METALS-Copper surges as shorts run for cover

* Base metals see largest one-day rally since November
* Copper ends worst quarter since Q3 2011

By Susan Thomas and Josephine Mason
LONDON/NEW YORK, June 29 (Reuters) - Copper surged over 4 percent on Friday,
its biggest one-day gain since November, as the latest euro-zone rescue deal
boosted a broad range of commodity and financial markets with investors
scrambling to cover short positions.
Even after the day's sharp gains, copper still ended the second quarter down
around 8 percent in New York and 9 percent in London, its sharpest quarterly
decline since the middle of last year.
Leaders of the 17-nation euro zone agreed rescue funds could be used for
sovereign debt purchases without forcing countries to adopt extra austerity
measures. Countries will also be able to recapitalize banks directly without
increasing their budget deficit.
Few other details were available of the deal, agreed after all-night talks,
but it relieved investors who piled back into commodity and equities markets and
bought euros, placing the single currency on track for its sharpest daily rise
against the dollar in eight months
"Around midnight, it was almost like a miracle came out with a promise of
free money. (Copper) ran through stops in a short-covering rally," said a New
York-based trader.
Three-month copper on the London Metal Exchange closed at $7,690 a
tonne, more than 4 percent up from $7,385 at the close on Thursday. Earlier it
hit a session high and a one-month peak at $7,691 a tonne.
Volumes were double the two-month average, with 30,000 lots traded on the
LME's electronic platform by the end of play, the New York trader said.
In New York, the most-active September COMEX contract settled up
almost 5 percent at $3.4965 per lb, its biggest one-day gain since November,
after breaking through its 50-day moving average.
After Friday's rally, New York copper notched its strongest weekly gain so
far this year. But for the quarter, it still fell about 8 percent, its weakest
three months since the third quarter last year.
U.S. trading volumes are expected to be lower than usual next week, with
market participants off for the July 4 Independence Day holiday.
Other base metals were swept higher too, with zinc and aluminum notching up
their biggest one-day gains since November and breaking 20- and 14-day moving
average resistances respectively. Aluminum powered above $1,900 per tonne, a
psychologically important level and around many producers' cost of production.
Some investors were cautious about whether the rally signaled a turnaround
in commodities markets. Previous relief rallies have evaporated within days as
new twists in the debt crises emerged and doubts returned about commodity demand
amid faltering world economic growth.
"It was an historic deal and it was positive news for the market, although
there are still some shades such as the lack of an increase of the bailout
fund," consultant Gianclaudio Torlizzi from T-Commodity said.
"Today's jump, beside being a relief rally, is down to an end-of-the-quarter
markup: the improving economic picture has given funds a pretext to pile up on
metals."

CHINA
In China, the world's top consumer of copper, physical copper buyers have
been restocking on a hand-to-mouth basis, capitalizing on cheaper prices after
Shanghai copper lost over 6,800 yuan ($1,100) from the year's high of more than
62,000 yuan in February and a smaller LME-over-ShFE copper spread.
In a boost for the copper price, China's central bank said it would use a
basket of policy tools to keep credit and money supply growth at a steady and
reasonable pace. China is the world's top consumer of copper.
Separately, a finance ministry official said China could meet its 2012
economic growth target of 7.5 percent, despite early economic indicators
suggesting growth did not pick up this month.
Adding to optimism about the country's growth, global miner Rio Tinto said
it expected Chinese growth to be above 8 percent and that recent fiscal and
monetary loosening should lead to a pick-up in growth in the second half.

But with base metals prices still languishing this year as the economic
crisis grinds on, Russia's Norilsk Nickel, the world's largest nickel
miner, said it planned to cut its 2012 investment program within a month.
" There is little hope that prices for our metals will rise in the near term.
Within a month we will have to revise down our investment plans for 2012," Chief
Executive Vladimir Strzhalkovsky told the company's annual shareholder meeting.
Three-month nickel closed at $16,730 from $16,215 at the close on
Thursday but was down more than 6 percent for the quarter.
"The near-term environment is likely to remain challenging for commodities
until economic data point to improving activity more convincingly," Credit
Suisse said in a research note.
Three-month tin closed at $18,775 from $18,500, zinc at
$1,880 from $1,794, lead at $1,861 from $1,777 and aluminium at
$1,911 from $1,845.

Metal Prices at 1923 GMT

Metal Last Change Pct Move End 2011 Ytd Pct
move
COMEX Cu 349.70 16.55 +4.97 343.60 1.78
LME Alum 1911.00 66.00 +3.58 2020.00 -5.40
LME Cu 7684.00 299.00 +4.05 7600.00 1.11
LME Lead 1860.00 83.00 +4.67 2035.00 -8.60
LME Nickel 16725.00 510.00 +3.15 18710.00 -10.61
LME Tin 18775.00 275.00 +1.49 19200.00 -2.21
LME Zinc 1876.00 82.00 +4.57 1845.00 1.68
SHFE Alu 15420.00 45.00 +0.29 15845.00 -2.68
SHFE Cu* 55430.00 960.00 +1.76 55360.00 0.13
SHFE Zin 14555.00 225.00 +1.57 14795.00 -1.62
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07