Shanghai copper up 1.4 percent as commodities rise

SINGAPORE, Feb 1 - Shanghai copper futures rose 1.4 percent on Thursday, supported by strong domestic demand for prompt metal and firmer international commodity markets.

The most active April contract was up 720 yuan at 53,190 yuan ($6,842) a tonne at midday on Thursday.

"Copper futures in Shanghai are firm on high prices for cash metal compared with London prices," said Huang Shoufeng at Jinrui Futures in Shenzhen.

Shanghai spot copper prices were up 400 yuan at 55,550 to 55,700 yuan, a premium of 2,360 yuan ($303.6) from the April contract, versus a discount for cash metal on the London Metal Exchange of $41 to the three-month benchmark future.

Copper for delivery in three months on the LME was up $15 at $5,750 a tonne by 0409 GMT after climbing 1.7 percent on Wednesday.

"From where prices are today, I am not particularly bearish," said Adam Rowley, analyst at Macquarie Bank.

"We have gone from a chronically under-supplied market to one closer to balance. We see a surplus around 200,000 tonnes in 2007."

He added that economic growth was likely to pick up in the second half of 2007, and with it, demand.

However ABN AMRO analyst Nick Moore expected prices to fall through 2007 as copper producers ramp up production at new projects, expansions and restarts around the world.

"Copper with a 5 in front of the price may be attractive for restocking in the first half of 2007, but it will have to start with 4 to be attractive come the second half," Moore said.

Commodity markets rebounded on Wednesday, with gold touching its highest since early August, oil up over $1 a barrel to above $58 and gains in copper, nickel and zinc .

"Commodities got a real pull from crude on Wednesday," Man Financial analyst Edward Meir said.

The Reuters/Jefferies CRB Index of 19 commodity futures rose almost 1 percent to close at its highest level in 4-6 weeks to end unofficially at 301.22.

Nickel was down $550 at $36,450 a tonne as an agreement was reached in labour negotiations at the Sudbury, Ontario nickel operations owned by Anglo-Swiss company Xstrata

The Canadian Auto Workers union said it had reached an agreement just ahead of the midnight strike deadline.

Nickel hit a record $38,950 last Friday, up 16 percent from the start of the year and around three times higher than at the end of 2005.

Stocks in LME warehouses were down 306 tonnes at 3,972, of which 1,542 tonnes are earmarked for delivery, leaving 2,430 tonnes to support the 1.4 million tonne-per-year market.

Stocks are nearing levels last seen in October 2006, when they fell to 3,930 tonnes, their lowest since 1991.

The most traded April Shanghai aluminium futures contract rose to 19,450 yuan from 19,340 yuan, while LME aluminium edged down $3 at $2,727.

Dealers said a 50 percent hike in alumina prices by China's Chalco was not enough to support prices. [nHKG260937]

 "The increase in alumina prices of 1,200 yuan is insufficient to give much support to aluminium futures, as it comes from a very low base," Li Rong, analyst at Great Wall
Futures in Shanghai, said.

 Base metals prices at 0409 GMT
 Metal             Last     Net Change    Pct Move
 LME Cu         5750.00         15.00       +0.26
 SHFE Cu*      53190.00        720.00       +1.37
 LME Alum       2727.00         -3.00       -0.11
 SHFE Alu*     19450.00        110.