Shanghai copper rallies on London; China buys as panic

Shanghai copper jumped nearly 3 percent on Friday, tracking London's gains in the previous session, as renewed Chinese buying helped to ease the panic caused by Japan's earthquake and nuclear threat.

Chinese buying interest ticked up over the past few days after LME copper prices failed to effectively breach below the key $9,200 level.

"We are seeing a rebound after panic-selling earlier this week," said Zhu Bin, an analyst at Nanhua Futures in the eastern province of China.

"But we are unlikely to see copper prices press towards a new high, as Chinese buyers will become hesitant again once prices move higher."

Japan is still racing to keep the overheating fuel rods at a quake-damaged nuclear power plant under control and avert a nuclear catastrophe.

Three-month copper on the London Metal Exchange edged down 0.4 percent at $9,530.50 a tonne by 0322 GMT, but is poised for a 3.7 percent weekly rise, its biggest since early February.

Shanghai's most-active copper futures contract jumped nearly 3 percent at 71,720 yuan a tonne, on course for a 3.5 percent gain from a week earlier.

Base metals have largely outperformed the commodities complex and equities in the week following the devastating Japan earthquake and tsunami, as Japan's reconstruction effort is expected to boost metals demand in the medium to long term.

LME lead was headed for a 9 percent weekly rise, leading the industrial metals basket, compared to a nearly 1 percent drop in the 19-commodity Reuters-Jeffries CRB index and the battered Nikkei share average that plunged 11 percent so far this week.

Shanghai Futures Exchange said it will launch trading of lead futures on March 24, with the contract period from September 2011 to March 2012 and lot size at 25 tonnes, five times the 5 tonne lot size on existing futures.

"The large lot size on the new lead futures will make it more appealing to smelters for their hedging needs, rather than to speculators," said Yang Jun, an analyst at China Futures Co.

"Since prices of zinc and lead are closely correlated, speculators will probably continue to trade zinc, rather than choose lead."

LME lead was little moved at $2,650 a tonne.

LME zinc was flat at $2,333, while Shanghai zinc rallied 2.7 percent at 18,265 yuan a tonne.