Metals seek direction from copper, China weighs

LONDON (Reuters) - Metals looked to copper for leads on Thursday but the London Metal Exchange's (LME) benchmark contract remained mostly unmoved by jumps in other key prices.

Dwindling or low stocks would continue to support the market, analysts said, but uncertainty about demand in key metals consumer China weighed on overall sentiment.

"Unless the funds steam into copper again, it is going to be hard to get too bullish," analyst William Adams at BaseMetals.com said in a note.

At the start of the week, nickel hit a new high at $31,950 a tonne, lead touched a new contract high of $1,550, tin recorded a contract high of $11,000 and on Tuesday, zinc hit $4,040.

But copper remained within a narrow trading range between $7,850 and $7,450.

"So in the near term... all eyes will remain on copper to see whether it follows the other metals to new highs," Adams said.

Copper for delivery in three months traded at $7,615 per tonne in the open outcry trading session.

Copper was untraded in the previous session on Wednesday, quoted at $7,645/7,650.

Chinese annual gross domestic product growth slowed to 10.4 percent in the third quarter from 11.3 percent in the second quarter, in line with expectations.

The data would have little impact on prices, but it did cap general market sentiment, analyst Michael Widmer at Calyon said.

"You are entering a period of persistently very tight supply, but with demand growth decelerating," he said.

But UBS's Robin Bhar said in a note that the Chinese economy was responding to government measures to slow growth and this would create a more sustainable rate of expansion that "will underpin strong demand for metals and minerals going forward".

Zinc traded at $3,940, up 1.5 percent from $3,881.

On Tuesday, the metal hit an all-time high of $4,020.

Zinc stocks in LME-registered warehouses fell further to 123,975 tonnes, down by 1,700, their lowest since 1991.

ABN AMRO analyst Nick Moore, among others, said prices could see one last spike as low levels of metal inventories bite at markets that have proved slow to react to huge price rises.

"The dwindling inventories are being reflected in the pulse of the market and no one is going to short these markets when stocks are so low," Moore said.

Aluminium gained at $2,730 versus $2,715 on Wednesday, the highest close since May rising over 1.5 percent on a large turnover.

"We have to see aluminium close above $2,750, zinc at $4,040 and copper over $7,850 at the end of this week for the market to move higher," an LME trader said.

Analyst Bhar at UBS said a close today above $2,700 could be the catalyst for further gains as many of the ingredients look to be in place for a squeeze in the short term.

Tin, which surged 12 percent on Monday to a contract high of $11,000, ended at $9,700 on Wednesday.

Tin traded at $9,800 and lead rose to $1,500/1,502, versus $1,493.

Nickel strengthened at $31,300, up 1.1 percent or $340 from Wednesday's close.