Shanghai copper up, but unwilling to chase LME

SINGAPORE, Sept 25 - London copper held around $8,000 a tonne on Monday while Shanghai futures rose 0.7 percent, but fears of slowing Chinese demand brought on by near-record prices were likely to cap Shanghai's gains. The Shanghai Futures Exchange December copper contract , the most active, rose 440 yuan to 67,930 yuan a tonne at midday. "Shanghai copper is reluctant to rally. Demand in China is drying up and end-users will not accept higher London Metal Exchange prices and they believe the rally should reverse," a dealer in Shanghai said. "The right price for copper is below $7,500, but I am a little afraid that during the Golden Week holiday next week LME will break to a new record high." Chinese markets will be shut all next week for the National Day holiday. Dealers noted spot copper prices in Shanghai were up 300 yuan a tonne, trading between 67,300 yuan and 67,500 yuan, and would firmly anchor futures. Copper futures for delivery in three months on the London Metal Exchange were $40 lower at $8,000. On Monday, prices hit $8,045, their highest since July 24, and $800 away from the May 2006 record high. "Shanghai Futures Exchange prices have not followed the LME higher," Sempra Metals economist John Kemp said in a note. " passivity while prices on the LME surge higher tends to confirm rumours swirling round the market that London prices are being driven higher by substantial hedge fund buying out of the United States." IMF WARNING Mining shares continued to rise with BHP Billiton up 3.3 percent in Australia after gaining over 5 percent in the previous session. Rio Tinto gained 2.9 percent after climbing by over 3 percent on Monday. Oil was at $80.41, around $3.50 off a contract high, while gold drifted from its recent 28-year peak. The euro held near a record high of $.1.4130 against the dollar set on Monday on fears that a deepening housing slump could rein in economic growth and prompt more cuts in U.S. interest rates. The International Monetary Fund said on Monday that turmoil in global credit and money markets will likely continue as investors worry about the size of financial losses and where they might arise. Concerns over supply remained supportive after unions at Southern Copper's Cuajone mine and Ilo smelter filed documents with the company and the government to go on strike on Oct. 2. Southern's Cuajone and Toquepala mines in Peru together produce 370,000 tonnes of copper annually, and the Ilo smelter 350,000 tonnes per year. Zinc was up $5 at $2,910. Zinc prices, which have bounced off a low of $2,680 touched earlier this month, were seen capped, said technical analyst Daryl Guppy of Guppytraders.com "The rally from the downtrend line faces strong long-term resistance around $3,120," he said. "There is a high probability of a retreat from resistance followed by a rally rebound and a second stronger test of resistance. This repeats the pattern seen in nickel." Nickel eased $100 to $33,000. Prices have jumped from around $25,000 in mid August. Metal Prices by 0345 GMT: Metal Last Change Pct Move End 2006 Pct chg 07 LME Cu 8000.00 -40.00 -0.50 6330.00 26.38 SHFE Cu* 67930.00 440.00 +0.65 60080.00 13.07 LME Alum 2413.00 4.00 +0.17 2805.00 -13.98 SHFE Alum* 19360.00 -10.00 -0.05 20550.00 -5.79 COMEX Cu** 362.70 0.00 +0.00 287.10 26.33 LME Zinc 2910.00 5.00 +0.17 4230.00 -31.21 SHFE Zinc* 26500.00 30.00 +0.11 28915.00 -8.35 LME Nickel 33000.00 -100.00 -0.30 33325.00 -0.98 LME Lead 3445.00 -10.00 -0.29 1670.00 106.29 LME Tin 15250.00 -150.00 -0.97 11510.00 32.49 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc SHFE zinc began trading on March 26, 2007