METALS-Copper eyes $7000 on technical buying; gains seen capped
* Cash copper hits highest premium in one year against benchmark
* U.S. markets closed on Thursday for Independence day
* Coming Up; Euro zone Markit Services PMI at 0758 GMT
(Adds comment, detail, updates prices) SINGAPORE, July 3 (Reuters) - London copper hit almost a two-week high on Wednesday, just short of $7,000 a tonne, fuelled by short covering and bottlenecks in supply, although sluggish global growth eroded demand prospects and signalled gains may prove tough to sustain. Copper prices have pared some of June's steep losses as mine shutdowns have combined with limited delivery from London Metal Exchange-registered warehouses to choke immediate supply. But given slowing growth and rising regulation in China, the heat has been taken out of copper demand, said analyst Natalie Rampono at ANZ in Melbourne. "We don't think copper's gains are sustainable," she said. "Even if we do get these technical rallies or shorts covering on the basis of any positive data out of the U.S, the outlook for China is still pretty uncertain and that could weigh on any upside for copper," she added. Three-month copper on the London Metal Exchange rose to $6,993.50 a tonne, the highest since June 19, before trading at $6,979.25 a tonne by 0711 GMT, up 0.96 percent from the previous session. Copper prices racked up losses of more than 7 percent in June and are wallowing down more than 12 percent year to date. The most-traded October copper contract on the Shanghai Futures Exchange rallied 1.22 percent to close at 50,550 yuan ($8,200) a tonne. In a sign that an economic cool down is creeping across the country, growth in China's services sector sagged to its weakest pace in nine months in June as construction activity slowed, a survey showed on Wednesday. A cash crunch in China as well as a crackdown on commodities imports that have been used for financing in domestic markets have also raised worries over metals demand. But for now, China's copper importers are being forced by bottlenecks at LME warehousing systems to queue for deliveries of metal they have already bought, resulting in spot copper import premiums rising by a third since mid-June.
Reflecting this nearby physical tightness, in the futures market, cash copper jumped in two days from a discount to its highest premium in nearly a year over three-month prices.
Also souring the outlook for metals, a batch of U.S. data reinforced views that the days of easy money from the Federal Reserve are numbered. Easy money was a major driver fuelling copper's meteoric rise to records above $10,000 a tonne in February 2011 and the withdrawal of this measure is deflating prices. U.S. new motor vehicle sales in June were poised to record their strongest month in more than 5-1/2 years and factories posted a second straight month of gains in new orders in May, indicating some pick-up in economic activity. Markets are watching for June non-farm payrolls data on Friday for indications on Federal Reserve policy. However liquidity may be thinner than usual given Thursday's Independence Day holiday in the U.S. Base metals prices at 0709 GMT
Metal Last Change Pct Move YTD pct chg LME Cu 6976.25 66.25 +0.96 -12.04 SHFE CU FUT OCT3 50550 610 +1.22 -12.74 HG COPPER SEP3 3.16 0.02 +0.57 -13.46 LME Alum 1830.75 -1.75 -0.10 -11.69 SHFE AL FUT OCT3 14390 35 +0.24 -8.17 LME Zinc 1888.75 -3.25 -0.17 -9.19 SHFE ZN FUT OCT3 14645 50 +0.34 -8.78 LME Nickel 13970.00 -70.00 -0.50 -18.11 LME Lead 2084.50 5.00 +0.24 -10.54 SHFE PB FUT 13965.00 10.00 +0.07 -12.99 LME Tin 20101.00 -124.00 -0.61 -14.10 LME/Shanghai arb^ -692
Shanghai and COMEX contracts show most active months ($1 = 6.1330 Chinese yuan)
($1 = 6.1330 Chinese yuan)
(Reporting by Melanie Burton; Editing by Richard Pullin and Michael Perry)