UPDATE 2-Shanghai copper up, zinc gains on smelter damage

(Updates prices to Shanghai close, adds Shanghai stocks
figures)

By Nick Trevethan

SINGAPORE, May 16 (Reuters) - Shanghai copper futures rose
over 2 percent on Friday, buoyed by gains in London, and zinc
rallied nearly 2 percent after Sichuan-based Hongda confirmed
its smelter had suffered "serious damage" in Monday's quake.

The July copper contract SCFN8 on the Shanghai Futures
Exchange rose 2.1 percent or 1,300 yuan to 63,030 yuan a tonne
at the daily close.

"Copper trade was fairly active early on, but we are still
waiting for direction from London. London prices have been very
range-bound, caught between $8,000 and $8,800," a dealer in
Shanghai said.

"I think high prices are weighing on demand despite this
being the high season and buyers in China are still holding out
for lower prices, especially as it appears that there is
surplus copper in China."

Copper inventories monitored by the Shanghai exchange
increased one percent, or 388 tonnes, to 51,507 tonnes from a
week earlier.

Shanghai's July zinc contract SZNN8 rose 330 yuan to
18,805 yuan as news trickled out of Sichuan province in China
of damage and power problems with metals producers in the
region.

Sichuan Hongda Co (600331.SS: Quote, Profile, Research) confirmed it had sustained
serious damage at its 100,000 tonne zinc plant in Mianzhu, near
the epicentre of the quake, after days of speculation in the
market that the operation had been affected.

"Some of our production facility at the non-ferrous plant
has been seriously damaged. Part of the plant building has
cracked," the company said in a release to the Shanghai Stock
Exchange. [ID:nSHA339306]

Traders estimated total losses from the quake at around
50,000 to 60,000 tonnes of zinc across the province.

For a factbox detailing metals production facilities in the
quake region please click on thh following link. [ID:nSP23019]

Aluminium output may also be a long-term victim of the
disaster as officials try to ease pressure on damaged and
leaking hydropower dams.

"Investors increased exposure in anticipation that power
shortages in China would restrict aluminium supply over the
summer and force the market back up above $3,000 per tonne,"
RBS Sempra Metals economist John Kemp said.

LME aluminium MAL3 rose 2.5 percent overnight to $3,017,
its highest since April 23. At 0700 GMT it was quoted at
$3,015. Shanghai futures SAFN8 gained 2.3 percent to 19,315
yuan.

Sichuan is estimated to hold over 700,000 tonnes of
aluminium capacity -- 1.8 percent of the world total. The
province is rich in hydropower, much of which is sent to
China's industrial heartlands.

"The region exports massive quantities of surplus power
east towards Wuhan, Shanghai and Zhejiang and south to
Guangdong, Guangxi and Guizhou," Kemp said.

"These areas contain most of the country's modern
export-oriented manufacturing industry, and much of the
aluminium and alumina production."

China is the world's biggest aluminium producer and
consumer and was expected to churn out 16 million tonnes of the
energy intensive metal this year.

Copper for delivery in three months on the London Metal
Exchange MCU3 gained $24 to $8,320, after Thursday's 2.2
percent rally.

The gap in prices between the London and Shanghai copper
markets widened to 5,017 yuan from 4,791 yuan on Wednesday,
including Chinese value-added tax. The spread hit a record
6,549 yuan on April 18.
Metal Prices by 0700 GMT:
Metal Last Change Pct Move End 2007 Pct chg
08
LME Cu 8320.00 24.00 +0.29 6670.00
24.74
SHFE Cu* 62800.00 1160.00 +1.88 56880.00
10.41
LME Alum 3015.00 5.00 +0.17 2403.00
25.47
SHFE Alum* 19500.00 460.00 +2.42 18180.00
7.26
COMEX Cu** 379.15 3.05 +0.81 304.10
24.68
LME Zinc 2310.00 -5.00 -0.22 2370.00
-2.53
SHFE Zinc 18820.00 350.00 +1.89 18950.00
-0.69
LME Nickel 26450.00 145.00 +0.55 26350.00
0.38
LME Lead 2280.00 5.00 +0.22 2550.00
-10.59
LME/Shanghai arb^ 5017
** 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
(Additional reporting by Alfred Cang; Editing by Michael
Urquhart)