply in October as new home starts dropped 14.6 percent to their lowest level in over six years and building permits fell 6.3 percent.

"The housing data is certainly a contributor to copper's slide this morning. The weak housing starts and building permits just continue to add on to the downfall in residential construction," said Michael John Cuoco, research analyst at Mitsui Bussan Commodities (U.S.A.) Inc.

The general slowdown in U.S. home building reflected the recent builds in exchange-monitored stockpiles.

London Metal Exchange copper warehouse inventories surged 4,025 tonnes to 155,975 tonnes on Friday, while COMEX stocks rose 85 short tons at 25,903 short tons on Thursday.

Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell by 10 percent in the week ended Thursday to 31,576 tonnes, from 35,123 tonnes the week before.

On the production front, the largest workers' union at Chile's Codelco Norte, the giant copper miner's largest division, says the company is going to have to boost bonuses if it wants to avoid a crippling strike.

LME three-months copper closed at $6,790 a tonne, paring earlier losses after hitting a near five-month low at $6,645.

Copper declined, heading for a fourth successive weekly drop on the London Metal Exchange. Aluminum and nickel also fell.

Copper for delivery in three months on the LME dropped $70, or 1 percent, to $6,740 a ton as of 9:20 a.m. local time. The metal has lost 2.6 percent this week. It has fallen 23 percent since trading at a record $8,800 on May 11.

Aluminum declined $48, or 1.8 percent, to $2,620 a ton and nickel fell $200 to $29,400. Zinc dropped $65 to $4,160 and lead was $45 lower at $1,490. Tin slid $100 to $9,700.

Copper in Shanghai fell for the fourth straight day to settle at its lowest in more than three months as charts some traders use to predict price moves signaled further declines may be in store.

Prices of the metal haven fallen 7.5 percent since the close of Nov. 10 amid speculation that demand may ease from China and the U.S., the world's biggest users. The decline has taken Shanghai copper to below 65,000 yuan ($8,260) a metric ton, a level considered as a support, or points where buy orders cluster, trader Li Ling said.

``Technically speaking, as long as prices are below 65,000 yuan, copper prices are in a weak trend,'' Li, a futures trader at Star Futures Co., said by phone from Shanghai today.

Copper for delivery in January fell 20 yuan, or 0.03 percent, to settle at 62,690 yuan a ton on the Shanghai Futures Exchange, the lowest settlement price since July 24.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, fell as much as 2,100 yuan, or 3.2 percent, to 64,100 yuan a ton today.

Still, Shanghai futures prices rebounded from an intraday low of 62,080 yuan as some investors judged prices to have fallen low enough to resume buying, analysts such as Wang Zheng said.

``Generally, we saw buying from investors,'' Wang, a futures trader at Shanghai Continent Futures Co., said by phone today. ``Open interest kept rising when prices rebounded, so that is a sign that new buying has surfaced,'' he said, referring to the total number of futures contracts that have not been closed, liquidated or delivered.

Copper for three-month delivery on the benchmark London Metal Exchange fell $45, or 0.7 percent, to $6,865 a ton at 7:50 a.m. London time.

Technical charts suggest ``that the larger trend remains to the downside'' for London copper prices, indicating prices may fall to $6,415 a ton, the lowest posted in June, Barclays Capital analysts led by Jordan Kotick said in a report dated yesterday.

Copper for delivery in March fell 0.75 cent, or 0.2 percent, to $3.1175 a pound in after-hours trade on the Comex division of the New York Mercantile Exchange at 7:50 a.m. London time.

Chile, the world's biggest copper supplier, said its exports of the metal declined in October from the prior month after prices fell.

Exports slid 6.8 percent to $2.943 billion from $3.159 billion in September, the Santiago-based Chilean central bank said today on its Web site. The nation's government will report copper production Nov. 28.

Speculation that demand for copper will weaken in the U.S. and China, the biggest users of the metal, has weighed on prices, said Julio Espinoza, an analyst at BiCE Corredores de Bolsa in Santiago. The nation's copper exports also will slide in 2007 from this year as prices extend a decline from their May record of $4.04 a pound, he said.

