METALS-U.S. housing data helps copper to 5-week high

NEW YORK/LONDON, July 17 (Reuters) - Copper prices climbed to a five-week high on Friday, after an unexpected jump in U.S. home construction data in June boosted hopes for economic recovery.

Zinc and lead both rose more than 5 percent, tracking gains in copper after the U.S. Commerce Department reported construction of new homes rose to a seven-month high. [ID:nN19590716]

Copper for September delivery HGU9 on the New York Mercantile Exchange's COMEX division gained 3.35 cents to close at $2.4230 a lb, after dealing between $2.3670 and $2.4390 -- a new high dating back to June 12.

The big boost in U.S. housing permits coupled with weakness in the U.S. dollar and a strong expansion in China's economy combined to drive the price of copper up nearly 10 percent on the week, said Michael Pento, chief economist with Delta Global Advisors.

"An upper-cut, a left hook, and a body blow ... what a three-punch combination to power copper up through its $2.40 resistance level," he said.

On the London Metal Exchange (LME) three-month copper MCU3 closed up $50 at $5,310 a tonne, after hitting a five-week high at $5,351.

The dollar pared gains to provide further support as it makes dollar-priced metals less expensive. [USD/]

Despite the stronger tone this week, analysts still remained cautious about further upside price potential.

"Is it all built on a foundation of sand?" questioned Calyon analyst Robin Bhar. "(Copper) will struggle to sustain these prices over the coming couple of months."

Copper stocks at LME warehouses rose 3,275 tonnes to 264,150 tonnes from levels around 500,000 tonnes in early April.

Concerns about nearby supplies have arisen because LME data for some days now has shown a dominant position controlling between 50 percent and 80 percent of LME stocks. [LME/WC]

The worry is reflected the premium or backwardation of about $10 a tonne for LME cash copper MCU0 over the three-month contract. This compares to a contango of $14.50 on July 8.

"The backwardation (isn't) a sign that consumption is strong. There are genuine concerns about long-term demand," a trader said. "Backwardation is a function of nearby tightness in the market, short positions being rolled forward."


Aluminum MAL3 closed at $1,708 from Thursday's last bid at $1,690. Earlier, the metal used in transport and packaging hit $1,735, the highest since early December 2008.

Canceled warrants -- material tagged for delivery -- rose to 152,500 tonnes from 138,100 tonnes. Traders say this material is probably heading for Chinese government stockpiles.

But dampening sentiment was news that aluminum stocks rose to a record high above 4.5 million tonnes.

Zinc MZN3 closed at $1,619 from Thursday's last bid at $1,549, having earlier hit a three-week high of $1,640. Battery material lead MPB3 was untraded at the close but was last bid at $1,670 from $1,620, having hit an earlier high of $1,705.

Nickel MNI3 closed at $16,125 from $16,100.

Tin MSN3 was untraded at the close but was last bid at $13,240 from Thursday's last bid of $13,025. Worries about nearby supplies of tin have pushed the premium for cash material over the three-month contract to $150 a tonne from a discount of around $40 a tonne mid-June. MSN0-3

Traders are concerned about the scale of long positions in the tin market, compared with the amount of available metal in LME warehouses.

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