"According to fundamentals zinc prices should be above $1,040/MT, but prices went down on the back of copper," said a trader for a French trade house.

Copper prices took a sharp dip early Wednesday, after a single trade house sold heavily into a rally above $1,700/MT Tuesday. (LME three-months official price in dollars a metric ton with previous official close in parentheses. Nymex copper at 1330 GMT in cents a pound, with previous close in parentheses.)

Copper 1,678.50 (1,703.50) Zinc 1,027.25 (1,038.50) Aluminum 1,331.25 (1,337.50) Tin 6,022.50 (6,045.50) Nickel 4,602.50 (4,647.50) Lead 543.50 (543.50) Nymex Jul Copper 76.10 (76.35)

"Whenever we go above $1,700 one trade house pushes copper prices right down. It is so annoying," said a trader from aFrench brokerage.

Zinc prices continued to slide in the rings to a low of $1,030/MT, after opening lower in pre-market trading Wednesday on follow-through fund selling.

Zinc is the only base metal market which has seen a substantial decline in LME warehouse stocks over the past week. A drawdown of 2,375 tons brought total stocks down to 422,550 tons, Wednesday. Canceled warrants are at a high 33,850 tons, up from 16,000 tons last week, suggesting that further withdrawals can be expected in the near future.

Traders shrugged off suggestions that copper prices were sensitive to the yen-dollar exchange rate.

"Trade has been light recently and we saw very little Japanese trade," said a copper trader for a North-American brokerage.

Asia inventories up 4.2 per cent, Africa up 7.7 per cent.

World aluminum inventories at the end of April stood at 3.193 million metric tons, up 0.56 per cent from 3.175 million tons in March, according to data released Wednesday by the International Primary AluminumInstitute.

A drop in North American inventories was offset by increased levels of stocks around the world.

The most significant increase was recorded in Africa. Inventories rose 7.7 per cent to 70 million tons from 65 million tons. Asian inventories rose by 4.2 per cent to 190 million tons and Latin American inventories rose by 1.8 per cent to 169 million tons.

In Europe, stocks increased by 1.5 per cent to 1.180 million tons.

Inventories in North America fell by 1.4 per cent to 1.418 million tons.

Australia's AME minerals says CIS output pressures aluminum

Aluminum prices are currently at an 18-month low and are unlikely to recover in the months ahead given steady production and a significant reduction in demand, AME Mineral Economics Pty. Ltd. said its its monthly May report.AME Mineral Economics is a research and consultancy firm based in Sydney.

Steady production and exports especially from the Commonwealth Of Independent States, is seen as a major factor pressuring aluminumprices."There are few signs that production and exports from the CIS will be reduced substantially in the near to medium term," the report said.

CIS aluminum exports in 1997 were at 2.7 million metric tons. With imports negligible and domestic consumption in 1997 at 520,000 metric tons, this indicates 85% utilization of its 3.7 million tons per year smelting capacity.

It would require CIS domestic consumption to rise to levels of six years ago, for exports to be reduced. "This would require a very significant turnaround in the CIS economies, which is certainly not apparent now." CIS consumption stood at around 1.352 million tons in 1992.

CIS production of aluminum registered 1.1 million tons during the first four months of 1998. At an annualized rate, CIS is expected to produce 3.27 million metric tons, very similar to 1997 production.

Aluminum stocks in the London Metal Exchange warehouses have been on the decline for 18 months but "it remains a matter (of) conjecture as to whether declining LMEstocks are indicative of market activity at this time," AME said.

As at June 9, LME aluminum stocks stood at 546,150 metric tons, down from 950,000 tons as at the end of 1996.

China Copper Futures End Dn On Regional Woes, LME Forecasts

Copper futures on the Shanghai and Shenzhen metals exchanges ended sharply lower Wednesday, hit by pessimism on the domestic market and sharp falls in regional financial markets, traders and analysts said.

The benchmark Shanghai September futures slid CNY220 ($1=CNY8.28) to CNY16,400/metric ton on trading of 80,680 tons.

"Traders here are shell shocked," a Shenzhen-based trader with a major Chinese firm said. "They are so bearish about the market that any movement in the LME indicating another slide spurs a rush of short positions, and falling stock markets and currencies around Asia just add to the pessimism."

Early gains in LME copper futures trading Tuesday were followed by falls in the afternoon session, giving traders reason to believe that the LMEthree-month, having failed to cross a key resistance level, is on the way down, he said.

Producers and speculators have been watching the London Metal Exchange copper futures closely for signs of market direction, the Shenzhen trader said. Technical factors on the LME futures show the market heading for another spill, he said.

Longs liquidated while shorts added positions Wednesday, traders said.

A weaker Japanese yen, which fell past Y141 against the U.S. dollar Wednesday, and plunges in equity markets across the region added to bearish sentiment on copper, traders said.

The Hong Kong Hang Seng Index fell 412.09 points to 7979.37, a three-year low.

(Closing prices in yuan per five-metric-ton lot versus LME late kerb prices from Wednesday in dollars per metric ton.)

Copper Change Aluminum Change Shang Sep 16,400 Dn 220 Sep 13,650 Dn 100 Shenz Sep 16,410 Dn 200 Jun 13,550 Unch LME 3Mo $1,696 Up $4 3Mo $1,336 Dn $10 ($1=8.28 yuan.)