Copper rose on Tuesday as a fresh drop in inventories suggested demand from China could pick up, but the rally eased as losses in equities put a leash on market sentiment. Three-month copper on the London Metal Exchange MCU3 was untraded in official rings, but bid at $4,335 a tonne from Monday's close of $4,270. The metal used in power and construction on Monday snapped a five-day winning streak that had lifted prices to a five-month high of $4,459 a tonne on Monday. Sparking expectations demand could pick up, stocks of copper at LME warehouses dropped by 2,925 tonnes to 501,900 tonnes. "Copper looks good," said Andrey Kryuchenkov, an analyst at VTB Capital."Copper is the king, the Chinese will keep buying for infrastructure programmes, but I'd be very wary that we are still a little bit in a bear rally." He said copper would likely hit resistance at around $4,400. Also signalling a potential pick up in demand was a leap in cancelled warrants for copper at LME warehouses. The material earmarked for delivery jumped to 60,850 tonnes, up by 140 percent from a level of 25,475 tonnes the week before. The rise in cancelled warrants took place largely in Europe, whereas earlier this year a jump in cancelled warrants predominantly took place in Asian warehouses. Analysts said this material was likely heading for China due to stockpiling and because of tightness in the scrap metal market in the world's top copper consumer. "It seems unlikely that this is material destined for European markets, European demand is still flat on its back and it's more likely to be material that's heading for Asia, China in particular," said Stephen Briggs, a metals strategist at RBS Global Banking & Markets. "They're having to go further afield for supplies," he said. Copper earlier hit a day's high of $4,409.25 a tonne. Capping gains, European equities turned negative, tracking U.S. stock futures lower on intensifying concerns for the financial sector. [.EU] [.N] A rising dollar also pressured industrial metals priced in the U.S. currency. [USD/] RECORD ALUMINIUM INVENTORIES Aluminium, used in transport and packaging, was at $1,460 a tonne from $1,465. Hurting the demand outlook for the metal, aluminium inventories climbed by 36,925 tonnes to a record above 3.5 million tonnes. Cancelled aluminium warrants fell to 88,125 tonnes versus 98,200 at the end of last week and compared with 10,575 tonnes on Jan. 12. This material earmarked for delivery could be destined for China. China is sucking in big tonnages of aluminium as firm domestic prices have created a strong arbitrage opportunity. Investors hoping to gauge the health of the aluminium market awaited results from aluminium producer Alcoa Inc (AA.N), which is expected to report a second consecutive quarterly loss. Zinc MZN3 was at $1,350.5 a tonne from $1,360, while battery material lead MPB3 was last quoted at $1,315/1,320 from $1,325. Tin MSN3 was at 10,650 from $10,850, while steel making ingredient nickel MNI3 was at $10,700 from $10,750. "There's still potential for copper to pop a bit higher," said an LME-based trader in London. "4,100 to 4,600 is my range for this week." Metal Prices at 1215 GMT Metal Last Change Pct Move End 2008 Ytd Pct move COMEX Cu 197.35 1.50 +0.77 139.50 41.47 LME Alum 1460.00 -5.00 -0.34 1535.00 -4.89 LME Cu 4350.00 40.00 +0.93 3060.00 42.16 LME Lead 1315.00 -10.00 -0.75 999.00 31.63 LME Nickel 10675.00 -225.00 -2.06 11700.00 -8.76 LME Tin 10600.00 -250.00 -2.30 10700.00 -0.93 LME Zinc 1350.00 -10.00 -0.74 1208.00 11.75 SHFE Alu 13120.00 390.00 +3.06 11540.00 13.69 SHFE Cu* 36070.00 1770.00 +5.16 23840.00 51.30 SHFE Zin 12250.00 515.00 +4.39 10120.00 21.05 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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