By Michael Taylor and Melanie Burton

LONDON, Nov 18 (Reuters) - Copper climbed as much as 2.5 percent on Thursday, as concerns over Euro zone sovereign debt eased and U.S. economic data improved, underpinning demand expectations for industrial metals.

Benchmark copper for three month delivery on the London Metal Exchange traded at $8,375 a tonne at 1545 GMT, from $8,190 at the close on Wednesday, close to a session high at $8,399.

The metal, used in power and construction, hit a record high at $8,966 last week but has since fallen as much as 12 percent. "We're seeing a little bit of confidence starting to creep back into these markets," said Daniel Smith, analyst at Standard Chartered. "There is a well-received auction of Spanish bonds, and that has given more confidence around the European (debt) situation and helped to weaken the dollar."

Worries about Ireland's debt crisis, which had weighed on markets, eased after Dublin agreed to work with a European Union-IMF mission on urgent steps to shore up its shattered banking sector. T

Further bearish news would be required for fresh metals selling to emerge, said BNP Paribas analyst Stephen Briggs.

"We've had a bounce back because it was a very steep and sudden correction, so it's not surprising that you should have a bit of a recovery. But obviously the markets remain vulnerable to derailment," he said.

"You could get the euro situation deteriorating again... or attempts by China to control inflation by interest rate hikes or other means... you would need a move on one of those fronts for losses to continue," he added.

Copper has also been hit hard by growing fears that China may take aggressive action to curb inflation, which is running at 25-month highs.

If China raises interest rates or caps domestic prices, it could constrain commodity demand or drain liquidity from bubbling domestic markets.

SUPPLIES SCRUTINIZED

Demand for copper from emerging markets was expected to be robust next year, but analysts have raised concerns about whether supplies can keep pace.

With this in mind, investors are keeping close tabs on Chile's Collahuasi mine, which has moved to give workers a "final" wage offer and cut off negotiations. The world's No. 3 copper deposit, which yields 3.3 percent of the world's mined copper, is in a labour strike that entered its 14th day on Thursday.

Signalling a dearth of available immediate supply, the premium for the LME's copper cash contract against the benchmark three-month futures contract jumped to its highest since October 2008 at $35 a tonne. Inventories also continue to decline.

On Thursday, LME data showed copper stocks shed 525 tonnes to 360,600 tonnes, having fallen from 6-1/2 year highs at 555,075 tonnes in mid-February.

"We did see a bit of a panic reaction when China talks about tightening, but the longer-run trend is still towards higher commodity prices," added Standard's Smith. "It's bullish at this point."

Stainless steel-making ingredient nickel slipped to $21,500 a tonne from $21,550.

Investors paid close attention to political unrest in Madagascar, location of Sherritt International's Ambatovy nickel project, which is expected to begin production in early 2011, with a gradual build up to full capacity of 60,000 tonnes per year by 2013.

When fully up and running it will be one of the world's biggest mines.

On Wednesday, Sherritt declined to comment.

Aluminium traded at $2,290 versus $2,270, while battery material lead business pared gains to $2,294 from $2,265.

Zinc traded at $2,160 a tonne from $2,113 after earlier rising more than 4 percent to $2,201. Tin, used in electrical solder, was at $25,400 from $24,750.

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Metal Prices at 1528 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2009 Ytd Percent

move COMEX Cu 380.40 7.45 +2.00 334.65 13.67 LME Alum 0.00 -2270.00 -100.00 2230.00 -100.00 LME Cu 0.00 -8190.00 -100.00 7375.00 -100.00 LME Lead 0.00 -2265.00 -100.00 2432.00 -100.00 LME Nickel 21650.00 100.00 +0.46 18525.00 16.87 LME Tin 25250.00 500.00 +2.02 16950.00 48.97 LME Zinc 2168.00 55.00 +2.60 2560.00 -15.31 SHFE Alu 16385.00 445.00 +2.79 17160.00 -4.52 SHFE Cu* 62720.00 1170.00 +1.90 59900.00 4.71 SHFE Zin 17870.00 210.00 +1.19 21195.00 -15.69 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Karen Norton and Melanie Burton) (Reporting by Michael Taylor; editing by William Hardy)

Source: http://www.forexyard.com/en/news/METALS-Copper-up-on-easing-Irish-debt-worries-data-2010-11-18T155838Z-US