Farallon Resources Ltd. (fka FRLIF)

[the cork]

Zinc falls, Copper Declines in London as Dollar Strengthens, China Inventories Expand
By Glenys Sim - Oct 18, 2010 1:11 AM PT

Copper declined along with other industrial metals as the dollar rose and high prices deterred purchases by Chinese users amid rising domestic stockpiles.

Futures for delivery in three months on the London Metal Exchange dropped as much as 1.2 percent to $8,297 a metric ton and traded at $8,300 at 4:05 p.m. in Singapore. Copper reached $8,490 a ton on Oct. 14, the highest level in 27 months.

“Metals trading will be driven by what happens to the dollar,” Xie Xiaoming, an analyst at Sheng Da Futures Co., said from Guangdong. “Rising domestic stockpiles are an indication that consumers are unwilling to buy at these high prices.”

The December-delivery contract on the Comex in New York fell as much as 1.6 percent to $3.779 a pound, before trading at $3.7805 a pound. Copper for January delivery in Shanghai lost as much as 1.5 percent to 62,960 yuan ($9,475) a ton.

Copper stockpiles tallied by the Shanghai Futures Exchange gained for a second week to a six-week high of 103,510 tons last week, according to data provided by the bourse. That’s the highest level since the week ended Sept. 3.

The metal, used in construction and household appliances, has risen 7.8 percent in the past month as the dollar lost 4.9 percent against a basket of six major currencies. The U.S. currency rose for a second day against the euro before a German report tomorrow that may show investor confidence fell to a 21- month low in October.

‘Positive Momentum’

“We don’t debate that the market has plenty of positive momentum,” HSBC Holdings Plc analysts led by Andrew Keen wrote in an Oct. 17 report. “But the problem from an investment viewpoint is that it is a consensus trade and we would argue that copper’s good prospects are already in the price of both the metal and the equities.”

HSBC expects copper to average $3.27 a pound, or $7,200 a ton in 2011. Prices in London have averaged $7,263.73 this year.

“We identify three downside risks to copper: demand destruction at $4 a pound, disruption rates that could already be double-counted in conservative production estimates, and that the starting balance in the copper market might not be the huge deficit that consensus appears to believe,” Keen wrote.

Zinc in London fell 1.6 percent to $2,383.75 a ton, lead lost 1.7 percent to $2,385 a ton and nickel dropped 2.7 percent to $23,410 a ton. Aluminum decreased 0.4 percent to $2,368 a ton and tin declined 2.2 percent to $26,150 a ton.

http://www.bloomberg.com/news/2010-10-18/copper-leads-decline-in-metals-as-dollar-rallies-china-inventories-grow.html