Farallon Resources Ltd. (fka FRLIF)

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Zinc drops, Copper Fluctuates in London Trading on Stockpile Decline, Dollar Movement

By Anna Stablum - Aug 18, 2010 2:18 AM PT

Copper fluctuated in London as stockpiles of metal shrank further and a stronger dollar reduced the appeal of industrial metals as an alternative investment.

Copper inventories tracked by the London Metal Exchange fell for a fourth day, and orders to draw metal from stocks, or canceled warrants, rose more than 10 percent for a third straight day. The U.S. Dollar Index, which measures the currency’s strength against six monies, climbed as much as 0.3 percent before erasing the gain.

Movement in the dollar “is the main driver at the moment,” Steve Hardcastle, an analyst at Sucden Financial Ltd. in London, said by phone. A stronger U.S. currency makes dollar- priced metals more expensive in terms of other monies.

Copper for delivery in three months fell $7, or 0.1 percent, to $7,375 a metric ton at 10:10 a.m. on the LME. The contract rose as much as 0.4 percent and slid as much as 0.6 percent. Futures for December delivery were little changed at $3.357 a pound on the Comex in New York.

LME copper stockpiles dropped to 403,300 tons, the lowest level since Nov. 12, according to daily exchange figures. They are down 2.5 percent this month after sliding 8.3 percent in July, the most since June 2009. Stocks have fallen 20 percent this year, on course for the first annual drop since 2004.

Canceled warrants rose 13 percent to 30,950 tons. They have surged 51 percent this week, heading for the biggest jump in five months.

Tin Drops

Tin for three-month delivery on the LME fell 0.6 percent to $21,175 a ton. The contract reached $21,650 yesterday, the highest intraday price since Aug. 22, 2008. Inventories in LME- monitored warehouses dropped 0.1 percent to 14,050 tons today, of which almost a third is booked for delivery.

“Consumption is running reasonably well from the electronics industry, which is the main area,” Sucden’s Hardcastle said. “Tin looks like being still in short supply, exactly the same time as consumption is picking up.”

Tin production in Indonesia, the world’s largest exporter, may plunge about 20 percent this year because of bad weather, the energy ministry said on Aug. 11.

The backwardation, cash tin’s premium to the three-month contract, narrowed to $140 a ton yesterday from the prior session’s $165, according to LME data. It reached $200 a ton on Aug. 13, the widest level since Oct. 27.

Zinc fell 0.2 percent to $2,119 a ton. Smelters in China, the world’s biggest producer and consumer, may boost output next month as summer maintenance programs are completed, lifting utilization rates from the lowest level since March 2009, a researcher said.

A total of 41 smelters used 68 percent of their capacity in July to produce 282,000 tons, according to a survey by data provider Shanghai Metals Market. “The overall utilization rate should rebound after mid-August,” Zhu Yiman, an analyst at Shanghai Metals, said by phone today.

Aluminum dropped 0.6 percent to $2,129 a ton and nickel slipped 0.2 percent to $21,900 a ton. Lead advanced 0.2 percent to $2,133.75 a ton.

http://www.bloomberg.com/news/2010-08-18/copper-fluctuates-in-london-trading-on-stockpile-decline-dollar-movement.html