``Global growth won't be as spectacular, so you'll see a fall in prices,'' Espinoza said by phone.

Prices will average $2.80 a next year, down from $3.10 a pound this year, the Chilean Copper Commission, a government-run studies group in Santiago, said in October.

Copper for delivery in three months on the LME fell $35, or 0.5 percent, to $6,810 a ton at 12:41 p.m. in London, sliding for a second session.

Exports will decline next year even as the nation's copper production climbs, Espinoza said. Chilean output will rise 5.6 percent next year to 5.7 million metric tons from 2006 after companies boosted investment after prices surged, the Copper Commission estimates.

Copper prices edged up as the market consolidated after falling below the critical 7,000 usd a tonne level on Friday, but analysts warned the outlook remains shaky.

At 1.45 pm, LME copper for three-month delivery rose to 6,965.00 usd a tonne against 6,935.00 usd at the close yesterday. Other base metals were also up.

Zinc rose to 4,265.00 usd against 4,245.00 usd, aluminium edged up to 2,732.50 usd against 2,714.00 usd, nickel rose to 30,200.00 usd against 29,900.00 usd while tin climbed to 9,975.00 against 9,925.00 usd.

Lead bucked the trend, however, falling to 1,530.00 usd against 1,570.00 usd.

Copper closed slightly higher yesterday but failed to breach the key 7,000 usd a tonne level, and analysts said the fact that it has failed to breach that level again today is worrying.

BaseMetals.com analyst Martin Hayes said copper was taking slight relief from the fact that LME stocks did not rise as much as expected today, and from yesterday's modest recovery.

'For today the mood is just a little bit better but I think there's a wariness that it won't take much to tip copper back into minus ... there are very few robust buyers around,' he said.

The LME said today stocks monitored in its warehouses rose by another 625 tonnes to 151,925 tonnes. The rise was slightly less than the thousand tonne rises seen over the past few days.

Overall stocks have increased by 42,325 tonnes or 39 pct from a recent low of 109,600 tonnes, however, and some analysts speculate supply may exceed demand next year.

'With copper below the 7,000 usd a tonne level and with weak current fundamentals, a fact underlined by the BME which said a small surplus had emerged ... we would not rule out a test of support at 6,400-6,450 usd a tonne,' said UBS Investment Bank analyst Robin Bhar.

Man Financial analyst Ed Meir pointed out that if copper 'resumes its decline, it is bound to cast its shadow on the rest of the group, putting the sustainability of their recoveries in doubt'.

He added that 'with fund money concentrated primarily in the far more liquid copper and aluminium markets' he cannot see zinc, lead, nickel and tin leading the group higher without their participation.

Copper fell to a fresh four-month trough and lead tumbled 12.0 percent to a 3-1/2-week low on Monday as investors took profits on growing worries about rising stocks, while zinc fell 6.5 percent.

Lead for delivery in three months tumbled to $1,470 a tonne, the lowest since October 18, on the London Metal Exchange after last week's contract high of $1,755 a tonne.

"It was time for some profit-taking after copper's sell-off ... Copper didn't recover and it was zinc's and lead's turn today," a trader said. "Higher copper inventories and more lead on the market next year are part of the reason."

Zinc hit a session low of $4,020 a tonne, the lowest since October 25, from $4,300 on Friday when it surged to an alltime peak at $4,580 on inventories, the lowest since 1991.

Zinc traded at $4,100 in the second official LME rings from Friday's $4,300 close, lead traded at $1,525 from $1,675 and copper at $6,761, the lowest since June 28, from $6,900.

Copper has fallen more than 20 percent since the record top of $8,800 a tonne hit on May 11.

"There has been a lot of destocking in the copper market and it looks like consumption has been falling," William Adams, analyst at BaseMetals.com said.

"However ... there has been some substitution ... In China aluminium is being used in things like power cables ... But it's not across the board substitution."

CHINA COPPER

China's copper imports fell 22.4 percent in the 10 months to the end of October, partly, analysts say, because the country's Strategic Reserve Bureau has been selling copper.

