* Zinc rallies after China cancels export rebates
* Copper, aluminium steady ahead of U.S. economic data
(Adds fresh comment/details, changes dateline PVS SYDNEY)
By Julie Crust
LONDON, July 31 (Reuters) - Zinc futures jumped over 6 percent on Thursday after top producer China cancelled export rebates in a move that could curb the flow of Chinese zinc into the world market.
Copper and aluminium futures were steady as traders looked ahead to a raft of U.S. economic data later in the day.
Three month zinc MZN3 traded on the London Metal Exchange at $1,927 a tonne by 1043 GMT, up from Wednesday's close of $1,870. It eased from an earlier two-week peak of $1,984 after LME stocks increased by 3,000 tonnes to 157,325 tonnes, the highest level since September 2006.
"A mixture of positioning, techincals and now fundamentals leaves the zinc market poised for a nasty squeeze higher," John Reade, analyst at UBS, said in a research note.
"With the market apparently extremely short zinc, this could be a trigger for a sharp move higher to $2,000 a tonne or beyond," he said.
The Chinese tax rebate of five percent for super high-grade zinc, used as a galvanizing agent on steel, will come into effect from Aug 1. [ID:nHKG92342]
DATA AWAITED Three-month copper MCU3 was little changed at $8,085 a tonne at 1008 GMT, versus $8,030 previously.
Prices fell back from the day's high after inventory data showed LME stocks jumped 4,450 tonnes to 142,400.
Aluminium MAL3 inched up to $2,977 from $2,960, also paring gains as LME inventories continued their steady rise to stand at their highest level since May 2004.
"This is part of the broader trend for stocks," said Gayle Berry, analyst at Barclays Capital. "Stocks tend to rise during the summer months, particularly July and August.
The market will be looking for further direction from U.S. economic data. Second-quarter gross domestic product and jobless figures are due at 1230 GMT, while U.S. Treasury Secretary Henry Paulson will speak about markets and the economy at 1700 GMT.
Although copper prices are down by some 9 percent from an all-time high of $8,930 on July 2, supply is still tight and prices are up 20 percent on the year.
Japan's Sumitomo Metal Mining Co Ltd (5713.T: Quote, Profile, Research, Stock Buzz) on Thursday set lower copper proccessing fees with miner BHP Billiton (BHP.AX: Quote, Profile, Research, Stock Buzz) (BLT.L: Quote, Profile, Research, Stock Buzz) at less than $45 per tonne and 4.5 cents a pound. [ID:nT167704]
"Compare that to two years ago when prices were $120/t and 10 cents and it shows that copper concentrate supply is very very tight," Jeremy Gray, analyst at Credit Suisse, said in a research note.
Miners pay smelters a fee, known as treatment and refinement charges (TC/RCs), to turn copper concentrates into metal and when raw materials are in short supply, miners have the upper hand in negotiations.
"We are still convinced copper will hit $12,000 per tonne," Gray said.
Lead MPB3 edged up to $2,200 a tonne from $2,180 a tonne Stocks at LME warehouses rose 275 tonnes to 91,000, but have fallen more than 9 percent so far this month.
"The general trend is falling," said Barclay Capital's Berry. "Underlying consumption is healthy, but the market is being driven by the supply side...particularly in China."
Western Mining (601168.SS: Quote, Profile, Research, Stock Buzz), China's second-largest lead miner, on Wednesday cut its lead and zinc production forecast for 2008. [ID:nPEK167112]
Nickel MNI3 fell to $18,849 from $18,750, while tin traded at $22,600 from $22,500/22,550.
Metal Prices at 1057 GMT
Metal Last Change Pct Move End 2007 Ytd
Pct
move LME Cu 8065.00 35.00 +0.44 6670.00 20.91 SHFE Cu* 61770.00 970.00 +1.60 56880.00 8.60 LME Alum 2975.00 15.00 +0.51 2403.00 23.80 SHFE Alu* 19135.00 15.00 +0.08 18180.00 5.25 COMEX Cu** 371.65 3.70 +1.01 303.05 22.64 LME Zinc 1910.00 40.00 +2.14 2370.00 -19.41 SHFE Zinc* 15580.00 235.00 +1.53 18950.00 -17.78 LME Nick 18650.00 -100.00 -0.53 26350.00 -29.22 LME Lead 2200.00 20.00 +0.92 2550.00 -13.73 LME Tin 22400.00 50.00 +0.22 16400.00 36.59 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Reporting by Julie Crust; Editing by Clare Black)
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