METALS-Copper extends gains on scramble for scarce metal

(Updates with official prices)

LONDON, Oct 19 (Reuters) - Copper prices marched higher on Tuesday as industrial users sought material from declining inventories while speculative buyers also piled in.

Three-month copper on the London Metal Exchange (LME) climbed 0.7% to $10,265 a tonne in official trading.

LME copper has jumped by 15% in less than two weeks, moving closer to a record peak of $10,747.50 touched in May, supported by sliding inventories and concerns over inflation.

“Specs are attracted by commodities as an inflation hedge while the physical guys are trying to get as much material as possible,” said Gianclaudio Torlizzi, partner at the T-Commodity consultancy in Milan.

“Climate-change policies are a game changer, increasing demand for copper all over the world, so China is no longer the main driver.”

LME cash copper's premium over the three-month contract MCU0-3 hit a record high of $1,103.50 a tonne on Monday, compared with only $55 a a week earlier, indicating extremely tight near-term inventories.

The premium soared on Monday as shorts covered positions ahead of “Third Wednesday”, when monthly contracts expire, traders said. The premium eased to $740 on Tuesday.

“There seems to really be no copper around,” said Marex commodities broker Anna Stablum in Singapore.

A weaker dollar also made greenback-priced metals cheaper to holders of other currencies.

Further support came from a Peruvian community’s threat to block a mining road used by MMG’s Las Bambas copper mine.

* On-warrant LME copper inventories MCUSTX-TOTAL plunged to 14,150 tonnes on Friday, their lowest since 1998, with one entity controlling between 50% and 79% of LME copper warrants and short-term futures <0#LME-WHT>, LME data showed.

* One party held more than 90% of available LME lead stocks and short-term futures <0#LME-WHT>.

* LME aluminium rose 0.8% to $3,194 a tonne, nickel advanced 2% to $20,400, lead gained 0.3% to $2,386, tin was up 1.3% at a record $38,300, but zinc eased 0.3% to $3,685.

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