That has dented sentiment, as have expectations of an oversupply next year if current stock trends persist.

Copper stocks at LME-registered warehouses have risen to more than 150,000 tonnes from little more than 25,000 tonnes in July last year.

Both lead and zinc have been boosted in recent weeks by worries about dwindling stocks. But while zinc stocks are expected to stay low for much of next year, lead stocks are seen rising from the first quarter onwards, analysts said.

LME-registered zinc stocks have dropped below 100,000 tonnes from more than 750,000 tonnes in April 2005, while lead stocks around 46,000 tonnes, down from nearly 120,000 tonnes in June.

"There are reports from China of a short-term growth in refined zinc exports," Macquarie said in a research note.

"Domestic zinc prices have fallen well below LME prices as the growth rate in domestic production appears to be exceeding that of domestic consumption for the first time this year."

Overall, producer selling on Friday reinforced the negative sentiment of investors watching the economic slowdown in the United States and slowing demand for base metals.

"We are also seeing some buying from consumers taking advantage of falling prices," a trader said. "There was a lot of talk about strikes in the summer and there haven't really been any ... That's been a dampener."

News that Peru's mining unions are preparing a national strike to oppose government proposals to change profit-sharing plans has done little to boost base metals.

But traders say that could change as the country is the world's third-biggest producer of copper and zinc.

Meanwhile Chile's giant Escondida mine, majority owned by BHP Billiton Ltd/Plc, has opened 2007 copper treatment and refining charge talks with Chinese smelters with an offer a third lower than in 2006.

The miner offered $60 per tonne for treating and 6 cents per pound for refining its concentrate in 2007, from $90 a tonne and 9 cents a pound, with price participation, in 2006..

Aluminium traded at $2,647 a tonne, up from an earlier 4-week low of $2,615 and $2,695 at Friday's close.

Nickel gained to $29,600 from $29,400 and tin shed $75 to $9,775. Earlier nickel and tin traded traded at 5-week and 3-week lows of $28,700 and $9,700 respectively.

Copper prices fell at the London Metal Exchange on Friday as reported stocks rose further, fund managers said.

Three-months futures were quoted at $7,135/7,145 per tonne at 1120 GMT, down $175 or 2.4 percent from Thursday's kerb close.

"I'm not moving money out of copper, it's more to do with the fact that stocks are increasing. It's the only metal where they are," said a Geneva-based fund manager.

Stocks in warehouses that report their positions to the LME are a closely watched indicator of metal availability.

Copper stocks rose by 1,625 tonnes on Friday to 148,200, up 54 percent from the start of the year.

"Still, I'm not keen to go short of copper. I think it may be tight again," he said.

In a sign that copper smelters might continue to chase tight concentrate next year, Chile's Escondida has opened 2007 copper treatment and refining charge talks with Chinese smelters with an offer a third lower than charges for 2006.

The miner offered $60 per tonne for treating and 6 cents per pound for refining its concentrate in 2007, from $90 a tonne and 9 cents a pound, with price participation, in 2006.

DECOUPLING FROM COPPER?

Other metals were mostly unchanged, which analysts saw as a sign that copper's tradtional dominance of the market might be weakening.

"Copper continues to probe recent lows this morning but so far the other metals are not following suit," said UBS metals strategist Robin Bhar.

"Over the past few weeks evidence has been mounting that the other metals are not slavishly following copper and perhaps have managed to decouple from the red metal," he said.

Zinc , which has been serially recording new peaks as stocks fall, hit another new high of $4,580 in earlier trading before slipping to $4,450/4,480, down $80 from Thursday's close.

Aluminium was down $20 at $2,805/2,810 and nickel up $300 at $30,600/30,800.

The LME said on Friday that as of Monday it would lift the $300 per tonne per day nickel backwardation limit it imposed in August.

Zinc prices fell flat after several days of successive record highs on the London Metal Exchange, but copper firmed on Thursday after sharp falls the previous day.

