Shanghai copper surged by its daily 5 percent limit for the second straight session on Monday, tracking Friday's London rally on growing optimism about economic recovery in China, the biggest consumer of the industrial metal. Copper's gains lifted other base metals, though analysts don't think the rally is sustainable with rising inventories showing that global demand remains weak. "There is a return of optimism in the market on hopes of a recovery or a bottoming out in economic conditions within this year, and China is a big part in this following some signs of better economic data there," said analyst Yingxi Yu at Barclays (nyse: BCS - news - people ) Capital in Singapore. Comment On This Story "But I think it's also a function of how much prices have already fallen and how much bad news has been priced into the base metals market," she added. Shanghai copper rose 1,400 yuan ($205) to its Monday ceiling of 29,510 yuan per tonne, up 5 percent from the settlement on Friday. Three-month copper on the London Metal Exchange gained $105, or 3 percent, to $3,645 a tonne, after rallying more than 6 percent on Friday. Shanghai base metals mostly tracked the gains in China's stock market last week, spurred by data that strengthened hopes for an early recovery of the Chinese economy. China's imports of unwrought copper and semi-finished copper products are expected to have remained high last month, and its imports of copper cathode near December's record level. Investors were looking past grim data released on Friday which showed U.S. employers slashed jobs in January by the most in 34 years and the jobless rate shot up to 7.6 percent. RISING INVENTORIES But with metals stockpiles still on the rise as slower economic activity blunts demand, any rallies should be short-lived. "Price increases could be limited, with inventories up in both London and Shanghai," said Zoe Wang, analyst at China International Futures. Copper stocks in warehouses monitored by the Shanghai Futures Exchange rose 72 percent from two weeks ago on Friday. In LME warehouses, copper inventories climbed 2,025 tonnes to 504,625 tonnes, the highest level since November 2003. "The fundamental story for most of the base metals has not changed significantly and as such we expect any rallies to be rather fragile," said Barclay's Yu. Base metals prices at 0346 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 3640.00 100.00 +2.82 3060.00 18.95 SHFE Cu* 29510.00 890.00 +3.11 23840.00 23.78 LME Alum 1465.00 -13.00 -0.88 1535.00 -4.56 SHFE Alum* 12145.00 315.00 +2.66 11540.00 5.24 COMEX Cu** 164.25 2.00 +1.23 139.50 17.74 LME Zinc 1215.00 25.00 +2.10 1208.00 0.58 SHFE Zinc 10860.00 370.00 +3.53 10120.00 7.31 LME Nickel 11550.00 45.00 +0.39 11700.00 -1.28 LME Lead 1185.00 0.00 +0.00 999.00 18.62 LME Tin 11100.00 -100.00 -0.89 10700.00 3.74 LME/Shanghai arb^ -416 Dollar/yuan 6.8314 \ 6.8324 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month (Additional reporting by Alfred Cang in Shanghai; Editing by Michael Urquhart)

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