LONDON, Oct 23 (Reuters) - Industrial metals recovered from intra-day lows on Thursday as the oil price rose and a rally on the U.S. stock market helped brighten investor mood, although worries about the global economic outlook remained.
U.S. stocks rebounded over 3 percent, while European equities recouped some of their earlier losses, although mining shares such as BHP Billiton (nyse: BBL - news - people ) and Rio Tinto fell 5-6 percent.
Copper for three-months delivery on the London Metal Exchange fell to $3,815 per tonne, its lowest since October 2005, before rising to $4,074, compared with $4,160 at the close on Wednesday.
Higher oil also helped sentiment. Crude bounced back after a 7.5 percent fall on Wednesday as investors focused on expectations oil cartel OPEC will opt to cut output at its emergency meeting on Friday.
But analysts were wary of the long-term sustainability of any rise in metals prices.
"The single most dominant factor responsible for the very negative sentiment in base metals has been concerns on the macro economic view as well as the recessionary environment we are facing," Sudakshina Unnikrishnan, a commodity analyst at London's Barclays (nyse: BCS - news - people ) Capital, said.
"There is actually no good news coming in at all -- most metals are trading at or below marginal cost of production across the board."
Copper is down more than 50 percent from its record high of $8,940 per tonne hit in early July while nickel is down more than 80 percent since a record of $51,800 per tonne in May 2007.
Several analysts and traders expected more falls in the short term.
"Further short-term downside in copper - indeed in all industrial metals - looks likely in the short term," analyst John Reade at UBS (nyse: UBS - news - people ) said. "Especially if deleveraging and disinvestment continues to hit growth assets and help the dollar."
The dollar hit a new two-year high against the euro as worries over the outlook for the global economy sparked a flight to safety among investors.
COPPER TIGHTNESS EASES
Once one of the tightest markets, the backwardation for copper -- premium for cash material over three months --- has fallen sharply from $240 per tonne in July to a small contango this week.
Inventories have doubled since May and currently are around 209,000 tonnes -- close to their highest since February 2007. But LME data shows that more than 90 percent of the stocks on warrant are held by a single dominant market player.
However, some analysts and traders said the sell-off was overdone and saw room for brief spikes in prices on bargain hunting.
"The world is just trying to get to grips with what is going on," one LME trader said. On the recent metals sell-off he added: "It's just a complete way of releasing capital to pay for equity losses...there's a lot more to come because there are cracks being papered over."
Nickel tumbled 10 percent to $9,000 and was last at $9,448 per tonne from $10,000 on Wednesday.
Among other LME metals, aluminium rose $3 to $2,005 a tonne after falling to $1,958 -- its lowest point since November 2005.
Lead fell 8.7 percent to $1,150 a tonne, its lowest since August 2006, before bouncing to $1,276 versus $1,260/1,261 on Wednesday. Zinc rose to $1,185 a tonne from $1,140 on Wednesday, and traders cited short trading.
Tin slipped to $10,799 a tonne, its weakest since January 2007, before recovering to $11,674 versus $11,550 on Wednesday.
Base metals prices at 1516 GMT Metal Last Change Percent Move End 2007 Ytd Percent
move LME Cu 4040.00 -120.00 -2.88 6670.00 -39.43 SHFE Cu* 33900.00 -2170.00 -6.02 56880.00 -40.40 LME Alum 1995.00 -7.00 -0.35 2403.00 -16.98 SHFE Alu* 13915.00 215.00 +1.57 18180.00 -23.46 COMEX Cu** 176.95 -8.15 -4.40 303.05 -41.61 LME Zinc 1180.00 40.00 +3.51 2370.00 -50.21 SHFE Zinc* 9210.00 -590.00 -6.02 18950.00 -51.40 LME Nick 9350.00 -650.00 -6.50 26350.00 -64.52 LME Lead 1275.00 -95.00 -6.93 2550.00 -50.00 LME Tin 11400.00 -150.00 -1.30 16400.00 -30.49 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Reporting by Michael Taylor; editing by Sue Thomas)
