METALS-Copper ends strong as tight supply focus returns
* Bullish bank outlooks, tight supplies drive copper rally
* Output at copper mine Escondida down 4.2 pct on year
* Zinc hits highest in three weeks
* Coming up: U.S. Q1 GDP, weekly jobless claims Thurs. (Recasts, adds double dateline/byline, updates prices, adds analyst comments)
By Chris Kelly and Melanie Burton
NEW YORK/LONDON, May 25 (Reuters) - Copper climbed more than 2 percent on Wednesday, on buying spurred by recent bullish investment bank outlooks amid mounting evidence of a production short-fall this year.
Macquarie Bank's removal of its short-term sell in copper a week ago and Goldman Sachs' recommended long position this week seem to back what many long-term bulls have been betting on -- that supply growth in 2011 will fall well short of rising global demand. [ID:nWNAB0808]
Another bullish call came from commodity giant Glencore on Tuesday, forecasting that buoyant demand from emerging markets in Asia should underpin growth in commodities as global producers strive to keep pace with booming appetite from the region. [ID:nL3E7GP0EY]
"All the banks have been putting out buy calls on copper... I think we are seeing an uptick in investment demand for longer term investors," said Catherine Virga, senior base metals analyst with CPM Group in New York.
That investment demand helped copper prices push higher for a second straight day and buck the negative demand implication from U.S. data showing new orders for long-lasting manufactured goods posted their largest drop in six months in April. [ID:nN25110127]
London Metal Exchange (LME) three-month copper CMCU3 closed up $205 or 2.3 percent at $9,065 per tonne.
In New York, the July COMEX contract HGN1 jumped 9.40 cents to settle at $4.1070 per lb, near the upper end of its $4.0005 to $4.1270 session range.
The gains helped prices recover more than 6 percent of their value from five-month lows at $8,504.50 a tonne and $3.8535 a lb on May 12, when heavy liquidation saw losses pile up across many commodity markets.
Copper's mid-week rally was also spurred by news that output from the world's largest mine, Chile's Escondida, fell 4.2 percent in the first quarter versus a year ago due to maintenance and lower ore grades. [ID:nN24285277]
"The supply story is certainly part of the strong fundamentals," said Nic Brown, head of research at Natixis.
"The Chilean copper producers have been struggling for quite some time with declining ore grade and although there is some new investment in copper, production from major projects is not due to come on stream until 2012-2013."
Natixis forecast a 165,000 tonne supply deficit this year and a 180,000 tonne deficit in 2012.
Escondida said its output during the first quarter was comprised of 157,976 tonnes of copper contained in concentrate and 77,294 tonnes of copper cathodes.
Unrest at Chile's fourth largest copper mine, Codelco's El Teniente, only added to the festering supply-side concerns. [ID:nN25141010]
For Reuters Metals Production Database click on: mpd.session.rservices.com
Zinc, down 9.5 percent so far this year, was enjoying some support, said RBC Capital in a note titled: "Zinc, the dog of the LME, is having its day."
Three-month zinc CMZN3 touched a three-week high at $2,248 per tonne before closing up $54 at $2,245.
Apart from having the largest speculative short commitment of the metals, "it has been used as a hedge for macro copper longs, been a favored short amongst the technical community and not expected to be in deficit until 2013," RBC said in a note.
"We would expect zinc's outperformance to be short term in nature and that it will follow broader moves by the complex which continues to see rallies getting sold."
Aluminium CMAL3 went untraded in rings, but was last bid at $2,540 a tonne from Tuesday's close at $2,505.
The London Metal Exchange is due to take further steps this week to address warehousing bottlenecks, which critics say have unfairly allowed aluminium to be locked up and helped inflate prices. [ID:nLDE74N1VF] [ID:nLDE74O0NI] Metal Prices at 1817 GMT COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct
move COMEX Cu 410.70 9.40 +2.34 444.70 -7.65 LME Alum 2540.00 35.00 +1.40 2470.00 2.83 LME Cu 9065.00 205.00 +2.31 9600.00 -5.57 LME Lead 2520.00 33.00 +1.33 2550.00 -1.18 LME Nickel 23350.00 455.00 +1.99 24750.00 -5.66 LME Tin 27695.00 445.00 +1.63 26900.00 2.96 LME Zinc 2245.00 54.00 +2.46 2454.00 -8.52 SHFE Alu 16710.00 0.00 +0.00 16840.00 -0.77 SHFE Cu* 66960.00 580.00 +0.87 71850.00 -6.81 SHFE Zin 16995.00 290.00 +1.74 19475.00 -12.73 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Silvia Antonioli in London; editing by Alden Bentley)