India copper pares losses but rising stocks cap rise

MUMBAI, Sept 19 (Reuters) - Indian copper futures pared early losses and traded near the day's high on Friday as the U.S. government's plan to stabilise the banking system eased the negative economic outlook affecting metals, analysts said.

News that the U.S. government was considering a comprehensive plan to deal with toxic bank assets at the heart of the global financial turmoil restored investor confidence.

At 4.01 p.m., the benchmark November copper MCCX8 was down 0.25 percent at 315.05 rupees per kg.

"The U.S. news is bringing in much-needed relief into the commodity markets and copper has recovered because of that. However, a continuous rise in LME inventories has been pressurising the metal," said an analyst with Motilal Oswal Commodity Brokers Pvt Ltd.

London Metal Exchange inventories rose 5,650 tonnes to 209,800 tonnes on Friday and weighed on prices.

The red metal was also pressured by a substantial rise in the Shanghai copper warehouse stocks, which rose to 17,072 tonnes from 13,554 tonnes, a 26 percent rise from last week.

Buying in November copper was recommended at current levels with a stop loss of 311 rupees and a target of 319 rupees, said an analyst with a Mumbai-based brokerage.

Lead prices rose on news that smelters in China, the world's top lead producer, may halt production in coming months as concentrate supply falls. See [nSP112473]

Falling inventories also provided the metal support, analysts said. Lead inventories on the LME fell 1,350 tonnes to 69,175 tonnes on Friday.

At 4.01 p.m., benchmark September lead MLDU8 was up 0.89 percent at 85.15 rupees.

Zinc futures traded steady on Friday as pressure from a continuous rise in stocks was offset by supply threats, analysts said. At 4.02 p.m., the benchmark September zinc MZIU8 was down 0.5 percent at 79.50 rupees per kg.

The metal used to galvanise steel found support from news that Australian miner OZ Minerals Ltd (OZL.AX) planned to cut zinc production at its Golden Grove mine by upto 40 percent in 2009, a drop of about 35-40 percent on its 2008 forecast.

Nickel futures traded down 1 percent as demand for the metal from its main consumer, the stainless steel industry, did not show any improvement. At 4.03 p.m., the benchmark September nickel MNKU8 was down 1.1 percent at 773.9 rupees.

(Reporting by Nandita Bose; Editing by Prem Udayabhanu)