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Base metals eased lower in premarket trade Tuesday as investors were cautious as the second quarter got underway and the new fiscal year began. Strength in financial marketd and renewed vigor in the dollar appeared to push investors away from commodities. One trader contacted by Platts said: "Investors appear to be rebalancing and adjusting positions as the new financial year gets going. The volume is moderate in premarket trade. We might see some weaker longs and short-term longs shaken out." The London-based trader added that "prices could go lower in the first half of the week with prices building towards the week's end. I expect to see some consolidation in both aluminium and copper." The trade noted that the underlying fundamentals in both complex heavyweights were solid and underpinned support for the base metals in the long term. However, copper was bid down $145 at $8,245/mt on a three-months basis at 1010 GMT, having closed Monday at $8,390/mt.

"Copper prices are pressured down by increased profit-taking activity ... supply in China remains plentiful and prices are under pressure," said one Chinese trader. However, London-based investment bank Fairfax said in its daily research note: "LME inventory levels fall to just 3.5 days of global consumption. Copper prices should remain relatively high on this basis alone while further funding of commodity futures could pull prices higher." It added that "market participants are concerned about slowing US growth impacting copper demand, however, the US is expected to account for 11% of world refined copper consumption versus China at 28% and rising." The bank is more concerned with a downturn in Japanese business sentiment which faltered to a four-year low according to a Tankan quarterly survey. Aluminuim eased $50 at 1010 GMT to $2,935/mt. Fairfax said, "news that a prominent bank in South Africa has recommended the closure of a BHP aluminium smelter may underpin prices."

The trader was less supportive of zinc and lead. Zinc dipped $45 to $2,275/mt while lead dropped $25 to settle at $2,756. "Zinc giving up $2,600 is very, very poor, while lead below $2,900 is shaky," said the trader. Zinc in particular has been plagued by oversupply concerns. Tin was once again a stand-out feature, although down $325 in premarket trade the metal still traded above $20,000/mt, at $20,175. As such, Indonesian tin major PT Timah posted net profit of Rupiah 1.78 trillion ($191.86 billion), up 757% from 2006. Timah attributed the higher net profit to better performance and higher global tin prices that were supported by a more favorable situation in the national tin industry. The trader said: "Tin still looks good, but it is a funny market. If you have a big position you need a good entry/exit strategy." Nickel was indicated at $29,450/mt, off $450, standard alloy was down $20 at $2,750/mt and North American alloy eased $15 to $2,775/mt. This commentary was first published in Platts Metals Alert. If you have any feedback about this commentary or want to find out more about Platts Metals products and services, please contact webeditor@platts.com.
Updated: April 1, 2008

This content first appears in Platts Metals Alert. Platts Metals Alert is the metal industry's leading real-time data feed service. It provides continuous breaking Metals news from the editors of Platts Metals Week, a long-term global team of metals specialists dedicated exclusively to metals reporting, 24-hours-a-day.

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