METALS-Copper up as buyers bet on rally next year

* Chinese buying interest pushes prices up * Arbitrage opens, likely to boost China's copper imports By Rujun Shen and Edmund Klamann SHANGHAI, Dec 21 (Reuters) - London copper prices rose more than 1 percent on Monday, as investors optimistic about next year's market prospects built positions ahead of the year end. The arbitrage window between Shanghai and London has opened, at around 400 yuan in favour of imports, lifting hopes that China's imports may rise from levels seen in the past month or two, adding to already bullish sentiment in the market. [ID:nSGE5BK00R] "Chinese are buying with expectations of better prices next year, as traders elsewhere are closing their positions ahead of the holidays," said a Shanghai-based trader. The dollar slipped against the euro on Monday but still hovered near its highest point in more than 3 months as currency players anticipated more short-covering in the greenback in a week shortened by a holiday. [USD/] "If you look at the factors behind the strength in the dollar -- an improved outlook on the U.S. economy, anticipation of interest rates hike and inflation -- these factors actually brighten copper's prospects," said Zhu Bin, an analyst at Nanhua Futures. "The strong dollar therefore isn't necessarily a blow to metals. The overall sentiment in financial markets is quite good." Three-month copper on the London Metal Exchange MCU3 rose $80, or 1.2 percent, to $6,925 a tonne by 0701 GMT, extending a one-percent rise last week. Shanghai's benchmark third-month copper futures contract SCFc3 shook off early losses to end at 55,700 yuan a tonne, up 0.4 percent. After a spectacular rally this year, copper prices may become very volatile in 2010, Zhu warned. "The current supply-demand conditions don't support a strong rally. Prices will be subject to fluctuations in market sentiment, which might manifest as huge volatility," he said. On the price chart of LME copper, the 10-day moving average at $6,910.35 has been moving downward and is likely to soon cross below the 30-day moving average, currently at $6,849.35, signaling technical pressure on copper prices. Shanghai aluminium SAFc3 edged down 0.2 percent to 16,275 yuan a tonne, and LME aluminium MAL3 gained $3 to $2,245 a tonne. Aluminium prices have been on a steady ascent, up more than 10 percent since late November, despite record high stockpiles. LME aluminium stocks hit a record high above 4.6 million tonnes on Friday. Consumers betting on lower aluminium prices could be disappointed next year, because most of the financing deals that have locked up as much as 70 percent of the stockpiles are likely to be renewed, keeping material out of an oversupplied market. [ID:nGEE5BA277] Despite the evident oversupply in the market, state-run Saudi Arabian Mining Co (Maaden) 1211.SE and U.S. aluminium giant Alcoa (AA.N: Quote, Profile, Research) plan to build a $10.8 billion aluminium complex, aiming at launching production in 2013. [ID:nLDE5BJ0A6] Nickel MNI3 also rose, up 1 percent at $17,290 a tonne, underpinned by an announcement that Russia will reinstate a 5 percent export tarrif on the metal, waived early this year to help Russian producers. [ID:nLDE5BK05G] Base metals prices at 0701 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 6925.00 80.00 +1.17 3060.00 126.31 SHFE Cu* 55700.00 200.00 +0.36 23840.00 133.64 LME Alum 2245.00 3.00 +0.13 1535.00 46.25 SHFE Alum* 16275.00 -35.00 -0.21 11540.00 41.03 COMEX Cu** 312.10 0.00 +0.00 139.50 123.73 LME Zinc 2435.00 30.00 +1.25 1208.00 101.57 SHFE Zinc 19305.00 185.00 +0.97 10120.00 90.76 LME Nickel 17290.00 160.00 +0.93 11700.00 47.78 LME Lead 2340.00 20.00 +0.86 999.00 134.23 LME Tin 15805.00 5.00 +0.03 10700.00 47.71 LME/Shanghai arb^ -380 Dollar/yuan 6.8277 6.8284 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month (Editing by Michael Urquhart)