"People are getting more and more sceptical, prices have been overdone and copper is probably one of the most overpriced commodities out there," a European trader said.

Three months copper dropped over four percent in the previous session but by 1157 GMT was quoted at $7,190/7,205 a tonne, up one percent since the close of $7,120.

Initial support was seen at $7,120 but traders said the market might test $6,500 and go lower if it broke below $7,000.

"It could be a few thousand bucks correction and on the upside we will see it capped -- at the moment people will take profit on any rally," the trader said.

Copper remained under pressure and dampened sentiment in the rest of the metals market as stocks continued to rise.

LME warehouse inventories rose 2,325 tonnes to 146,575, and traders said more stocks could be on their way.

Stocks have risen by 25 percent since mid-October.

"If you look at the physical market there is more and more copper available so you are bound to see the cash price come off a bit and a slight contango at the front," the trader said.

Rising stocks erased copper's cash premium earlier this month for the first time in three years.

Cash copper is now trading at a discount, or contango, of $17/12 a tonne, compared with a $240 premium, or backwardation, at its peak in June.

A backwardation allows investors to make money by lending metal to the market by selling cash and simultaneously buying three-months contracts, pocketing the difference.

"Whether or not that contango will stay depends on how much demand will pick up," the trader said.

ROLLING FORWARD

Copper and aluminium were also under pressure as commodity index investors rolled positions forward, which was seen keeping a lid on prices to the end of the week.

Investors would be monitoring contract talks at the Codelco Norte division of Codelco.

Also, investors were keeping an eye on Zambia's Konkola Copper Mines (KCM), which halted copper production at its Tailings Leach Plant after a spill polluted a river.

Before the production halt, KCM planned to produce 200,000 tonnes of finished copper by December 2006.

Aluminium lost 2.8 percent in the previoUs session but was supported by consumer buying at the lower numbers.

Three months aluminium was indicated at $2,742/2,745, up 0.9 percent, against $2,717 on Wednesday.

Prices rose from around $2,450 in mid-July to a high of $2,832 on October 30, with speculators putting more than $5 billion into the aluminium market in the past five months.

"The sheer quantity of metal the major funds have had to buy...suggests a large, and very unstable, long position which could make the market very problematic once the year-end tightness is past," economist John Kemp at Sempra Metals said.

ZINC AND LEAD SOFTER

Zinc and lead softened on profit-taking after recording new highs of $4,535 and $1,755, respectively, on Wednesday.

"There is a sense among many of the investment funds that copper is now yesterday's trading play and can be safely ignored and even allowed to retreat even as the others continue to make fresh highs," Kemp said in a note.

Zinc was flat at $4,420/4,440 after falling 1.8 percent in the previous session.

LME stocks continue to slide, down 925 tonnes to 96,800, their lowest since March 1991.

Prices have soared by more than 130 percent since the start of the year as consumption has outpaced production, taking stocks to critically low levels.

Lead was quoted at $1,700/1,720, down 0.9 percent against $1,715.

Nickel was quoted at $29,750/29,950 versus $30,100 on Wednesday, when the metal dipped by nearly 4 percent.

BHP Billiton Ltd, the world's largest miner, will cut copper processing fees paid to smelters in South Korea and India for 2007 contracts, people involved in the price negotiations said.

BHP will pay $60 a metric ton for treatment charges and 6.0 cents a pound for refining charges to turn copper ore and concentrate into refined metal for the year that starts Jan. 1, said the people, who asked not to be identified because of the confidentiality of the negotiations.

The 2007 fees compare with previous settlements of $95 a ton and 9.5 cents a pound for calendar 2006. BHP also terminated a 30-year so-called ``price participation'' clause, which could depress earnings at so-called custom smelters that don't have their own mines and use BHP agreements as a benchmark.

The clause allows processors to raise fees when copper prices gain. Up to the calendar 2006 contract, smelters charged an extra 10 percent of the increase in copper prices once they rose above 90 cents a pound.

Smelters that settled the 2007 processing fees with BHP include Vedanta Resources Plc, India's largest producer of copper and zinc, and South Korea's LS-Nikko Copper Inc, the world's third-largest copper smelter, the people said.

