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Copper stars on LME,

ends near 3-1/2 month peaks

LONDON: Copper trading was active during LME Friday afternoon trading, with prices bursting above the $2,600/tonne level to end near 3-1/2 month highs as nearby tightness flared up once more, traders said.

The cash/threes backwardation, in single figures a week ago reached $75/77, on sustained borrowing for the "third Wednesday" dates within the spread. Nearby, cash/May moved to $18 backwardation from $2 in mid-week.

Analysts said fundamentals helped the move, with a tremor in Chile raising concern over production, and talk circulating that Escondida cathodes are suffering quality problems.

Copper stocks rose by 1,400 tonnes, but this was less than many had expected, and was eventually shrugged off with the market bouncing smartly from near $2,560, analyst Martin Squires of LME trader Rudolf Wolff said.

The pace of business picked up in the $2,590s, with speculative stops and option-linked buying lifting prices through $2,600. If this level is maintained, the next objective is $2,650, Squires added.

Other traders said the spread tightness is technical, as Escondida's problems do not justify such a move with its monthly electrowon production only some 3,000/4,000 tonnes.

Final three months copper business was at $2,606 a tonne, up $32 from Thursday.

The rest of the LME complex was less actively traded, reversing direction from mid-afternoon onwards and moving higher.

"There is not a lot to say about the other markets - they are just following copper," Squires said.

Aluminium was depressed by stocks jumping by 18,150 tonnes and spent most of the session drifting away from $1,600. Despite a late bounce, the market was still $7 easier at $1,595 at the end of the kerb.

Latest data from the International Lead and Zinc Study Group (ILZSG) had little impact on these markets.

The ILZSG said lead consumption would rise 1.9 percent and production by 2.1 percent. Zinc consumption was forecast to rise 1.8 percent and production to increase 2.2 percent. But both markets will still register shortfalls.

Lead hardly moved until the kerb, when prices inched up to end at $811, up $5. Zinc staged a corrective rally to Thursday's losses, and finished at $1,064, up $12.-Reuter