Copper steady; jobs jubilation swamped by China demand fear

* London copper steady; China shut for holiday

* Lead at 3-yr high; Japan demand rush unlikely

* Coming up: Euro zone producer prices, Feb; 0900 GMT

(Updates prices)

By Nick Trevethan

SINGAPORE, April 4 (Reuters) - Base metals rose on Monday in London, up 0.4 percent on average, led by rallies in zinc and lead, which touched a three-year high, in light trade during a two-day market holiday in China.

London Metal Exchange lead was the strongest performer of the metals, rising 2 percent to touch $2,755 a tonne, its highest since April 2008.

"There are questions over Japanese demand after the quake. We calculate some 84,000 vehicles may have been lost – that means 730 tonnes of lead, which is not market moving," said Chen Xin Yi, analyst at Barclays Capital.

"Another source of demand is stationary batteries. When we crunch the numbers there, we calculate around 500 to 1,000 tonnes of lead demand."

She said a fundamental supply-demand imbalance and risks of government crackdowns on the industry, especially in China, would support the market.

"We see a deficit in the second half of the year, and a total annual deficit of 38,000 tonnes in 2011," she said, adding: "The market is also nervous about the threat to lead mines, smelters and secondary sources, from pollution control."

Three-month copper on the London Metal Exchange rose by $2.25 to $9,361.25 a tonne by 0646 GMT. Earlier prices slipped to as low as $9,285 before covering. Volumes were light with just 1,000 lots traded.

Copper investors largely ignored positive U.S. jobs data from last week that cheered equity and energy markets, with a second straight strong monthly read, suggesting a shift in the struggling labour market.

"The focus right now is less about the U.S. jobs market and more about Chinese buying -- or rather their reluctance to buy," said a trader in Singapore.

Copper prices hit a record high of $10,190 a tonne in February, having rallied from just above $2,800 in December 2008, mostly due to a surge in Chinese consumption and stockpiling.

In the short term, Chinese consumers, unhappy with current high prices, are living off those stockpiles, which could be near 1 million tonnes, including inventories held on the Shanghai Futures Exchange, by merchants, traders, and private investors.

That has dragged prices down by almost 10 percent from their peaks, and while Western economies may not return to pre-Lehman Brothers levels for another year or three, demand from China, which consumes 40 percent of the world's annual copper output of 21 million tonnes, is seen rising by around 10 percent this year.

Along with expectations of rising demand from Japan in the second half to rebuild after last month's earthquake, analysts expect a market deficit of between 300,000 and 800,000 tonnes globally by the end of the year and with that, new highs.

"We are looking at a return of the Chinese to the international market in the second half. Last week's inventory numbers gave me a little hope, but there is a lot of material we need to work though, both on the exchange and in private hands," the Singapore trader said.

Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 6 percent last week and LME stocks saw a rare weekly drop, down by just over 1,000 tonnes to 438,850 tonnes. [ID:nEMS011026]

In industry news, attention was on the $6.5 billion bid by China's Minmetals for Canadian-listed Equinox in a deal that is growing in complexity, with Equinox interested in Lundin and Lundin looking to Inmet.

Minmetals offer is contingent on Equinox dropping its play for Lundin. [ID:nL3E7F30DI]

Base metals prices at 0646 GMT
  Metal              Last       Change   Pct Move YTD pct chg
  LME Cu            9361.25      2.25     +0.02     -2.49
  LME Alum          2632.00      1.00     +0.04      6.56
  HG COPPER MAY1     425.75     -4.85     -0.02     -4.10
  LME Zinc          2411.50     21.50     +0.90     -1.73
  LME Nickel       25690.00     90.00     +0.35      3.80
  LME Lead          2733.00     35.00     +1.30      7.18
  LME Tin          31500.00      0.00     +0.00     17.10
	

(Source: http://af.reuters.com/article/metalsNews/idAFL3E7F40SS20110404)