METALS-Copper at 3-week high as economic prospects shine

* Copper in leadership role, signals economic uptick

* Market awaits return of Chinese players

* Copper stocks highest since 2003

(Changes headline, recasts with New York closing copper price,
adds New York dateline/byline and analyst comments)

By Chris Kelly and Maytaal Angel

NEW YORK/LONDON, Feb 18 (Reuters) - Copper climbed to its
highest level in three weeks on Thursday, after strong regional
manufacturing data in the United States pointed to brighter
economic prospects and offset labor market concerns and higher
producer inflation.

Copper for March delivery on the New York Mercantile
Exchange's COMEX division rose 4.60 cents, or 1.4 percent, to
settle at $3.2855 per lb, its highest level on a closing basis
since Jan. 26.

On the London Metal Exchange (LME), benchmark copper for
three-months delivery peaked at $7,336, its highest since Jan. 27,
and was last quoted at $7,260/7,265 a tonne from a close of $7,130
on Wednesday.

"You have to take copper as a leader," said Frank McGhee, head
precious metals trader with Integrated Brokerage Services LLC in
Chicago. "It is so sensitive to slow-downs and to pickups, and
stock builds and stock drawdowns, that I think it is trying to
tell you that there is going to be a (economic) uptick."

That economic optimism was reflected in two reports showing
stronger gains in factory activity in the U.S. Mid-Atlantic region
and a tenth straight monthly rise in a gauge of the economy's
prospects.

But separate data, showing a surge in weekly U.S. jobless
claims and a faster-than-expected rise in U.S. January producer
prices tempered the gains.

Expectations of increased Chinese demand offered additional
underpinnings for copper prices, analysts said.

Chinese markets are closed this week for Lunar New Year
holidays, but analysts expect demand from the world's top copper
consumer will remain robust in the coming weeks.

"Demand is looking good. Everyone's bullish in the long run,"
said VTB Capital analyst Andrey Kryuchenkov.

"Demand will be good in the second quarter, when the Chinese
come back to the market," he said, adding Chinese demand
traditionally strengthens in weeks after the New Year holidays.

EARMARKED

Tempering upbeat sentiment, LME copper stocks rose 5,175
tonnes to 555,075, the highest since October 2003. Canceled
warrants -- material earmarked for delivery out of warehouses --
fell to 15,250 tonnes from 16,900 the previous day.

Prices of copper and other metals have been gaining traction
in recent weeks thanks to the rise in canceled warrants, which
participants believe indicates a pickup in real demand outside
China.

In other metals, aluminum, used in transport and packaging,
closed at $2,114 a tonne from $2,122.

LME aluminum stocks fell 3,900 tonnes to total 4.6 million
tonnes - near record levels, while canceled warrants fell to
289,425 tonnes from 293,175 tonnes.

However, canceled warrants remain near their highest ever
levels, indicating demand is increasing.

Zinc traded at $2,310 a tonne from $2,300, while battery
material lead traded at $2,319 from $2,290.

Zinc stocks fell 75 tonnes to 541,300 tonnes, but the fall did
little to combat the previous day's rise of nearly 40,000 tonnes,
which traders believe was sparked in part by tightness around the
May prompt date.

Tin traded at $17,050 a tonne from $16,750, and nickel closed
at $20,450 from $20,140. The metal used for galvanizing steel
earlier hit $20,600, marking a six-month high for a third
consecutive day.
Metal Prices at 2042 GMT
Metal Last Change Pct Move End 2009 Ytd Pct

move
COMEX Cu 331.35 7.40 +2.28 334.65 -0.99
LME Alum 2121.00 -1.00 -0.05 2230.00 -4.89
LME Cu 7290.00 160.00 +2.24 7375.00 -1.15
LME Lead 2342.00 52.00 +2.27 2432.00 -3.70
LME Nickel 20400.00 260.00 +1.29 18525.00 10.12
LME Tin 16925.00 175.00 +1.04 16950.00 -0.15
LME Zinc 2300.00 0.00 +0.00 2560.00 -10.16
SHFE Alu 16825.00 185.00 +1.11 17160.00 -1.95
SHFE Cu* 56410.00 1020.00 +1.84 59900.00 -5.83
SHFE Zin 18345.00 270.00 +1.49 21195.00 -13.45
* 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading
on 26/3/07
(Additional reporting by Rebekah Curtis in London; Editing by
Lisa Shumaker)