Sharp fall of oil prices kept the base metals on the back foot

Tag : base metals
Three-month copper on the London Metal Exchange traded at $7,868 atonne at 0958 GMT, down from $7,945 at the close on Tuesday.
The metal, used in construction and power cables, earlier tradednear a 6-week low of $7,857 as LME stocks rose 1,225 tonnes to137,950.
Aluminium traded at $2,946 a tonne from $2,960. LME inventories ofthe metal -- used in transport, construction and power -- grew 725tonnes to 1.124 million tonnes, the highest since May 2004.
"The dollar has been stronger of late and clearly oil prices havetaken another sharp fall in the last few days and this essentiallyhas kept the base metals on the back foot," said Robin Bhar,analyst at Calyon investment bank.
"We are now testing key support where we would expect metals tohold. We should see reasonable consumer demand and some bargainhunting by funds," he added.
The dollar traded near a one-month high against the euro, while oilsteadied around $122 a barrel. European shares rose as strongresults from industrial firms and subdued oil prices took the edgeoff inflation worries.
"The good performance put on in the equities suggests sentiment inthe wider market is picking up a bit, but the base metals arehaving to struggle against the current of weaker oil prices and astronger dollar," said William Adams, analyst, BaseMetals.com.
"A secondary impact of more bullish equities and more confidencecoming back into the market could be that we see a pick-up in themetals as well," he said.
FALLING PRODUCTION
FTSE-100 miners Xstrata and Kazakhmys both reported a dip inproduction on Wednesday.
Xstrata posted a 1.1 percent fall in first-half mined copper outputand a 6.1 percent fall in mined nickel production. Meanwhile, theworld's tenth-biggest copper producer Kazakhmys reported a 1.4percent year-on-year fall in second-quarter copper cathodeproduction.
In China, security controls on explosives ahead of the Olympics andongoing crackdowns on small mines, are starting to tighten supplyof lead and zinc concentrate in the country, traders and analystssaid on Wednesday.
Lead fell 3.7 percent to $2,185 a tonne from $2,270 onprofit-taking, with a rise in LME stocks also dampening sentiment.Zinc traded at $1,853 a tonne from $1,870.
Nickel dipped close to a 2-year low, before recovering to trade at$18,300 a tonne, from $18,050. The metal has lost about 30 percentof its value this year due to concerns about waning demand fromstainless steel producers.
Calyon's Bhar said he expected buying to emerge near current levelswith prices below $20,000 a tonne, a level that could triggerproduction cutbacks.
Tin traded at $22,370 a tonne from $22,360/22,380.