http://www.reuters.com/article/marke...

UPDATE 5-Base metals boosted by China's spending package

Mon Nov 10, 2008 8:32am EST

* China approves $586 billion in new government spending

 * Weaker dollar also lifts industrial metals

 * Nickel jumps 13 percent helped by short covering

 (Updates prices, adds comments)

 By Julie Crust

 LONDON, Nov 10 (Reuters) - Copper jumped almost 10 percent
on Monday, pulling all industrial metals higher, on hopes that
China's $600 billion economic stimulus plan will boost demand.

 China, the world's biggest copper user, on Sunday approved 4
trillion yuan ($586 billion) in new government spending between
now and 2010. [ID:nN09395080]

 "Overall this is good news for metal consumption but it is
going to take time," said Barclays Capital analyst Gayle Berry.
"It was a slightly larger spending plan than our economists had
expected but it is needed because the slowdown in the exports
market has been so rapid."

 London Metal Exchange copper MCU3 rallied as high as
$4,120.5 a tonne, up 9.7 percent, from $3,755 a tonne at the
close on Friday. It was trading at $4,025 in official rings.

 "While such an injection of cash is certainty constructive,
we are skeptical about the "staying power" of this move on metal
prices, and doubt it will be enough to propel the complex to a
higher trading range," said MF Global in a note.

 Prices for copper have slumped more than 50 percent from a
record high of $8,940 in July amid slowing demand.

 Inventories of the metal, used in construction and power,
rose 6,050 tonnes to 260,850 tonnes, the highest since March
2004. Copper stocks have jumped almost 23,000 tonnes so far in
November.

 "This is not overly surprising given the state of the
physical markets, particularly in the U.S. and Europe," Berry
said.

 China's stimulus plan and a pledge by the G20 group, 
representing 90 percent of the world's economy, to take all
necessary measures to get financial markets back on their feet
lifted all industrial metals as did the weaker dollar. [USD/]

 A weaker U.S. currency makes dollar-priced metals cheaper
for holders of other currencies.

 NICKEL VOLATILITY

 Nickel MNI3 jumped 13 percent helped by short-covering as
investors who had bet on lower prices bought back their
positions.

 "We have seen that over the past couple of weeks where the
gains from short covering have been really quite substantial and
that is a reflection of how large a short position has been
established on nickel," said Berry.

 The volatility in nickel prices is likely to continue over
the next few months, she added.

 The metal soared as high as $12,400 a tonne, from Friday's
last bid of $10,975, and was last quoted at $12,100/12,150 in
official rings. 

 "Nickel has probably fallen further below production cost
than any other base metal, so in the short term it also has the
greatest potential for recovery," said Commerzbank in a note.

 Prices have dropped over 50 percent so far this year on
lower demand from stainless steel producers and have remained
below $20,000 a tonne since Sept. 1.

.