SHANGHAI, Jan 21 - Shanghai copper futures climbed 2.1 percent on Monday, tracking gains in London on Friday, but a sharp rise in Chinese production worried analysts.
The most active March contract rose 1,070 yuan to 52,400 yuan ($6,739) a tonne by the midday break on Monday.
A sharp fall in stocks of metal in warehouses monitored by the London Metal Exchange supported futures.
"The decreased copper stocks in London raised concerns that overseas funds could purchase metal," Cai Luoyi, an analyst at China International Futures in Shanghai.
On Friday, global LME stocks stood at 192,975 tonnes, down 5,275 tonnes or 2.5 percent.
However, Chinese refined copper production rose to 2.93 million tonnes in 2006 according to a Web site operated by the China Non-Ferrous Metals Industry Association, up 17.8 percent from 2005.
"That is a lot metal but it's not surprising. This is China's reaction to high prices and it's what people have been worrying about," Andrew Harrington, an analyst at ANZ, said.
"Combined with a slowdown in demand growth, this could be very painful for the market."
A weaker outlook for global growth has pushed copper prices down over 30 percent from a record $8,800 last May.
Spot copper prices in Shanghai were down 835 yuan, quoted between 55,250 yuan and 55,570 yuan.
Strong premiums in China's spot copper market are encouraging imports of metal, with traders rushing to land metal before the market is flooded and spot prices collapse.
December refined copper imports are estimated at about 95,000 tonnes, by far the highest monthly level in 2006, according to Reuters calculations based on preliminary customs figures.
Dealers are expecting imports to rise to around 110,000-120,000 tonnes in January.
London Metal Exchange copper futures for delivery in three months were lower at $5,590 a tonne at 0434 GMT, from $5,620 on Friday, when prices rose 1 percent after the fall in stocks and firmer crude oil prices .
Support for copper was seen at $5,500, while resistance was between $5,800 and $6,000.
LME nickel was $36,000, down from Friday's record high of $36,300 at the close.
Nickel supply remains tight, with total LME stocks at 5,128 tonnes. Available stocks were 4,410 tonnes.
"Right now any kind of supply threat will drive prices up while positive supply news doesn't register, for example the resolution of the Eramet strike," Harrington said.
Last week, a general strike that crippled production at Eramet's Doniambo smelter in New Caledonia and the mines that supply it with ore ended, but did little to cool prices.
The market has switched attention to progress to salvage a container ship which was beached off Devon on the southern English coast on Saturday.
The cargo of the 62,277 dead-weight tonne MSC Napoli, which carried 2,400 containers, includes 1,000 tonnes of nickel. Coastguards said the vessel has already lost nearly 160 containers.
In the short term, nickel prices were expected to remain high, dealers said, but continuing high prices would ultimately result in substitution of the metal for cheaper alternatives.
March Shanghai aluminium futures rose to 19,600 yuan from 19,420 yuan. LME aluminium lost $3 to $2,710.
Premiums for LME cash metal above the three-month price hit $120 on Monday, up from $30 at the start of 2006 and the highest since 1990. On Monday, the cash to three-month spread was $95/110.
In a note, Standard Bank London said the limited inflows of metal in LME warehouses, despite attractive premiums for cash metal, was a bullish sign.
"The amount delivered over the last week was in fact rather paltry and may be an indication that there may not be that much material available despite the perception that the aluminium market has not recently been as tight as some others such as nickel."
LME stocks have risen by aroun
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