April 29, 2014 / 8:49 AM / in 4 years

METALS-Copper underpinned on China shortfall; traders eye holidays

* ShFe copper curve hits widest backwardation in five years

* China domestic copper premiums surge to five year peak

* Coming Up; Germany GfK consumer sentiment May at 0600 GMT (Updates prices)

By Melanie Burton

SYDNEY, April 29 (Reuters) - London copper steadied on Tuesday but was below a near two-month high, underpinned by tight supply in China, while top performer nickel was held below near 15-month highs on fading momentum ahead of a slew of holidays in Asia this week.

Copper prices have clawed back nearly 2 percent in April, given tight credit conditions in China that have restricted some copper consumers from imports in what is the peak season for demand.

“The risks are laid to the upside for the copper price because of what the local premium is reflecting, which is likely a tightness in supply at a time when demand is quite strong,” said Morgan Stanley analyst Joel Crane in Melbourne.

Three-month copper on the London Metal Exchange edged up 0.1 percent to $6,753.75 a tonne by 0805 GMT. The contract hit its highest level since March 7 in the previous session at $6,798 a tonne, before closing with a small loss. Prices remain down more than 8 percent this year.

The most-traded July copper contract on the Shanghai Futures Exchange slipped by 0.6 percent to 47,640 yuan ($7,600)a tonne.

Reflecting a shortfall of physical copper in China’s domestic market, onshore copper premiums surged 1,900 yuan above the front month ShFE contract on Monday, the highest since April 2009.

Also reflecting stress in immediate supply, the front month ShFE contract traded at 1,140 yuan above the third month contract, easing slightly after earlier hitting the highest in five years.

Still, business was tapering off ahead of a string of holidays and key data points this week. Japanese markets are closed on Tuesday. The Shanghai Futures Exchange will be shut on Thursday and Friday, while the LME will be closed on Monday.

Data points include an initial estimate of U.S. first quarter economic growth and a U.S. monetary policy meeting on Wednesday and jobs data on Friday, as well as an official reading of China’s manufacturing health on Thursday.

A brutally cold winter will likely put a brake on the U.S. economy in the first quarter, but growth fundamentals remain strong and signs of an acceleration have already emerged.

Contracts to buy previously owned U.S. homes rose in March for the first time in nine months, a sign the housing market could be stabilizing after suffering a setback from a rise in interest rates and a severe winter.

Nickel prices, which hit the highest in almost 15 months at $18,715 on Monday, lost steam to $18,276 a tonne, after a list of sanction-hit companies did not include metals companies such as top refined nickel producer Norilsk Nickel.

Senior U.S. Republican lawmakers said on Monday the latest sanctions imposed on Russian individuals and companies are too mild to deter Moscow from further action in Ukraine and promised to offer legislation as soon as this week to pressure the Obama administration to take stronger action.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin ($1 = 6.2530 Chinese Yuan) (Reporting by Melanie Burton; Editing by Richard Pullin, Michael Perry and Anand Basu)

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