Weak dollar, supply woes boost industrial metals

Tag : lead,copper
United Kingdom - * Copper surges almost 4 percent to three-week high
* Lead jumps more than 8 percent on supply concerns
* Supply problems propel tin, zinc to three-week high

By Julie Crust and Humeyra Pamuk
LONDON, Aug 21 (Reuters) - Industrial metals powered to multi-weekhighs on Thursday, with copper rallying almost 4 percent to itshighest in three weeks as a lower dollar and rising oil spurredbuying across the metals complex.
Traders also cited potential supply disruptions and expectations ofannual output cuts pushed zinc and tin to three-week highs andnickel to a five-week high.
Copper for three-month delivery on the London Metal Exchange roseto as high as $7,800 a tonne, its highest since August 4. It was at$7,775/7,795 by 1423 GMT versus $7,510 on Wednesday.
Eugen Weinberg, at Commerzbank in Germany said the weak dollar haddriven metal prices higher.
"These commodity markets have become a new asset class, a newinvestment and they also behave like an investment -- which meansvolatility is much higher," he said.
Industrial metals have recently been hostage to moves in currencymarkets as a weak dollar makes dollar-denominated metals cheaperfor local currency holders.
The dollar fell across the board, pressured by persistent worriesover the U.S. financial sector that also sparked a broad flightfrom risky trades, pushing the Japanese yen sharply higher.
Oil prices rose more than $3 a barrel to over $119 as Washington'smissile shield deal with Poland angered Russia, adding tointernational tension.
"The mood for commodities appears slightly more bullish but tradingconditions are expected to remain volatile," said EvolutionSecurities in a research note.
Analysts say that on a technical basis, copper couuld rally toaround $8,000 per tonne, but slack demand from the world's biggestconsumer China casts a shadow over upside progress.
"The fundamentals look less rosy, with LME stocks still risingmodestly (despite a sharp climb in cancelled warrants), whilequestions about Chinese end-user demand still linger," Edward Meir,analyst at MF Global said in a research note.
Inventories in LME warehouses of the metal, used by theconstruction and power industries, increased 400 tonnes to 156,525tonnes, the highest level since Feb 11.

SUPPLY MATTERS
Tin rallied almost 6 percent to $21,670 after the world's biggestintegrated producer Indonesian PT Timah cut its output expectationfor this year and consultancy ITRI raised its forecast for the tinmarket deficit.
PT Timah said said it may not be able to produce 50,000 tonnes oftin this year as dry weather hampered operations.. The metal waslast at $21,700 versus $20,500/20,505 on Wednesday.
Zinc was boosted by supply side news too. Australia's Perilya Ltdsaid it will cut its zinc production by almost half in the face oflow metals prices and will wait for a rebound in the commoditiescycle before resuming full operations.
The metal was rose as high as quoted at $1,838.75 per tonne, itshighest since August 4 and was last at $1,825/1,845 fromWednesday's $1,750.
"We suspect that the gains in zinc could be short-livedbecause...they are unlikely to be enough to tighten the market inour view, especially given the size of the expected surplus."
Zinc production losses also boosted lead as most of the time bothare produced together. The metal, used mainly by battery makers,surged 8 perrcent to $1,880.
An increase in cancelled warrants -- material earmarked fordelivery -- in recent days has also supported sentiment. Thewarrants account for almost 20 percent of LME stock levels.
Aluminium was last quoted at $2,808/2,810 a tonne, up from $2,762while nickel, a key ingredient in stainless steel, jumped to a5-week high of $21,450 from $19,900, also on supply worries. MetalPrices at 1424 GMT Metal Last Change Percent Move End 2007 YtdPercent
move LME Cu 7775.00 265.00 +3.53 6670.00 16.57 SHFE Cu* 59350.00500.00 +0.85 56880.00 4.34 LME Alum 2808.00 46.00 +1.67 2403.0016.85 SHFE Alu* 18135.00 45.00 +0.25 18180.00 -0.25 COMEX Cu**351.00 10.00 +2.93 303.05 15.82 LME Zinc 1825.00 75.00 +4.292370.00 -23.00 SHFE Zinc* 14110.00 145.00 +1.04 18950.00 -25.54 LMENick 21300.00 1400.00 +7.04 26350.00 -19.17 LME Lead 1870.00 130.00+7.47 2550.00 -26.67 LME Tin 0.00 -18700.00 -100.00 16400.00-100.00 ** 1st contract month for COMEX copper * 3rd contact monthfor SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Reportingby Humeyra Pamuk; editing by David Evans) Copyright 2008 Reuters, Click for Restriction