METALS-Nickel jumps to six-week peak, copper at 4-month high

Thu Jul 3, 2014 12:31pm EDT

* Zinc hits highest since September 2011

* Aluminium climbs to 10-month high

* U.S. job growth higher than expected, jobless rate falls (Updates with closing prices)

By Harpreet Bhal and Eric Onstad

KUALA LUMPUR/LONDON, July 3 (Reuters) - Nickel surged to a six-week peak on Thursday and copper prices touched their highest levels in more than four months on fund buying after strong U.S. jobs data boosted hopes that economic recovery would spur demand for industrial metals.

Aluminium climbed to the strongest level in more than 10 months and zinc hit its highest level in nearly three years before retreating.

Three month nickel was the strongest performer on the London Metal Exchange (LME), climbing 1.3 percent to close at $19,870 a tonne after touching a session peak of $19,990, the strongest since May 20.

Nickel has been the star performer on the LME this year, with gains of more than 40 percent after top producer Indonesia imposed a ban on exports of unprocessed ore.

Nickel raced to a high of $21,625 in May, but has since struggled to regain those levels as investors realised that no shortages had yet emerged due to high levels of stocks.

"Although the medium-term outlook for nickel is certainly very favourable, we are still waiting for tangible signs of scarcity, or at the very least diminishing stocks," analyst Grant Sporre at Deutsche Bank said in a note.

"We think the market is going to be prone to bouts of profit-taking with periods of short-term exuberance with prices moving well ahead of the fundamentals."

The price was also being supported ahead of next week's presidential election in Indonesia, where a new government is expected to reaffirm the ore export ban.

U.S. JOBS DATA LIFTS METALS

Most of the LME metals complex, including copper, saw fund buying in the wake of healthy economic data from the United States.

Employment growth jumped in June while the jobless rate closed in on a six-year low, showing the U.S. economy was rebounding after a slump at the start of the year.

That added to optimism spurred by data this week showing an upbeat outlook for global manufacturing, especially in China.

After the U.S. jobs data LME copper surged to a session high of $7,187.50 a tonne, the highest since Feb. 19, before paring gains to close at $7,175, up 0.7 percent.

"The growth story is well intact...and this is going to increase the demand in the longer term for copper and aluminium as more construction projects will get the green light," said Naeem Aslam, chief market analyst at Ava Trade.

Investors should be cautious, however, warned analyst Dominic Schnider of UBS Wealth Management in Singapore.

"People were saying, 'What is cheap in the world?' They figured out the metals were cheap and if things accelerated a little bit, why not take a position?" he said.

"We have been telling our clients to look for 5-10 percent gains and then pull the plug. You can't get greedy with more than double digits. It is not a trending market."

Benchmark zinc hit an intraday high of $2,270.25 a tonne, its highest level since Sept. 2011, before giving up gains and going in the red, ending down 0.4 percent at $2,239.

Zinc, used for galvanising steel, has risen about 9 percent so far this year, lifted by expectations that mine closures and declining ore grades would lead to shortages in the market.

Aluminium hit a high of $1,938.50 a tonne, the strongest since Aug. 19, 2013, before trimming gains to finish at $1,936, a rise of 0.67 percent.

Tin shed 0.5 percent to close at $22,900 a tonne and lead also fell 0.5 percent to end at $2,196.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin (Additional reporting by Melanie Burton in Sydney; Editing by William Hardy and Keiron Henderson)

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