Annual copper mine capacity over the 2005-to-2009 period is projected to grow at an average rate of 4.6% a year to 19.9 million metric tons by 2009, an increase of 3.3 million metric tons from 2005, the International Copper Study Group said in a report released Tuesday.

Of the total increase, copper in concentrate production is expected to rise by 1.8 million metric tons, or by an average annual rate of 3.1%, and solvent extraction-electrowinning production by 1.5 million metric tons, or by an average annual rate of 10.2%.

Smelter capacity is projected to reach 17.5 million metric tons by 2009, an increase of 1.2 million metric tons, or 7.5%, from that in 2005.

During the first two years of the projection, 2006-07, an annual smelter growth rate of 2.2% is projected to exceed a corresponding annual concentrate growth rate of 1.7% a year.

However, the ICSG said the situation will be reversed in 2008-09, when concentrate capacity growth will exceed smelter capacity growth.

A projected average annual smelter capacity growth rate for the period 2005-09 of 1.8% is 1.3% lower than the projected growth in concentrate capacity, the group said.

"Assuming that smelter capacity utilization rates rise from the current low level to their historical average, smelter capacity over the entire forecast period should be sufficient to treat additional concentrate production," the ICSG said. "There could, however, be short-term shifts in the concentrate supply-demand balance owing to the unequal distribution of growth."

In 2009, the ICSG expects world refinery capacity to reach 23.3 million metric tons, an increase of 3 million metric tons from that in 2005.

About 1.53 million metric tons of the expansion is expected to come from electrolytic refineries and 1.48 million metric tons is expected to come from electrowinning, the ICSG said.

The average annual growth rate in the period 2005-09 for electrolytic refineries is projected to be 2.3%, slightly above the projected growth in smelter capacity. The annual growth rate for electrowinning capacity - at the refinery level - is expected to be 10%.

The projected developments include existing capacity at mines and plants that are currently on care and maintenance or are temporarily cut back, also known as swing capacity.

According to ICSG research, this swing capacity is currently minimal for mines.

With the definitive closure of two U.S. plants at the end of 2005 that had been on care and maintenance since 2001, total idled capacity for smelters declined to 180,000 metric tons and idled refinery capacity fell to 370,000 metric tons.

Copper futures in Shanghai rose for a second day on expectations that buyers in China, the world's largest user of the metal, will rebuild inventories.

Copper stockpiles in Shanghai Futures Exchange warehouses fell 12.6 percent last week to 30,410 tons, the lowest in more than six months, the exchange said Nov. 3. Imports of refined copper into China fell 41 percent in the first nine months. Buyers in China have refrained from purchases as copper futures prices have soared 85 percent in the past year.

``Some investors believe that Chinese demand stays healthy,'' Wang Zheng, a metal futures trader at Dalu Futures Co., said by phone from Shanghai today. ``End users will have to replenish depleted stocks soon.''

Copper for delivery in January gained 480 yuan, or 0.7 percent, to settle at 68,270 yuan ($8,667) when trading ended at 3:00 p.m. local time.

Benchmark London Metal Exchange copper for delivery in three months gained $40, or 0.5 percent, to $7,400 a ton at 7:59 a.m. London time.

Gains in other base metals, such as aluminum, also supported the copper market in Shanghai, Wang said.

Aluminum in Shanghai for delivery for January rose for a third consecutive day, gaining 290 yuan, or 1.4 percent, to settle at 20,370 yuan a ton. The contract has gained 3.4 percent in the past three days.

Copper for delivery in December gained 2.05 cent, or 0.6 percent, to $3.3575 a pound on the Comex division of the New York Mercantile Exchange, in after-hours electronic trading at 8:03 a.m. London time.

Copper futures Shanghai gained as buyers in China, the world's largest user of the metal, increased purchases after prices touched a two-month low, and stockpiles declined.

Imports of refined copper into China fell 41 percent in the first nine months of this year as prices in London soared to a record in May. Shanghai futures fell 3.8 percent last week to settle at their lowest since September.

