Shanghai copper drifts, LME readying for rally

SINGAPORE, Sept 27 - Copper prices in Shanghai and London were little changed on Thursday, but the market may be gearing up for a sharp move higher next week when Chinese markets are closed for National Day holidays. ADVERTISEMENT The Shanghai Futures Exchange December copper contract , the most active, ticked down 110 yuan to 67,300 yuan a tonne at midday, while spot copper prices in Shanghai were down 475 yuan a tonne, trading between 66,800 and 67,000 yuan. "I believe the copper stocks will keep falling this week ahead of the upcoming week-long national holiday. Whoever needs to use copper during the holiday has to get enough stocks before the market closes," a dealer in Shanghai said. Copper for delivery in three months on the London Metal Exchange was up $30 at $7,970 at 0410 GMT. LME copper stocks fell 325 tonnes at 130,950 on Wednesday. Inventories have fallen about 6 percent this month and if weekly Shanghai copper stocks data on Friday show a significant fall, that could galvanise LME investors to push copper above the May 2006 record high of $8,800 during the Chinese holiday. Dealers said stocks in Shanghai were expected to fall in the region of 7,500 tonnes. "I think copper is going to have crack at the highs next week. Someone is trying to rev it up and there are a couple of factors that are helping," a dealer in Sydney said. "People had been short and were forced to cover which got things heading higher and although subprime problems initially disrupted plans, the Fed rate cut has helped things further along." Dealers also said a dominant position in London futures had developed, paving the way for further gains. Latest data from the exchange for Sept. 24 showed that one party held over 90 percent of the cash and Tom/Next positions, Standard Bank noted. "This may provide a degree of support to the market," Standard said, adding that copper looked to be positioning itself for a short-term move higher. On the supply side, concerns have faded into the background. "The strike news is a little quieter -- rumblings now rather than than roaring, which is robbing copper of some of its upward momentum," ANZ analyst Andrew Harrington said. But fears could reawaken if a strike due to start at Southern Copper's operations in Peru goes ahead next week. Southern Copper's parent, Grupo Mexico is also grappling with a weeks-long strike in Mexico. DATA DOWN U.S. durable goods orders in August saw their steepest monthly fall since January, the Commerce Department said. That follows lacklustre home sales and consumer sentiment earlier this week, raising the chance of further interest rate cuts by the U.S. Federal Reserve and pinning the dollar near a record low against the euro . Investors are waiting for second quarter U.S. GDP numbers later on Thursday and inflation data on Friday. Lead was steady at $3,445, $55 off a record high touched on July 23. Standard Bank said a dominant position had also developed in lead, holding 90 percent of Tom/Next and cash positions. "The lead market has remained tight and will continue to do so in the short term, boosting short-term prices which have an eye on the $3,500 level." Prices got a further boost on Wednesday on news of a fresh investigation into lead contamination at the minerals export port of Esperance following the discovery of high levels of lead in rainwater tanks. Analysts said the latest probe could delay the resumption of shipments of lead concentrate from the Magellan mine in Western Australia, suspended since March, even further. Metal Prices by 0410 GMT: Metal Last Change Pct Move End 2006 Pct chg 07 LME Cu 7970.00 30.00 +0.38 6330.00 25.91 SHFE Cu* 67300.00 -110.00 -0.16 60080.00 12.02 LME Alum 2471.00 3.00 +0.12 2805.00 -11.91 SHFE Alum* 19340.00 -10.00 -0.05 20550.00 -5.89 COMEX Cu** 361.00 0.00 +0.00 287.10 25.74 LME Zinc 2982.00 -3.00 -0.10 4230.00 -29.50 SHFE Zinc* 26600.00 165.00 +0.62 28915.00 -8.01 LME Lead 3445.00 0.00 +0.00 1670.00 106.29 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc SHFE zinc began trading on March 26, 2007