METALS-London copper up on China prospects; supply rise caps gains
* China copper production up by 10.8 pct to 6.1 MT in 2012
* China aluminium output climbs by 13.2 pct to 19.9 MT in 2012
* Coming Up; Germany ZEW economic sentiment Jan at 1000 GMT
(Adds analyst, trader comment, detail) SINGAPORE, Jan 22 (Reuters) - London copper climbed on Tuesday on growing confidence in the strength of China's economic recovery ahead of an early gauge of manufacturing activity this week, but growing domestic output and upcoming holidays were likely to keep gains contained. HSBC's flash PMI for January is due on Thursday, while markets in China, the world's largest metals consumer, will be closed for a week in mid February for the Lunar New Year. Buyers are wary of stocking up beforehand after last year finding only scant demand for their products in the seasonally strongest second quarter, after global economic slowdown dented demand for their exports. "We still have to wait and see whether there is restocking ahead of Chinese new year -- the spot market remains the same for now. Demand might pick up at the end of the first quarter, because of seasonality," said Chunlan Li, a Beijing-based copper analyst with consultancy CRU. Three-month copper on the London Metal Exchange rallied 0.65 percent to $8,107.25 a tonne by 0242 GMT, after closing the last session little changed. Prices have struggled to find momentum since hitting a 2-1/2-month high near $8,250 a tonne in early January. The physical discount for copper in China eased further to 180 yuan from 170 on Monday, according to Shanghai Metal Market. "Buying on Shanghai at the open pushed the red metal through overnight highs but there was not much follow through. Volumes so far are better than yesterday but still light," a trader based in Singapore said. U.S. markets were closed for Martin Luther King Jr. Day on Monday. The most-traded May copper contract on the Shanghai Futures Exchange rose 0.5 percent to 58,720 yuan ($9,400) a tonne. It earlier hit a one week high of 58,800 a tonne. China's refined copper output climbed 22.4 pct in December to a record at 580,000 tonnes, boosting 2012 output by 10.8 percent to 6.01 million tonnes and also a record high. "China's production has grown by quite bit because many smelters expanded their capacity and we see that production may grow further in 2013," Li added. Copper stocks in China's bonded warehouses hit a record high of over one million tonnes in November. China will push forward market-based reforms on interest rate systems as well as on the currency regime, state radio quoted outgoing Premier Wen Jiabao as saying on Monday.
ALUMINIUM OVERSUPPLY China is the world's top aluminium producer, helped by coal-fired smelters that make its production much cheaper than in the West, where producers are increasingly facing pressure to write down the value of their aluminium operations due to a protracted period of low prices. China's aluminium production rose by 23.8 percent in December to expand more than 13 percent over 2012, reaching 19.9 million tonnes. Rio Tinto announced $14 billion of impairments last week tied to underperforming Mozambican coal and Canadian aluminium operations. Mining firms including BHP Billiton and Anglo American are likely to follow Rio's lead in writing down underperforming assets by as much as $10 billion, as low prices and rising costs eat into valuations. PRICES
Base metals prices at 0242 GMT
Metal Last Change Pct Move YTD pct chg LME Cu 8107.25 52.25 +0.65 2.25 SHFE CU FUT MAY3 58720 290 +0.50 -- HG COPPER MAR3 369.00 1.10 +0.30 1.03 LME Alum 2045.25 4.75 +0.23 -1.24 SHFE AL FUT APR3 15275 20 +0.13 -0.46 LME Zinc 2042.25 10.75 +0.53 -1.03 SHFE ZN FUT APR3 15445 -100 -0.64 -0.64 LME Nickel 17480.00 100.00 +0.58 1.89 LME Lead 2308.00 8.00 +0.35 -1.37 SHFE PB FUT 15330.00 30.00 +0.20 0.52 LME Tin 25040.00 40.00 +0.16 7.01 LME/Shanghai arb^ 491
Shanghai and COMEX contracts show most active months
($1 = 6.2213 Chinese yuan)
(Reporting by Melanie Burton; Editing by Jacqueline Wong and Ed Davies)