SINGAPORE, Jan 26 - Shanghai copper futures closed lower after early gains on Friday, but prices are seen remaining firm, supported by strong economic data from China and a positive technical outlook for London futures.
The most active April contract in Shanghai lost 450 yuan to 53,400 yuan ($6,874) a tonne by the close on Friday, after rising as high as 54,800 yuan.
"The copper price is expected to rise after the Lunar New Year on rising demand. Even before the national holidays, prices should be steady," said Qu Yu, a senior market manager at Jiangsu-based Baosheng Cable, China's largest copper cable maker.
Chinese manufacturing will slow in mid-February for week-long Lunar New Year holidays, starting on Feb. 19.
Copper for delivery in three months on the LME was $15 lower at $5,835 a tonne at 0800 GMT. Copper rallied 2.4 percent on Thursday.
"I think we will go higher." a trade source in London said.
"Looking at the charts, copper is finding a base at $5,500. and a rise of $1,000 from there could be expected. Rises beyond there are possible but will depend on growth in the U.S. economy and on production, which may fall short of expectations."
Copper markets remain finely tuned to threats to supply, despite stocks doubling in London Metal Exchange warehouses to just above 200,000 tonnes over the past 12 months.
A senior executive at Yunnan Copper Co. Ltd. said on Friday that the company had suffered from lower electricity supplies in the province, but added that production had not been affected.
Elsewhere in China, Baiyin Nonferrous Metals (Group) Co. Ltd., will close its 80,000-tonne-a-year smelter on Feb. 10 and the refining system a week later for annual maintenance, a source said. The smelter was scheduled to reopen on March 25.
ECONOMIC GROWTH
China's gross domestic product grew by 10.7 percent in 2006, versus 10.4 percent in the previous year, supporting a positive outlook for base metals. [ID:nPEK112699]
China's copper imports rose 59.4 percent year-on-year in December to 95,831 tonnes, suggesting Chinese consumers were restocking after running down inventories through most of 2006.
"With rumblings that Chinese fabricators are short of stocks and with imports rising, the picture indeed looks rosy for copper," Standard Bank London said in note.
"We see copper imports rising, and this data underlines this view with the possibility that this latest wave of buying may be in anticipation of future demand."
The most traded April Shanghai aluminium futures contract slipped to 19,410 yuan from 19,560 yuan. LME aluminium gained $11 to $2,803.
From a technical perspective, aluminium was nearing a band of resistance above $2,845, and analysts said a break above $2,872 could herald a move back above $3,000.
"Renewed aluminium strength beyond $2,872 indicates a break out of the current consolidation phase, turning the outlook positive, yielding a move to $3,100," Standard Bank said.
"However, the breakout may well provide the catalyst for a re-test of the $3,300 high, so great importance is placed on $2,872."
Nickel for delivery in three months on the LME was at $38,150 a tonne, up $5 from Thursday, when nickel soared to a record for the seventh session in a row, touching $38,798.
The cash to three-months spread has doubled to a $3,250/3,330 backwardation in the past week, moving towards August's peak of $5,250, when the LME intervened to set daily backwardation limits in order to maintain an orderly market.
"Prices are unsustainable at these levels, but they keep ticking higher. Each pullback is met with buying and it just goes higher. Where the top is no one knows, but people are starting to talk about it at $50,000 a tonne." an LME dealer said.
Stocks in LME warehouses fell 66 tonnes to 4,950, of which
2,250 tonnes are earmarked for
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