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broken through 7.1c resistance, page-21

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    interesting read

    Humeyra Pamuk

    LONDON Reuters
    Published on Tuesday, Jan. 12, 2010 7:03AM EST


    .Industrial metals slipped on Tuesday on the back of a stronger U.S. dollar, and selling pressure due to index rebalancing, while bearish results from major aluminum producer Alcoa dampened market sentiment.

    Tin was the only metal that bucked the trend, rising 2.5 per cent to hit its highest since September 2008, as the fundamentals for the metal have improved after recent upbeat data and tighter exports from the top producer Indonesia.

    Benchmark copper (HG-FT) for delivery in three months on the London Metal Exchange edged down to $7,555 (U.S.) a tonne by 1100 GMT, from Monday's $7,567.5 a tonne. The metal, used extensively in construction, touched a 17-month high last week.

    The U.S. dollar was flat a basket of currencies, holding on gains made after an official from a Chinese sovereign wealth fund said he did not think the U.S. currency would depreciate more.

    One reason why metals are falling is the dollar, said metals analyst Daniel Brebner at Deutsche Bank. Also Alcoa numbers that came after the market's close yesterday were pretty weak and are dampening the market, he said.

    Alcoa Inc. (AA-N) , one of the world's largest aluminum producers, posted a narrower quarterly loss on Monday, but the results fell short of expectations.

    The company said although aluminum prices (AL-FT) are climbing, demand from some customers, especially plane makers and the commercial construction sector, was not expected to improve soon.

    Disconnect

    In the face of persistently weak demand, rising global stockpiles are a major concern among investors. Chile's mining minister warned on Monday that copper prices could face a downward correction as inventories climb.

    Copper stocks rose by 1,975 tonnes to 517,175 tonnes, their highest since March 2009, while nickel stocks are at 159,726 tonnes, just below Monday's record high of 159,792 tonnes.

    The feedback from the physical desk echoes what the Chileans are saying demand is pretty lacklustre indeed, producers are asking if we can take more material, a senior trader based in Singapore said.

    There are periods of disconnects between the fundamentals and prices and this is clearly one of those periods. The prices are looking a little over extended at this point, Mr. Brebner said, adding that there could be further falls for zinc.

    LME zinc inventories fell by over 2,000 tonnes, but a 30 per cent rise in Shanghai zinc stocks offset any potential boost to the zinc price which was at $2,543 a tonne versus $2,573 the day before.

    Aluminum inventories also fell by 3,675 tonnes, but prices were down at $2,321 a tonne from Monday's $2,330 a tonne. Traders said worries about power shortages in China and upbeat assessments on demand from UC Rusal could help ward off a larger decline.

    Around 70 per cent of the total 4.6 million tonnes of aluminum stocks in LME warehouses are said to be tied up in financing deals. Aluminum cancelled warrants material earmarked for delivery stood at 244,700 tonnes, equivalent to the 18 per cent of the remaining 30 per cent.

    Nickel was at $17,997 a tonne from Monday's $17,890 a tonne while lead was at $2,500 a tonne from $2,532 a tonne.

    Tin rallied as high as $18,350 a tonne, before easing to $18,275 a tonne versus $17,890 a tonne.

    We said last month that tin prices were finally threatening to break higher, having traded in a sideways direction since June when they decoupled from the uptrends in the other metals, Standard Bank said in a research note.

    Based on our upwardly-revised forecasts, we are looking for a further increase of 29 per cent this year as the global economy recovers, demand improves and as restocking gets under way.
 
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