* Norsk Hydro plans production cuts at Australian plant
* Dollar firm but negative correlation to metals eroding
* China import data helps, economic concerns remain
By Susan Thomas
LONDON, Jan 11 (Reuters) - Copper rose on Wednesday, after rallying
more than 3 percent the previous day, propelled by strong import data from top
consumer China and an improving economic outlook for the United States.
A firm dollar restrained gains slightly but dollar-denominated commodities
are showing signs of unshackling from a negative correlation with the U.S. unit,
with recent data suggesting that recovery in the world's largest economy is
gaining steam.
Three-month London Metal Exchange (LME) benchmark copper rose 0.6
percent to $7,790 per tonne by 1058 GMT, from $7,745 at the close on Tuesday.
"People were a little bit surprised yesterday by the strength of the Chinese
imports, particularly in copper," Natixis analyst Nic Brown said. "Our overall
view on China demand for copper this year is that it's going to be good."
But he cautioned against reading too much into the numbers, which showed
inbound shipments of copper rose 12.6 percent to a record in December from the
previous month as arbitrage and financing opportunities sucked more metal into
the country.
"There were ample import arbitrage opportunities in the October/November
period. And in December they largely went away. This is reflective of a number
of factors," Brown said.
"You've still got concerns over Chinese growth prospects, you've got tight
monetary conditions going into year end, plus you also have a very early Chinese
New Year this year."
China's offices and exchanges will be shut in the last week of January for
the Lunar New Year holidays, traditionally a weak period for copper consumption.
NORSK PLANS PRODUCTION CUTS
Chinese imports of aluminium also rose last month, and this has helped
underpin aluminium prices, as has news of production cuts.
Norway's Norsk Hydro became the latest aluminium producer to cut production
due to economic uncertainty and high costs, announcing plans to curtail output
at a plant in Australia.
Last week, Alcoa Inc, the largest U.S. producer of aluminium, was the
first to announce a cutback in response to steep aluminium price falls, slashing
annual global smelting capacity by 12 percent.
This could signal cuts at China producers too.
"A substantial chunk of the industry (in China) is likely to be in negative
territory given where prices are at the minute," Brown said.
"Plus you've got the emphasis on environmental policies, energy intensity
policies, so we think there is pressure to constrain Chinese output of
aluminium."
However, there are still plentiful inventories of alumininium in warehouses,
keeping a lid on further rises in the price of the metal.
Three-month aluminium was 0.1 percent firmer at $2,167 per tonne
from $2,164 at the close on Tuesday.
Credit Suisse said more evidence than the Chinese import data was needed
before a bottom in base metals prices could be confirmed.
"For now, technical momentum remains largely negative across the sector," it
said in a note. "However, the latest positive performance coupled with the
improved sentiment mark a good start."
Tin was up 0.6 percent at $20,380 from $20,275, zinc was
flat at $1,930, lead was up 1 percent at $2,010 from $1,989 and nickel
was up 0.2 percent at $19,542 from $19,505.
Metal Prices at 1054 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
move
COMEX Cu 354.90 3.80 +1.08 444.70 -20.19
LME Alum 2168.00 4.00 +0.18 2470.00 -12.23
LME Cu 7786.75 41.75 +0.54 9600.00 -18.89
LME Lead 2010.25 21.25 +1.07 2550.00 -21.17
LME Nickel 19540.00 35.00 +0.18 24750.00 -21.05
LME Tin 20375.00 100.00 +0.49 26900.00 -24.26
LME Zinc 1931.50 1.50 +0.08 2454.00 -21.29
SHFE Alu 16190.00 120.00 +0.75 16840.00 -3.86
SHFE Cu* 56860.00 990.00 +1.77 71850.00 -20.86
SHFE Zin 15080.00 160.00 +1.07 19475.00 -22.57
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