``To copper users in China, the current price looks attractive, and they've got demand,'' Yu Mengguo, metal futures trader at Jinpeng Futures Co., said by phone from Beijing today.

Copper for delivery in January on the Shanghai Futures Exchange rose 130 yuan, or 0.2 percent, to settle at 67,790 yuan ($8,604) when trading ended at 3:00 p.m. local time.

Benchmark London Metal Exchange copper for delivery in three months gained $5, or 0.1 percent, to $7,335 a ton at 7:37 a.m. local time.

``Demand on the physical copper market remained quite healthy in China,'' said Yuan Fang, metal futures trader at Shanghai Dongya Futures Co. ``Declining stockpiles also provided the futures prices some support.''

Copper stockpiles in Shanghai Futures Exchange warehouses fell 12.6 percent last week to 30,410 tons, the lowest in more than six months, the exchange said Nov. 3. Aluminum stockpiles fell by 16.6 percent to 29,638 tons last week.

Metal for immediate delivery in Changjiang, Shanghai's biggest spot market, traded little changed between 69,000 and 69,200 yuan.

Aluminum Prices

Rising aluminum prices also supported copper, said Zhou Jie, metals trader at China International Futures (Shanghai) Co.

Aluminum in Shanghai for delivery in January gained 230 yuan, or 1.2 percent, to settle at 20,080 yuan at 3:00 p.m. Shanghai time.

Copper for delivery in December fell 0.25 cent, or 0.1 percent, to $3.32 a pound on the Comex division of the New York Mercantile Exchange, in after-hours electronic trading at 7:40 a.m. London time.

A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Copper futures in New York traded higher at the open on Friday, with inventory declines in Shanghai offsetting the recent three-week build in London stocks, sources said.

By 10:30 a.m. EST (1530 GMT), copper for December delivery climbed 3.65 cents at $3.3280 a lb on the New York Mercantile Exchange's COMEX division, just off its morning peak at $3.3310.

Spot November rose 3.10 cents to a morning peak at $3.3150.

COMEX copper volume at 10 a.m. was estimated at 3,000 lots.

The steady declines of copper stocks in Shanghai warehouses reflected the country's strong consumption growth, investment bank UBS said in a daily market comment.

"The country is a significant net importer of copper in various forms and although the government is keen to reduce the country's reliance on high-priced imports of refined metal, restocking will be required sooner than later which will help to support copper prices," they said.

Copper inventories monitored by the Shanghai Futures Exchange fell 13 percent to 30,410 tonnes in the week ended Thursday, from 34,796 tonnes the previous week.

London Metal Exchange warehouse stocks added 1,925 tonnes to 141,400 tonnes on Friday, while COMEX stocks rose 72 short tons to 23,174 tons on Thursday.

Separately, some fabricators in eastern China have resumed their tolling business after a local customs bureau allowed them to import refined copper duty-free this week even though Beijing has not released clear policies on it yet.

On a net basis, China imported 46,767 tonnes of refined copper in September, an increased of 2 percent compared with August, but Chinese copper imports are still half of what they were in September last year.

Meanwhile, ongoing labor negotiations at Codelco's Norte division in Chile continued to be a supportive factor in the market.

The majority of unionized mine workers at Codelco Norte, the largest division of government-owned copper miner Codelco, said on Thursday they will not negotiate a preliminary agreement with the company, but a minority said they expected a company proposal soon.[nN02447770]

Negotiations at Codelco Norte follow a 25-day strike in August at Escondida, the world's largest copper mine.

On Wednesday, Escondida suspended operations for 24 hours due to an accident that killed one worker.

A spokesman for Escondida did not say whether the suspension had affected production at the mine.

LME three-months copper last traded $7,335 a tonne, up $90 from Thursday's kerb close.

Copper prices were higher on Thursday with the market keeping an eye on a possible strike at a big producer and re-stocking by major consumer China, traders said.

"Copper has been trading sideways for many months and it lacks impetus," Adam Rowley, analyst at Macquarie Bank, said.

