Copper leads commodities up on China, U.S.

NEW YORK/LONDON Mon Apr 2, 2012 3:08pm EDT

Copper cathodes are seen inside a warehouse near Yangshan Deep Water Port, south of Shanghai March 23, 2012. REUTERS/Carlos Barria (CHINA - Tags: BUSINESS COMMODITIES)

Copper cathodes are seen inside a warehouse near Yangshan Deep Water Port, south of Shanghai March 23, 2012.

Credit: Reuters/Carlos Barria (CHINA - Tags: BUSINESS COMMODITIES)

NEW YORK/LONDON (Reuters) - Copper surged on the first trading day of the new quarter Monday, posting its biggest one-day gain in 6 weeks, after upbeat manufacturing data from China and the United States calmed worries over demand prospects for industrial metals.

Up over 2 percent, copper led all gainers within the 19-commodity Thomson Reuters-Jefferies CRB index .CRB on Monday as investment demand improved for the red metal after surprisingly strong Chinese factory data and further growth in U.S. manufacturing.

"It's a big shot in the arm for copper prices," said Michael Gross, futures analyst with Optionsellers.com in Tampa, Florida. "First with the Chinese data this morning and then the ISM later in the day confirming stronger demand here in the U.S."

London Metal Exchange (LME) three-month copper closed up $195 or 2.3 percent at $8,640 a tonne, its biggest daily gain since February 21, when copper rallied 2.6 percent.

In New York, the COMEX May contract shot up 9.60 cents or by 2.5 percent to settle at $3.9210 per tonne, near the upper end of its $3.8285 to $3.9325 session range.

A stream of new orders buoyed factory activity in China to an 11-month high in March, according to the official PMI, but credit-constrained smaller manufacturers struggled, suggesting the economy was still losing steam.

U.S. data showed the pace of growth in the manufacturing sector had picked up a tad in March, underscoring views about how the economy is recovering at a gradual clip even as February construction spending figures disappointed.

Elsewhere, data showed the euro zone's manufacturing sector in March shrank for an eighth month and at a faster pace, adding to signs the bloc is in recession as the downturn spreads to core members France and Germany.

Optionseller.com's Gross said the U.S. and Chinese data were good pieces of news in a market that has lacked convincing news flows lately.

"That being said, we're still in a range right now," he said.

Copper has held in a wide band between the $8,100 and $8,800 per tonne levels ($3.70-$4 per lb) since late January -- a range likely to remain in play as investors weigh the prospects of a slowdown in China against signs of improvement in the U.S. economy.

Industry trade figures out on Friday reflected the market's indecisive tone.

Data from the Commodity Futures Trading Commission (CFTC) showed the non-commercial net long position in COMEX copper fell after traders closed out 4,500 lots in long positions, and trimmed short positions by 300 lots.

Still, price trends in copper are very sensitive to developments in China, which consumes around 40 percent of the world's copper. Copper is up about 12 percent this year as worries over the debt-strained euro zone have eased and the U.S. economy has begun to pick up.

"We don't buy today's move as the beginning of a bullish phase, because we think the Chinese economy is still slowing down and at the same time the central bank is not yet willing to cut interest rates," said Gianclaudio Torlizzi, analyst at metals consultancy T-Commodity.

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Copper technical range: link.reuters.com/fuq37s

CFTC trader positions: r.reuters.com/buv87r

Chinese GDP growth and PMI link.reuters.com/ned37s

Global manufacturing PMIs link.reuters.com/byv24s

Euro zone PMI and GDP growth link.reuters.com/rud84s

US ISM manufacturing overview link.reuters.com/bam86s

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NICKEL OPTIMISM

London nickel futures have risen just 1 percent this year, making it the worst performing metal in the complex, though some analysts are now turning more optimistic, saying the selling has been overdone given changing fundamentals.

"Feedback from the recent days suggests Chinese buyers (are) rushing to restock at what are believed to be low prices. This is reflected in rising physical spot premiums over the last week or so," said Macquarie analysts in a note.

"The LME nickel price is now trading below domestic prices in China, which makes buying imports more attractive, and currently prevailing price levels are trading below cash production costs for some nickel pig iron production in China," they added.

Nickel closed up $400 at $18,225 a tonne.

Aluminum ended up $4 at $2,130 a tonne.

In industry news for aluminum, state-run Aluminum Corp of China Ltd (601600.SS) (2600.HK) agreed to pay $926 million for a controlling stake in Mongolian coal miner SouthGobi Resources in a deal with mining billionaire Robert Friedland's Ivanhoe Resources.

The deal marks the first foray into coal by Chalco, which is facing a bleak outlook in aluminum, and will give it access to a large coal producer in neighboring Mongolia.

Metal Prices at 1908

Metal Last Change Pct Move End 2011 Ytd Pct

move

COMEX Cu 391.55 9.05 +2.37 343.60 13.96

LME Alum 2130.00 4.00 +0.19 2020.00 5.45

LME Cu 8640.00 195.00 +2.31 7600.00 13.68

LME Lead 2062.00 22.00 +1.08 2035.00 1.33

LME Nickel 18220.00 395.00 +2.22 18710.00 -2.62

LME Tin 23245.00 445.00 +1.95 19200.00 21.07

LME Zinc 2006.00 5.00 +0.25 1845.00 8.73

SHFE Alu 16165.00 -5.00 -0.03 15845.00 2.02

SHFE Cu* 60010.00 270.00 +0.45 55360.00 8.40

SHFE Zin 15445.00 105.00 +0.68 14795.00 4.39 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Editing by Alison Birrane and Jane Baird)