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Copper rises on China demand hopes

LONDON - Copper rose on Thursday on prospects that demand from top copper consumer China could recover by year-end, though an upcoming holiday in China and persistent concerns about Europe’s debt crisis kept gains in check.

Benchmark copper on the London Metal Exchange (LME)rebounded from two-week lows hit in the previous session to trade at $8,173 a tonne in official rings, from a close of $8,120 on Wednesday.

Stimulus measures announced by the U.S. Federal Reserve and the European Central Bank have helped put copper on track for a gain of more than 7 percent for September. It is trading 7.5 percent higher in the year to date.

“People are a bit more clear on the macro outlook for China for the end of the year. It is likely to register growth of just under 8 percent so that will be positive for base metals,” said Andrey Kryuchenkov, analyst at VTB Capital.

“But until we hear more about what is happening in Spain and the euro zone, copper is likely to trade within its current range.”

Copper product makers in China, where demand is expected to improve modestly in the fourth quarter, are getting their books in order before a week-long holiday beginning on Monday that is likely to pare volume and direction from the market.

China accounts for around 40 percent of global demand for refined copper.

“You’re only two days away from the start of big holidays in China, so people are looking to square books and cut risk,” said Ivan Szpakowski, a Credit Suisse analyst in Singapore.

“The other thing people have been looking at is how much central bank action flows through to the real economy, but for that we may have to wait until top tier data next week.”

Economic data due next week is likely to provide fresh direction for metals prices. China’s National Bureau of Statistics manufacturing PMI for September is due on Oct. 1, with U.S. non-farm payrolls data for September on Oct. 5.

Spain concerns

Gains in base metals were capped by worries about the euro zone debt crisis and uncertainty about a bailout for Spain.

Spain will announce a series of economic reforms and a tight 2013 budget on Thursday, aiming to avoid the political humiliation of having Brussels impose conditions on a request for an international bailout.

Euro zone economic sentiment defied expectations of stabilisation and again fell sharply in September, underlining the economic gloom brought on by the sovereign debt crisis.

“We would want to sell into any near-term strength as (copper) prices look likely to move down to $8,000, and possibly $7,800, in the next four to six weeks - as the stimulus fever burns out and market jitters about Europe and China return to the fore,” ANZ said in a research note.

In other metals, battery material lead traded at $2,274 a tonne in official rings, f rom Wednesday’s close of $2,264, while ti n c hanged hands at $20,875 f rom Wednesday’s close of $20,800.

Aluminium traded at $2,095.50 a tonne. It was untraded at the close of Wednesday but bid at $2,071. St ainless steel material nickel c hanged hands at $18,225 a tonne. It was untraded at the close but bid at $18,055.

Colombia’s government said it expects output from the Cerro Matoso nickel mine to rise to 51,100 tons in 2012 from 37,810 last year. It also announced it would renegotiate outdated contract terms including royalty payments from the BHP Billiton mine.

Global miner Xstrata said it was suspending operations at its Cosmos nickel mine in Western Australia due to prolonged weakness in prices for the metal and a strong Australian dollar.