METALS-Shanghai copper limit up on China economy hopes

* Shanghai copper limit up on hopes for China economy

* Decline in LME stocks unlikely to last, may spell rally
end
(Updates prices to Shanghai close)

By Alfred Cang

SHANGHAI, March 17 (Reuters) - Shanghai copper futures rose
by their 5 percent daily limit on Tuesday, boosted by
expectations of a strong recovery in China's economy, a day
after a nearly similar rise in London on falling inventories.

The most-active Shanghai June copper contract SCFM9 rose
to 30,830 yuan ($4,510) a tonne by 0555 GMT, 5 percent higher
than its settlement price on Monday and marking its highest
since early November.

The metal then retreated to 30,440 yuan at the daily close
while London Metal Exchange copper MCU3 for three-month
delivery dropped $15 to $3,815 a tonne as of 0700 GMT.

"There is strong momentum in the market, backed up by some
macro data coming out of China, pointing to some positive signs
from leading indicators for the Chinese economy," said Yingxi
Yu, analyst at Barclays Capital in Singapore.

Barclays Capital said in a note that the rate of decline in
China's exports was likely to moderate in the coming months,
while spending on new projects soared in the early months of
the year.

These signs suggested the fiscal stimulus was beginning to
feed through to the bottom line, the note said.

Australian miner Rio Tinto Ltd/Plc (RIO.L) (RIO.AX) said on
Tuesday that it forecast demand for metals and minerals to pick
up rapidly once economic activity recovers, driven by a sharp
recovery in Chinese demand. [ID:nSYD467881]

RALLY TO END

However, analysts said the rally in copper prices could
come to a halt soon, as short-covering in the market could dry
up and the decline in stockpiles in London was not likely to
last, due to sharply falling volumes of cancelled warrants.

"Even though copper stocks fell again yesterday, with
outflows in Asia and Europe, we don't believe the declines in
copper stocks will last much longer," Barclays Capital's Yu
said.

LME warehouse copper stocks fell 2,775 tonnes to 494,850 on
Monday, having eased nearly 10 percent since inventories peaked
late in February, while cancelled warrants -- material
earmarked for delivery -- stood at 26,750 tonnes, down from
29,825 on Friday.

Analysts added that copper prices in Shanghai and on the
LME were approaching technical barriers that could cap further
rises.

"Shanghai copper will soon meet resistance around the
33,000-yuan level, while in London the metal's barrier stands
around $4,000," said analyst Yang Jun at China Futures.

The 33,000-yuan level marks the highs in early November
last year, where copper prices started to stabilise after steep
falls.

In other metals, LME stocks of aluminium rose 5,350 tonnes
to a record near 3.4 million tonnes on Monday, while the LME
aluminium price MAL3 fell $3 to $1,355 a tonne. Its Shanghai
counterpart SAFM9 closed down 15 yuan to 11,875 yuan a tonne.

LME lead MPB3, which rose 4 percent in the previous
session, gained $9 to $1,305 during Asian trading.

Daryl Guppy, analyst for Guppytraders.com, said in a note
that he saw strong support for lead at $1,200 while his target
for an upside breakout would be $1,580.

"There's good support for a rebound at $1,100. This is a
developing trend breakout from a consolidation pattern," he
said.
Base metals prices at 0700 GMT
Metal Last Change Pct Move End 2008 Pct chg
09
LME Cu 3815.00 -15.00 -0.39 3060.00
24.67
SHFE Cu* 30440.00 700.00 +2.35 23840.00
27.68
LME Alum 1355.00 -3.00 -0.22 1535.00
-11.73
SHFE Alum* 11875.00 -15.00 -0.13 11540.00
2.90
COMEX Cu** 175.00 1.05 +0.60 139.50
25.45
LME Zinc 1240.00 -9.00 -0.72 1208.00
2.65
SHFE Zinc 10725.00 5.00 +0.05 10120.00
5.98
LME Nickel 10125.00 50.00 +0.50 11700.00
-13.46
LME Lead 1305.00 9.00 +0.69 999.00
30.63
LME Tin 10400.00 50.00 +0.48 10700.00
-2.80
LME/Shanghai arb^ 356
Dollar/yuan 6.8367 \ 6.8370
** 1st contract month for COMEX copper
* 3rd contact month for SHFE aluminium, copper and zinc
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
third month
($1=6.836 Yuan)