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METALS-Copper gains for 3rd day, zinc hits near 10-month peak

Eric Onstad
Tuesday, 24 Dec 2013 | 6:18 AM ET

* Aluminium firms, zinc hits near 10-mth peak

* Rusal files legal action on LME warehousing rules

* Coming up: U.S. durable goods orders at 1330 GMT

(Adds details, quotes; previous SINGAPORE)

LONDON, Dec 24 (Reuters) - Copper extended gains on Tuesday, underpinned by tightness in near-term supplies as liquidity winds down ahead of Christmas holidays, but concerns about a Chinese credit squeeze dampened the rise.

Copper has fallen around 8 percent this year, reflecting slower demand from top consumer China that has helped trap prices in narrow ranges for most of the second half of 2013.

Buying by investors following chart patterns boosted prices on Tuesday, the third straight days of gains, said T-commodity consultant Gianclaudio Torlizzi.

"Technical-wise the market is strong but I am very cautious in the short term due to the Chinese money market," he said.

China's interbank cash crunch eased on Tuesday after the central bank injected funds through normal channels for the first time in three weeks, but traders warned that conditions remained tense.

"I am still betting on a sub-$7000 in the beginning of new year before rebounding strongly in the second quarter to over $8,000," Torlizzi added.

Three-month copper on the London Metal Exchange added 0.55 percent to $7,280 a tonne by 1058 GMT.

Analysts say copper has held up quite well despite the Federal Reserve's decision last week to start ending its bond-buying stimulus, a major support for commodity prices for years, amid signs that the U.S. economy is on a stronger footing.

"While the unwinding of the stimulus will become a feature on the horizon, that also builds up confidence in the U.S. economy and in demand for copper," said Jonathan Barratt, head of commodity research firm Barratt's Bulletin in Sydney, who sees the metal heading towards $8,200 in the first half of 2014.

"I look at the drawdowns, the tightness in premiums and the macroeconomic picture and I think people are trying to get in pre-Christmas and that's what's supporting the price," he added.

Copper stockpiles in warehouses monitored by the LME fell by another 7,125 tonnes on Tuesday to 371,975 tonnes <MCUSTX-TOTAL>, the lowest level since Feb. 1, bourse data showed.

The global refined copper market fell into a 162,000 tonnes deficit in September after posting a small surplus in August, as record-high Chinese apparent demand ate into supply, data from the International Copper Study Group showed.

The most-active copper for March delivery on the Shanghai Futures Exchange gained 0.2 percent to settle at 51,430 yuan ($8,500) a tonne.

FRESH PEAK FOR ZINC

LME zinc extended its rally, rising to a near 10-month peak of $2,085 a tonne, the strongest since Feb. 28. Zinc, buoyed by tighter supplies and firm Chinese demand, gained 1.2 percent at $2,082 a tonne.

LME aluminium advanced 0.3 percent to $1,766 a tonne after slipping to two-week lows in the previous session.

The world's biggest aluminium producer Rusal has taken legal action against the LME to ditch reforms to the exchange's warehousing policy, adding to a pile of other U.S. lawsuits that allege rigging of the aluminium market.

Lead climbed 0.8 percent to $2,247.25 a tonne, its loftiest since late August.

The LME will be shut on Wednesday and Thursday for Christmas and Boxing Day holidays.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin ($1 = 6.0702 Chinese yuan)

(Additional reporting by Manolo Serapio Jr. Editing by Jeremy Gaunt)