By Clare Black
LONDON (Reuters) - London Metal Exchange copper prices gained just under one percent on Monday following a bounce by Shanghai futures, which shrugged off the latest measures by key metals consumer China to slow growth.
But traders remained cautious given the heavy price slide last week.
"It's far too early to get carried away. The next day or two will be crunch time," a trader said, adding he was looking for copper to move closer towards $7,500 a tonne to confirm a sustainable recovery.
Copper for delivery in three months <MCU3 gained $58 to $7,330 during the second of the day's open outcry sessions. Zinc was indicated up $10 to $3,730/38 a tonne.
Shanghai futures shrugged off an announcement by the central bank last week that it was raising benchmark lending and deposit rates, lifting bank reserve ratios and widening the yuan's trading band.
Analysts said the latest measures were not scaring off metals buyers, and traders expected little impact on consumption, at least for a few months.
China also announced on Monday it would increase taxes on metals and steel exports in a bid to ease its huge trade surplus.
Li Xinchuang, vice-president of the China Metallurgical Industry and Research Institute did not believe the rise, due to take effect on June 1, would have much impact this year since most contracts had been signed already, but next year could see a big fall-off.
TOO EARLY
"It is too early to judge whether today's rise is a temporary rebound or the start of a longer-term surge," Li Rong at Great Wall Futures said.
"Copper fell for a whole week last week and technically there should be a recovery, but we also see that London futures are strongly supported under $7,200."
Copper rallied on Friday after a week of heavy losses, which saw prices decline nearly eight percent as market worries grew over growing stocks in China.
The market hit its lowest since early April late last week, effectively halting a heady run up between early February and May that culminated in a high of $8,335, near last year's record peak of $8,800.
Goldman Sachs said recent declines had brought metals prices more in line with its forecasts. It expected further near-term weakness in aluminium, nickel and zinc.
"We continue to expect copper prices to trade in a wide band around $7,500/T over the next 18 months," than bank said in a weekly report.
Mining equities featured in the top 10 gainers so far in London's FTSE 100 index, with Anglo American up by over 3 percent, Lonmin 2.5 percent and Xstrata by 1.8 percent.
Aluminium dipped $4 to $2,846. Lead was untraded but indicated $10 firmer at $2,07075. Tin was also untraded but indicated $50 higher at $14,050/14,075.
Nickel pared earlier losses, trading at $50,390 versus its previous $50,500 and not too far from recent all-time highs of $51,800.
An undersupply of nickel that has sent prices soaring has another 18 months or so to run until supply catches up, Indonesia's PT Aneka Tambang Tbk (Antam) said on Monday.
Supply has failed to keep pace with robust demand, propelling futures prices up by 50 percent so far this year.
(For the latest news from Reuters Global Mining and Steel Summit which starts on Monday, click on http://www.reuters.com/summit/GlobalMiningandSteel07?pid=500)
