LME nickel hits new high, copper falls

Nickel hit a new high on the London Metal Exchange on Wednesday but drifted lower later in the day, along with other base metals on profit-taking ahead of today’s U.S. Federal Reserve meeting, traders and analysts said.

Nickel for delivery in three months, which has risen by some 53 percent this year, touched a new all-time high of $51,800 on Wednesday.

“The consistent uptrend in nickel — or any other base metals for that matter — is because of the steadily decelerating warehouse stocks,” analyst Pradeep Unni at Vision Commodities told Reuters.

LME nickel stocks fell by 174 tonnes to 4,458, with only 3,270 available to the market — less than a day of global consumption.

Further delays at European Nickel’s flagship Caldag project also underpinned prices. [ID:nL09317451]

By the end of the official session nickel, a key ingredient in stainless steel, fell back to $49,295/49,300 against the close of $51,200 on Tuesday.

FED EYED

Copper for three-months delivery lost $145 or 1.8 percent and ended the official session at $8,020. The metal has risen around 30 percent this year and hit $8,335 last week, its highest in almost a year.

“The uptrend remains but it looks as if prices will come off a bit as people step aside and some take home profits ahead of the Fed’s meeting,” an LME floor trader said.

Most-active copper for July delivery on the New York Mercantile Exchange’s COMEX division finished with 4.35-cents losses at $3.6790 a lb. in technical selling. It slipped earlier to a one-week low at $3.63 a lb.

After the copper markets closed, the Federal Reserve reported that it held its key interest rate target steady at 5.25 percent for a seventh straight meeting and again said its main worry is that inflation will fail to moderate.

Analysts said the Fed’s communique was seen as constructive to base metals markets, because the focus remained on inflation instead of slower growth, suggesting demand for base metals would likely stay strong going forward.

“Inflation is still a concern. The Fed is going to have to make sure inflation is in control before they lower rates,” said Bob Moulton, president of Americana Mortgage Group.

While the Fed said growth slowed in the first quarter, it still looks for a pick-up in economic activity in the second half of 2007.

“Although the Fed has acknowledged the fact that the first quarter’s growth has slowed, the language remains the same as the previous March 21 statement, which emphasizes the inflation risks. In my mind, there is not even a baby step taken toward the direction of cutting rates,” said Ken Mayland, president of Clearview Economics.

Oil fell after a hefty rise in crude stocks in top consumer the United States.

“Crude oil is drifting and that is taking all the commodities down with it,” analyst John Kemp at Sempra Metals said.

French cable group Nexans , the world’s biggest private buyer of copper, said on Wednesday it expected the nonferrous metal’s price to remain firm over the next two to three years, driven by strong industrial demand. [ID:nL09726605]

Zinc, which gained almost 15 percent last week shed $70 to $4,060, while aluminium fell $10 to $2,885 after touching a one-month high of $2,927 earlier.

Dealers appeared unmoved by a takeover bid by the world’s largest producer, Alcoa , for smaller rival Alcan but the bid has fuelled talk of more mergers.

“No doubt that consolidation will continue — most firms have a lot of money,” Swedish miner Boliden’s CEO and president Jan Johansson said. [ID:nL08649776]

Speculation on the world’s second-biggest mining company, Rio Tinto could be swallowed up by larger rival BHP Billiton spurred London-listed mining shares between 2-5.5 percent.

Information from: Reuters via yahoo News