copper spreads flare

(Updates prices, adds quotes)

By Nick Trevethan

SINGAPORE, June 16 (Reuters) - The premium for London Metal
Exchange cash copper was at a two-year high on Monday as
speculators who had bet on falling prices covered positions
ahead of the June prompt date on Wednesday.

London Metal Exchange copper MCU3 for delivery in three
months fell $25 to $7,955 a tonne at 0336 GMT. Prices jumped
$145 on Friday, while the cash to three months MCU0-3 spread
flared to around a $176 backwardation.

"Shorts have piled up over the past few months, betting on
the weak macro-economic outlook and it looks like someone is
trying to get out of those positions ahead of the Third
Wednesday," a dealer in Singapore said.

"There's nothing else that would cause the spread to widen
like this. Stocks are pretty low historically, and I believe
those stocks are fairly tightly held, but this looks like
short- covering to me."

The most active Shanghai August copper SCFQ8 contract on
the Shanghai Futures Exchange rose 370 yuan, or 0.6 percent, to
60,650 yuan ($8,788) a tonne at the midday break.

"Supply has fallen. May imports were down," said Pang Ying,
an analyst at trading house Runtop.

China's production of refined copper rose 18.3 percent in
May to 323,800 tonnes, while aluminium output rose 21.3 percent
to 1.16 million tonnes, data showed on Monday. [ID:nPEK248392]

But the rise has not been enough to totally offset the 25
percent decline in copper imports, according to interim data,
forcing buyers to raid Shanghai warehouses for metal.
[ID:nPEK282260]

Shanghai copper inventories fell 12 percent to 33,992
tonnes last week and are down 50 percent since mid-March.
<0#SGH-STOCKS>

The Singapore trader also noted that the spread between the
expiring June contract in Shanghai and the third month had
widened to a 1,000 yuan premium, suggesting growing tightness.

The gap in prices between the London and Shanghai copper
markets widened to 3,674 yuan, from 3,491 yuan on Friday,
including Chinese value-added tax, well down from a record
6,549 yuan on April 18.

LME lead MPB3 fell $10 to $1,765, adding to Friday's 3
percent slide. Stocks jumped almost 7 percent to just below
80,000 tonnes on Friday.

"Many agree that lead looks oversold since fundamentals are
still pretty strong and hence bargain hunting should take place
(this) week," brokerage Triland Metals said in a note.

Technically, lead's relative strength indicator reading of
16.6 shows it well below the oversold threshold of 30 and
primed for a bounce after falling steeply since March, Triland
said.
Metal Prices (per tonne) by 0336 GMT:
Metal Last Change Pct Move End 2007 Pct chg
08
LME Cu 7955.00 -25.00 -0.31 6670.00
19.27
SHFE Cu* 60650.00 370.00 +0.61 56880.00
6.63
LME Alum 2940.00 -5.00 -0.17 2403.00
22.35
SHFE Alum* 18835.00 -50.00 -0.26 18180.00
3.60
COMEX Cu** 361.25 1.85 +0.51 304.10
18.79
LME Zinc 1875.00 -25.00 -1.32 2370.00
-20.89
SHFE Zinc 15755.00 25.00 +0.16 18950.00
-16.86
LME Nickel 24000.00 0.00 +0.00 26350.00
-8.92
LME Lead 1765.00 -10.00 -0.56 2550.00
-30.78
LME Tin 20845.00 -155.00 -0.74 16400.00
27.10
LME/Shanghai arb^ 3674
** 1st contract month for COMEX copper
* 3rd contact month for SHFE aluminium, copper and zinc
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
third month
($1=6.901 Yuan)
(Additional reporting by Rujun Shen in Shanghai; Editing by
Michael Urquhart)