METALS-Copper jumps to 1-week high on hopes of EU action

* Boston Fed Bank president feeds hopes for QE3
* Seasonal metals demand rise expected in early autumn
* PT Timah stops selling tin on spot market as prices low
* Coming up: German industrial output for June Wednesday

By Chris Kelly and Silvia Antonioli
NEW YORK/LONDON, Aug 7 (Reuters) - Copper rose to a one-week high on Tuesday
as the dollar fell and expectations grew that Europe will take the necessary
steps to resolve its debt crisis and shore up economies there.
A broad range of financial markets, including metals, crude oil, and
equities, all had a strong run after the European Central Bank (ECB) promised
last week to buy bonds to ease pressure on Spain and Italy, albeit under strict
conditions that are yet to be spelled out.
Prospects of further bond purchases by the U.S. Federal Reserve added to
Tuesday's optimistic tone. Boston Fed Bank President Eric Rosengren said in
interviews with the New York Times and CNBC that the Fed should start buying
Treasury and mortgage-backed securities and continue doing so until the economy
was back to full strength.
While Rosengren is not currently a voting member of the Federal Open Market
Committee, metals investors were encouraged that the Fed might launch a third
round of government bond buying, also known as quantitative easing, or QE3.

"I think this is some of the Fed talk," Matthew Zeman, head of trading with
Kingsview Financial in Chicago, said of copper's firmer tone. "You've got people
continuing to queue up the QE3 trade in expectation of an announcement next
month from Bernanke."
COMEX copper for September delivery climbed 5.15 cents or 1.5 percent
to settle at $3.4405 per lb, after dealing between $3.37 and $3.4490, its
priciest level since July 31.
"If there is a lack of action from the ECB, I think it will derail this move
in copper. They need to come out and do something big now or they are going to
lose a lot of credibility and that's going to take a lot of risk appetite away
from market participants," Zeman said.
Volumes stood at a hefty 69,967 lots in late New York trade, nearly
two-thirds above the 30-day average, according to preliminary Thomson Reuters
data.
On the London Metal Exchange, three-month copper rose $85 to finish
at $7,580 a tonne, after touching a session high of $7,612, which marked its
highest level in a week.
Still, prices in both markets are about 13 percent below the year's high hit
in February.
"We are sitting here and waiting for the eurozone to deliver something,"
said Andrey Kryuchenkov, analyst at VTB Capital.
"Markets are up on speculation that the ECB will make a move soon but copper
has been range-bound since the June sell-off and it is unlikely to move much
until you see the Chinese depleting their domestic warehouses. Chinese demand is
still anemic at the moment."
Inventories of copper in China have risen dramatically since
the end of last year as the pace of growth there started to slow down, raising
worries about the metal's consumption prospects.
China's copper stocks could start to come down in the early autumn, when
demand usually has a seasonal increase and as Chinese authorities likely
implement more measures to boost the economy, according to VTB Capital.

SLUGGISH DEMAND
Two sources at smelters said China's copper smelters are planning to
increase exports of refined copper following recent tax adjustments that have
reduced their export costs.
The move could shift thousands of tonnes of refined copper back to London
Metal Exchange warehouses and pressure global prices.
"This means the tax cost to smelters exporting cathode is now much lower, so
the price differential between the LME and the Shanghai Futures Exchange will
not have to be as large to incentivize exports," Barclays said in a note.
"This may be a limiting factor on the scale of the LME backwardation that
could re-emerge later in the year."
Reflecting still sluggish demand from end users in China, premiums for
physical metal have slipped, Citi noted in a report. "Chinese copper premia have
... come off, now at $65 a tonne having reached a high of $85 in early July," it
said.
China's economy is facing downward pressure from shrinking external demand
and a domestic property market downturn.
A string of economic data from China later this week should give some more
hints on the state of the world's second-largest economy.
Apart from three-month LME nickel, which shed $55 to end at $15,750
a tonne, all of the other metals finished firm.
Tin surged $445 to close at $18,270 a tonne, after news that
Indonesia's PT Timah has stopped selling the metal on the spot market
because of low market prices, cutting shipments this month from the world's
largest tin exporter.

Metal Prices at 1856 GMT

Metal Last Change Pct Move End 2011 Ytd Pct
move
COMEX Cu 343.80 4.90 +1.45 343.60 0.06
LME Alum 1909.00 49.00 +2.63 2020.00 -5.50
LME Cu 7580.00 85.00 +1.13 7600.00 -0.26
LME Lead 1909.00 18.00 +0.95 2035.00 -6.19
LME Nickel 15750.00 -55.00 -0.35 18710.00 -15.82
LME Tin 18265.00 440.00 +2.47 19200.00 -4.87
LME Zinc 1873.00 24.00 +1.30 1845.00 1.52
SHFE Alu 15370.00 0.00 +0.00 15845.00 -3.00
SHFE Cu* 54860.00 250.00 +0.46 55360.00 -0.90
SHFE Zin 14610.00 -10.00 -0.07 14795.00 -1.25
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07