"The two key drivers now are whether workers at Codelco's Norte division will strike later this year and whether Chinese demand will bounce back."

Labour contracts for some 6,000 workers at Codelco's Norte division expire at the end of December and unions are expected to bargain hard for a share of soaring profits due to record metals prices.

"Ahead of Codelco's labour contract renewal, there is an understandable reluctance to sell copper," Rowley said.

He added: "There has been a lot of de-stocking this year in China and there is a strong possibility that we will see buying early next year."

On a net basis, China imported 46,767 tonnes of refined copper in September, an increase of 2 percent compared with August, but Chinese copper imports are still half of what they were in September last year.

Some analysts attribute the fall in imports to sales from a Chinese government stockpile, while others think outright Chinese demand is falling.

STOCKS RISING

Copper in delivery in three months on the London Metal Exchange was quoted at $7,200/7,220 a tonne at 1045 GMT, from $7,150 on Wednesday when the market lost more than three percent after a sharp rise in stocks.

On Thursday, stocks rose 4,300 tonnes to 139,475, just under three days of global consumption.

Analysts noted that rising stocks of metal on the LME, which are up 20 percent since mid-October to their highest since May 2004, was putting pressure on the market.

"Coming to the end of the year you could expect people to put metal on warrant to cut their working capital. But two consecutive weeks of rises, and quite punchy rises, are significant," ABN AMRO analyst Nick Moore said.

"It also runs counter to what we are seeing in zinc and aluminium, where stocks are falling and adds to the view that Chinese demand has been overestimated."

Increased availability has depressed cash copper prices to the point where the premium against the three-month contract moved to a discount for the first time in three years earlier this week.

ALUMINIUM

Aluminium was up $26 at $2,756/2,760 a tonne.

"The market is recovering a little. For whatever reason, all the metals sold off late in the afternoon. Short-term support is around $2,680-2,700 and if we break below there it could get pretty nasty," a trader said.

"On the upside, the target is $2,950/3,000. If the market does get up to those levels it will get sold off pretty quickly."

China lifted the export tax on copper, nickel and aluminium to 15 percent to ease investment in energy-intensive sectors last week, which drove Chinese smelters to deliver thousands of tonnes of primary aluminium ingot to bonded warehouses at Chinese ports this week to avoid a higher tax on the metal..

Lead and zinc both of which hit fresh contract peaks on Wednesday were steady at $1,655/1,665 and $4,210/4,230 respectively.

"Zinc looks incredibly tight and will only get tighter over the next six months and prices will go significantly higher," Rowley said.

Copper edged lower in London on Wednesday under pressure from a sharp jump in stocks, but lead prices sustained gains and pushed to a new high, dealers said.

Three-month copper on the London Metal Exchange (LME) eased to $7,316 a tonne in the second open-outcry session of the day, from $7,380 on Tuesday.

Lead, however, extended its rise to post a fresh contract high of $1,650, up $40 from Tuesday.

"People are getting excited about the less-liquid contracts like lead, which are hitting new peaks," a fund source said.

"But perhaps there are better buying opportunities in bigger volume contracts such as copper, which have under-performed."

The source said a view held earlier this year by much of the market that copper was going to spike in the fourth quarter was changing.

"But there are signs of life, signs of buying from China, and I think there is potential for prices to get back to May's peaks."

Copper stocks rose 4,675 tonnes overnight to 135,175, up 20 percent since mid-October.

Increased availability has meant that the premium for cash metal has given way to a discount, known as a contango.

The cash-threes spread was at a $20/$10 contango, maintaining the discount for a second day for the first time since late 2003.

"The forward spreads have really collapsed. There are expectations that material is going to continue to come in and I really can't understand why the copper price doesn't have a six at the start of it," a trader said.

"And even at $6,000, I would say it was over-priced. It's probably the strength in gold that is supporting the market."

Spot gold was trading about $5 higher at $610.40 an ounce, while oil was down 30 cents at $58.43 a barrel.

