Mining Profits...Investing In Industrial Metals

Copper and zinc prices rose, reversing yesterday's losses, on falling inventories and continued supply worries, but tin and nickel edged lower, extending their fall off all time highs touched Monday.

The LME said copper inventories in its warehouses fell by 50 tonnes to 109,550 tonnes - the lowest stockpile level since August 10. Yesterday, the exchange reported a 5,000 decline in copper stocks.

Meanwhile, Rio Tinto, the world's second largest miner, said refined copper production fell by 15 pct in the third quarter due to a major smelter shutdown in early September.

It also reported a 6 pct drop in mined copper output, due in part to a drop in production following a strike in August at the company's 30 pct owned Escondida mine in Chile.

Zinc, which touched an all time high of 4,020 usd a tonne yesterday before close lower, was also finding support from declining inventories. The LME reported a 1,725 tonne decline in zinc inventories today.

'With fundamentals remaining tight dip buying ... continues to be seen and further attempts to break above resistance should be seen,' said UBS Investment Bank analyst Robin Bhar.

In the immediate term, however, some analysts sounded a note of caution.

Man Financial analyst Ed Meir said yesterday's weaker-than-expected US September industrial production data could weigh on the market, especially the copper market.

'The indicator is one of the more highly correlated readings to metal prices (for copper in particular). We believe the impact of poor industrial production may not have been fully discounted,' he said.

Tin and nickel prices, which on Monday hit their highest levels in 19 and 17 years, respectively, receded further today and analysts warned about volatility in these metals.

BaseMetals.com analyst William Adams said he would be more wary of nickel and tin 'because
they have already advanced rapidly' while copper and zinc have lagged behind and have more upside potential.

At 4.25 pm, LME copper for 3-month delivery edged up to 7655.00 usd a tonne against 7,639.00 usd at the close yesterday, zinc climbed to 3,900.00 usd against 3,865.00 usd while aluminium rose to 2707.50 usd against 2,674.00 usd.

Tin fell to 9,650.00 usd against 10,000.00 usd, nickel dropped to 31,000.00 usd against 31,400.00 while lead was flat at 1,495.00 usd.