METALS-Shanghai copper, zinc limit up ahead of index rejig

* Shanghai copper, zinc limit up ahead of index rebasing

* LME copper recovers from overnight losses

* Rally seen short-lived on weak demand outlook
(Updates with Shanghai closing prices)

By Manolo Serapio Jr.

MANILA, Jan 6 (Reuters) - Copper and zinc futures traded in
Shanghai surged by their daily limits on Tuesday, while London
copper rebounded from overnight losses on buying ahead of the
annual re-rating by major commodity indices.

Commodity index compilers Dow Jones AIG and the
S&P GSCI .SPGSCI recalculate the weightings for the
individual commodities in their indexes once every year.

The Dow Jones rebalancing will take place from Jan. 9 to 15
and will be based on Jan. 8 closing prices. The S&P reweighting
will happen from Jan. 8 to 14 and will be based on closing
prices on Jan. 7.

"So probably today or tomorrow, we'll see the end of the
rally," said analyst Bonnie Liu, at Macquarie Bank in Shanghai,
adding that copper was likely to benefit most from the
re-rating.

Shanghai copper for delivery in three months SCFc3 surged
6 percent to 26,240 yuan ($3,842) per tonne by 0729 GMT versus
its settlement price of 24,760 yuan on Monday when it also hit
its daily 6 percent limit.

Zinc SZNc3 also soared by its 6 percent daily limit to
11,155 yuan a tonne during the session, before closing at
11,145 yuan. Aluminium SAFc3 gained 1.2 percent to 12,100
yuan.

Copper on the London Metal Exchange MCU3 rose 3.8 percent
to $3,310 a tonne, recovering from a 1.2 percent drop overnight
caused by the dollar's strength.

Given the murky outlook for global demand, metals prices
are likely to hold on to any gains.

"I don't think we'll see the start of a sustained recovery
in prices until we see signs that the global economy is really
on the path to recovery," said Yingxi Yu, analyst at Barclays
Capital in Singapore.

"Without any meaningful improvement in the demand side of
the market any price rally would be short-lived."

Copper prices fell more than 50 percent in 2008 due to
weakening global demand and rising inventories. Stocks in LME
warehouses rose 1,500 tonnes to 342,050 tonnes, the highest
since February 2004.
Metals prices at 0729 GMT
Metal Last Change Pct Move End 2008 Pct chg
09
LME Cu 3315.00 125.00 +3.92 3060.00
8.33
SHFE Cu* 26240.00 1430.00 +5.76 23840.00
10.07
LME Alum 1567.00 19.00 +1.23 1535.00
2.08
SHFE Alum* 12100.00 140.00 +1.17 11540.00
4.85
COMEX Cu** 148.35 4.15 +2.88 139.50
6.34
LME Zinc 1320.00 20.00 +1.54 1208.00
9.27
SHFE Zinc 11145.00 595.00 +5.64 10120.00
10.13
LME Nickel 12925.00 75.00 +0.58 11700.00
10.47
LME Lead 1122.00 2.00 +0.18 999.00
12.31
LME Tin 11550.00 50.00 +0.43 10700.00
7.94
LME/Shanghai arb^ 321
Dollar/yuan 6.8378 \ 6.8388
** 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
(Editing by Clarence Fernandez)