PRICE FALL

Copper prices have fallen by almost 16 percent since they hit a record $8,800 in May on a flood of fund buying, which has largely dried up.

"There is a shift in emphasis away from a market in deficit, transitioning towards one in balance or surplus, and the inventories are a window on this," ABN AMRO commodity analyst Nick Moore said.

Despite falling from its peaks, copper remains well above long-term average prices around $2,100, and Mexico's Southern Copper Corp., one of the world's top producers of copper and a unit of Grupo Mexico, sees prices holding strong because of hefty demand from China.

Zinc was indicated $10 higher at $4,220/4,235 after touching a fresh record high of $4,290 on Tuesday.

Dealers say zinc stocks, currently just above 100,000 tonnes, to continue to fall for the rest of this year and that prices may touch $5,000. Stocks have fallen in a straight line from around 620,000 tonnes in mid-2005.

Three-month aluminium was down $10 at $2,780/2,781.

"A lot of the fund interest in aluminium is via the options market. There is a big slice of call options at $3,000 for December and there is a good chance the market will hit $3,000 in early December, a second trader said.

"The interesting thing will be to see what happens after those options expire and whether prices can be sustained at anywhere near these levsl," he added.

Mid-tier copper producer Inmet Mining Corp. is dismissing speculation that it's the target of a potential takeover by a private-equity fund, just days after reporting a three-fold increase in third-quarter profit.

Chairman and chief executive Richard Ross told shareholders Monday that such a deal would not be in their best interests — at least not right now.

“On that score, I can tell you that we have not had any serious discussions with any private-equity fund,” Ross told a conference call with analysts.

“In light of our growing production base and further growth potential, we do not believe it would be in the best interests of our shareholders to consider a transaction involving a private-equity fund at this time.”

Some analysts, however, have suggested that Inmet and rival Canadian copper producer Aur Resources Inc. are attractive targets amid the current takeover frenzy in the global metals industry.

“We believe there continues to be a compelling opportunity for private-equity investors to enter the base metals market,” Orest Wowkodaw of Canaccord Adams said in a recent note to clients.

“For illustration purposes only, we estimate that the cash required to launch a hostile bid for Inmet Mining, for example, even at a relatively rich 50 per cent premium to the current share price would be completely repaid by around the end of 2011, or in roughly five years, assuming all production is hedged at the current forward curve. The opportunity would be similar in the case of Aur Resources.”

Both companies are enticing because each has existing production and significant net cash growth, Mr. Wowkodaw added in an interview.

He estimates the companies will grow their net cash per share balance to about 60 per cent of their current share prices by the end of 2008. For its part, Inmet's cash balance totalled about $550-million at the end of September.

“We believe that the market continues to mis-price the anticipated net cash build of these three companies,” he said. “If this mis-pricing continues, we wonder how long it will take before we see a private-equity player capitalize on this opportunity.”

Inmet shares gained 2.1 per cent Monday, closing up $1.12 at $54.72 on the TSX. The stock has a 52-week high and low of $56.65 and $19.75.

Last Friday, Inmet reported that robust metal prices helped more than triple its third-quarter profit to $111.6-million or $2.31 share from a year-earlier $35.9-million or 80 cents per share.

“Copper and zinc prices continued to fluctuate around their record highs,” the company said.

“The average London Metal Exchange cash price this quarter was $3.48 (U.S.) per pound for copper, up significantly from $1.70 in 2005, and $1.52 per pound for zinc, compared with 59 cents per pound in 2005.”

Inmet's gross sales increased 69 per cent to $301.1-million. Copper production increased seven per cent to 20,700 tonnes, but zinc production fell 34 per cent to 16,500 tonnes.

“We are on target to achieve our 2006 objective of 80,000 tonnes of copper,” the miner said. “We have lowered our original 2006 objective for zinc to 74,000 tonnes because mining of some zinc rich zones at Pyhasalmi (in Finland) and Cayeli (in Turkey) has been pushed out to 2007.”

Inmet is a Toronto-based global mining company that produces copper, zinc and gold with mines in Canada, Turkey, Finland and Papua New Guinea.