Mining Profits...Investing In Industrial Metals

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.