February 20, 2019 / 5:46 PM / a year ago

METALS-Low stocks propel copper prices to 7-month high

* Copper stocks near 10-year lows

* Demand in China tends to pick up in second quarter

* GRAPHIC-2019 asset returns: tmsnrt.rs/2jvdmXl (Updates with closing prices, Chalco)

By Pratima Desai

LONDON, Feb 20 (Reuters) - Copper prices hit a seven month peak on Wednesday as the market worried about low stocks ahead of seasonally strong demand in top consumer China, while rising hopes of an end to the U.S.-China trade dispute also lent support.

Benchmark copper on the London Metal Exchange ended 1.4 percent higher at $6,405 a tonne, its highest since July 10.

Demand in China typically picks up in the second quarter ahead of the third quarter when construction activity rises.

“Demand should pick up as we move into the second quarter and stocks are low. It could be quite an explosive mix,” said Citi analyst Oliver Nugent.

“Copper stocks have not built nearly as much as would have been expected so far this winter, meaning a lower base from which to draw during the second quarter.

Citi expects to see copper prices rise to $6,700 a tonne over the next three to six months.

STOCKS: Stocks of copper in London Metal Exchange warehouses stand at 139,500 tonnes, close to 10-year lows of 122,500 tonnes hit in early December last year. MCUSTX-TOTAL

This is a fraction of global demand estimated at around 24 million tonnes. Nearly half of global consumption is accounted for by China which is expected to further stimulate the economy using monetary and fiscal policy tools.

LOANS: A key indicator of future economic activity in China is new loans, which hit a record 3.23 trillion yuan ($481 billion) in January as policymakers try to jumpstart sluggish investment and prevent a sharper slowdown.

TRADE: U.S. President Donald Trump said on Tuesday talks with China in Washington were going well and suggested he was open to extending the deadline to complete negotiations.

Tariffs on $200 billion worth of Chinese imports are scheduled to rise to 25 percent from 10 percent by March 1 if there is no deal.

POSITIONS: Large holdings of LME copper stocks, cash and tom/next contracts have fuelled worries about short-term availability and boosted prices for nearby contracts.

The premium for the cash over the three-month contract hit $58 a tonne on Monday, the highest since October. It now stands at $23.15 a tonne.

The premium for tom/next, which normally trades at a discount CMCUT-0, hit $20 a tonne on Tuesday, its highest since May last year. It is now around $2 a tonne.

ALUMINIUM: Aluminum Corp of China Ltd, , known as Chalco, said it had proposed selling 190,000 tonnes of annual aluminium smelting capacity to a Yunnan-based unit of its parent, Chinalco, for 950 million yuan ($141 million).

PRICES: Aluminium finished 0.7 percent higher at $1,868 per tonne, zinc added 1.5 percent at $2,698, lead gained 1 percent to $2,040.50, tin added 0.4 percent at $21,250 and nickel rose 1.8 percent at $12,905.

($1 = 6.7216 Chinese yuan renminbi)

Reporting by Pratima Desai Additional reporting by Peter Hobson Editing by Susan Fenton and Edmund Blair

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