Copper slipped 4 percent percent before tracking back on Thursday, as a weaker dollar and recovering equity markets provided support despite the bleak economic and demand backdrop. European shares reversed losses to lead base metals higher, while a weaker U.S. currency makes metals priced in dollars less expensive for holders of other currencies. <.DXY> [.EU] By 0937 GMT, copper for three month delivery on the London Metal Exchange was steady at $4,535 a tonne from $4,540 at the close on Wednesday and compared with a session low at $4,360. "There is still little reflection on the bearish macro environment in prices," said Richard Knights, an analyst at Numis Securities on copper. "It's well above the marginal cost of production for most producers. It's overbought." Prices of the metal used in power and construction have gained more than 40 percent this year, mainly due to an increase in cancelled warrants for copper at LME warehouses. The material earmarked for delivery jumped to 69,175 tonnes on Wednesday -- about 16 percent of total stocks -- from 70,975 the previous day. Copper LME stocks fell 9,625 tonnes to 440,475 tonnes. Analysts believe stockpiling by China, the world's largest consumer, is behind the moves seen in cancelled warrants as they have been largely at Asian warehouses. "The market has latched onto the recent jump in China's copper imports as a sign that the worst may be over," said Standard Chartered in a note. "Copper looks set to push higher in the short term, mainly for technical reasons." "However, we expect the rally to fade rapidly as we enter Q2 ... We do not believe that demand is strong enough yet to give much support to prices, and the temporary impact of restocking by China should start to disappear." Worries about supplies in the near term have pushed the metal into a $9 a tonne backwardation -- premium for cash material over the three-month contract -- compared with a discount of $40 a tonne at the end of March. ALUMINIUM INVENTORIES SOAR Aluminium rose $8 to $1,473, despite LME inventories in the metal used in transport and packaging jumping 17,000 tonnes to a new record of 3.67 million tonnes. On Wednesday, aluminium cancelled warrants rose to 62,250 compared with 10,575 tonnes on Jan. 12. Adding to the underlying gloom, General Motors Corp said it is unlikely to make a $1 billion debt payment due June 1 because it expects to be in the process of restructuring its debt through a voluntary exchange or bankruptcy court by that point. [ID:nN22110724] "It's not good and it hasn't been for a while," Marc Elliott, an analyst at Fairfax said on aluminium. "One can't be too positive with aluminium as long as inventories stay at massively high levels." "(But) it's taking it's guidance from equities," he added on the base metals complex. Short position -- bets on lower prices -- covering indicate that traders and investors think demand may be reaching a bottom. Open interest lots climbed to over 746,262 on Friday from 748,117 the day before. <0#MAL-FUT-OI> Steel making ingredient nickel traded at $11,650 from $11,520 while zinc traded at $1,458 a tonne from $1,460. Tin edged up to $12,450 from $12,150 and battery material lead was unchanged at $1,470. Also at a premium are tin and lead , above $260 and $7 respectively, mainly because of dominant positions holding more than 90 percent of cash warrants on LME stocks. Worries about tin and lead supplies persist, due to a dominant position controlling more than 90 percent of cash warrants on LME stocks reflected in the premium for cash material over the three-month contract.

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