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Metals - Base metals rise as dollar weakens but demand concerns...

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    Metals - Base metals rise as dollar weakens but demand concerns persist
    Thu, May 15 2008, 12:23 GMT

    LONDON (Thomson Financial) - Base metals were higher midday, in line with other commodities such as gold and oil, as the market took support from a weaker dollar.

    Zinc was the only exception, easing a touch as traders took profits after the metal's rise earlier this week.

    The greenback softened this morning against the euro as the single currency benefited from stronger-than-expected GDP growth in Europe's largest economy, Germany.

    Weakness in the U.S currency makes dollar-priced commodities such as the metals cheaper for holders of other currencies.

    However, buying from China, the world's biggest market for most of the industrial metals, remains subdued, with users waiting for further price falls, analysts said.

    "We are swinging back towards the upside, but trading lacks conviction, with prices hemmed in within narrow trading bands in most of the metals," said MF Global analyst Ed Meir.

    "A weaker dollar is supporting the complex, but a distinct lack of buying out of China, especially on the copper side, is keeping the upside potential in check," he added.

    At 12:50 p.m., London Metal Exchange copper for three-month delivery was trading at $8,219 per tonne against $8,130 per tonne at the close on Wednesday.

    Meanwhile zinc prices eased on profit-taking after the metal's rise earlier this week after Monday's devastating earthquake in southwest China.

    The grey metal climbed 7 percent in the first two days of this week amid fears supply of refined zinc could be disrupted by the quake. With little fresh news out of the region to fuel earlier worries over output, prices have eased.

    Zinc slipped to $2,280 per tonne against $2,285.

    Among other metals traded on the LME, lead rose to $2,270 per tonne, against $2,265 per tonne at the close Wednesday, while tin rose to $25,450, against $25,155.

    Aluminium was higher at $2,992 per tonne, against $2,941, and nickel climbed to $26,600 from $26,550.

    But while the majority of metals have managed to edge higher this morning as they consolidate after recent losses, the market could still be set for a fresh move lower, analysts said.

    "We are loathe to be long base metals in general at the moment as prices are elevated by speculative length and the prospects of ongoing production disruption," said UBS analyst John Reade. "Consumer demand is soft, based on our conversations with the trade."


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