LONDON (Reuters) - Copper prices slipped on Wednesday as a rise in stocks reignited worries about a surplus this year, while tin prices fell on expectations of rising supplies and nickel was hit by profit taking, traders said.
Three-month copper on the London Metal Exchange was untraded in official rings, but was quoted down at $5,380/5,381 a tonne from Tuesday's $5,475 close.
Copper prices are down around 15 percent since the beginning of the year on expectations that demand would slow alongside global economic growth, with the market moving into a surplus of around 200,000 tonnes.
Prices are down nearly 40 percent since copper hit a record high of $8,800 last May.
"The second half of 2005 and the first half of 2006 in particular was a period of very strong, synchronised world growth," said David Thurtell, analyst at BNP Paribas.
"That is not going to happen this year. Chances of supply disruptions are lower and there is an expansion of capacity."
Stocks of copper in LME warehouses rose 3,175 tonnes to 215,750 tonnes on Wednesday. They have doubled in the past 12 months and are about eight times higher than in July 2005.
Copper fell to 10-month lows of $5,250 last Friday after the Wall Street Journal reported $1.5 billion hedge fund Red Kite had lost 20 percent and wanted to extend the redemption notice period for investors to 45 days from 15.
Traders said the sell-off was triggered by worries that Red Kite would have to sell its holdings of copper and other metals to meet redemptions.
SUBSTITUTION
Aluminium traded at $2,655 a tonne from $2,712. Earlier it hit $2,639.75, matching the January 17 low.
Market focus had been on the maturity of options to buy and sell three-month aluminium futures at between $2,750 and $2,800.
Traders said offers at $2,710 had kept a lid on prices and the expiry had passed without any fireworks.
"It failed to get through $2,710 and we saw a sell-off after that," a LME trader said. "It then broke through support at $2,690 and hasn't looked back since."
Aluminium trading has been lacklustre in recent days and dealers expect fund selling will cap prices over coming days.
"Funds are betting that the aluminium surplus in China find its way to other countries," the trader said.
Nickel was bid at $35,350 from $35,800 on Tuesday.
Stocks at around 3,000 tonnes, the lowest since 1991, and expectations of continuing strong demand pushed nickel prices up to a record high of $38,950 on January 26.
Since then profit-taking and talk of substitution in the steel industry has sobered up the market.
"The issue of nickel substitution by stainless steel mills which comprise the major end-user demand sector for nickel is a key factor for future price direction," Barclays Capital said in a research note.
Tin was untraded, but bid lower at $11,775 a tonne from $11,925.
Sentiment was weighed by news that Indonesia, the world's second-largest tin producer, had allowed five small smelters to resume refined tin production after a recent crackdown on unregulated mining.
Shares in London-listed BHP Billiton were up more than four percent after the company posted a 41 percent jump in first-half profits and set aside $10 billion for share buybacks.
Zinc traded down at $3,120 from $3,220 on Tuesday and lead at $1,550 from $1,570.