London 27/07/2011 - Base metals remained steady but off earlier peaks in Wednesday mid-morning LME trading, with dollar softness offsetting macroeconomic worries as the US debt ceiling saga drags on. Copper hit an eight-day high of $9,859.75 earlier before settling lower. It was last down $24.75 at $9,795.25. The red metal has been supported by a dispute at BHP Billiton’s giant Escondida mine in Chile, with industrial action - originally scheduled to last 24 hours - now entering its fifth day. The mine produced 1.087 million tonnes of copper in 2010. Talks between the Chilean Government and workers are due to commence today. Overall, the macroeconomic and fundamental outlook remains choppy and could prompt a pullback in base metals prices, analysts said. “The charts and specific situations such as the strike in Chile, power shortages in China and the tightness in aluminium are helping to support prices, as indeed is the weaker dollar,” analyst William Adams of FastMarkets said. “But the broader economic and financial situations suggest that demand may get weaker before it strengthens again.” The stand-off between US lawmakers over the lifting of the country’s $14.3 trillion debt ceiling - less than week remains before the August 2 deadline, after which the country will run out of money to pay its bills - has taken its toll on the dollar. The US currency fell to a new low against the euro since June 5 at 1.4535 before clawing back some ground - it was last around parity at 1.45. On the data front, German CPI and US durable goods numbers are the only notable releases due for today. COPPER TO SURPASS $10,000/T AS MARKET DEFICIT RISES, ANALYSTS SAY Production problems and expected demand increases - particularly in China - should tighten the copper market and push the metal towards fresh record highs, analysts said. “Supply disruptions and losses - not just at major mines - coupled with robust physical demand points to a widening deficit in the refined copper market,” broker Credit Suisse said. “Although it may take a few attempts to break the $10,000 mark, we expect copper prices to move above that level later in the year.” Copper’s current all-time high stands at $10,190, which it hit in mid-February. Today’s stocks report for the six primary metals was patchy, however, underlining doubts over the fundamental outlook for the complex. Copper stocks rose a net 700 tonnes to 469,800 tonnes, while cancelled warrants - the material booked for removal - fell 1,225 tonnes to 17,250 tonnes. Aluminium inventories dropped 7,625 tonnes to 4,369,000 tonnes, although cancelled warrants receded by 6,450 tonnes to 393,800 tonnes. The metal struck a six-week high of $2,675.25 earlier before settling lower - it was last at $2,660.25, still up $8.25 on the day. Zinc registered a chunky 2,350-tonne inflow today due to large movements into Port Klang, with total stocks now standing at 890,225 tonnes. Cancelled warrants also fell 775 tonnes to 106,775 tonnes. The metal was last at $2,518.50, down $8.50 - it had risen to its highest since April 11 at $2,539.50 this morning. Nickel gained $85 to $24,185. Stocks advanced 510 tonnes today to 102,996 tonnes and cancelled warrants dropped 54 tonnes to 4,206 tonnes. Tin, which had edged to its highest since May 16 at $28,900 this morning, was last $225 higher at $28,700. Lead rose $9 to $2,729. Steel billet was quoted at $585/600 versus $587/600 at Tuesday’s close. Stocks increased a net 2,080 tonnes or 5.7 percent overnight to 38,870 tonnes due to heavy shipments into Detroit. Cobalt was indicated $1,050 lower at $34,000/35,300, while molybdenum shed $200 to $32,300/34,000.

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