September 7, 2015 / 8:29 AM / 2 years ago

METALS-London copper climbs as shorts cover on Glencore cutbacks

* Signs of emerging copper demand supporting prices -UBS

* U.S. markets closed for Labor Day holiday

* Potential copper output cuts by Glencore fuel rally (Adds analyst, trader comment; updates prices)

By Melanie Burton

MELBOURNE, Sept 7 (Reuters) - London copper rallied on Monday as news of planned production cuts at the African copper operations of miner trader Glencore fuelled a short-covering rush.

Glencore said that management at its Katanga Mining unit in the Democratic Republic of Congo had begun a review of operations, and that a similar review had started at Mopani Copper Mines in Zambia in light of the challenging environment for commodities, which would cut some 400,000 tonnes of copper production.

“This is likely to materially improve the supply and demand balance of copper,” said Citi in a note.

Glencore also said it would suspend dividends, sell assets and raise $2.5 billion in a new share issue as it aims to cut its debt by a third to $20 billion by the end of next year.

Three-month copper on the London Metal Exchange jumped by 1.4 percent to $5,192 a tonne, cutting 2.4 percent losses from the previous session.

Shanghai Futures Exchange copper climbed 0.8 percent to 39,370 yuan ($6,183) a tonne.

The news encouraged buying early in London and forced shorts to cover, traders said.

“Short positions held by the non-trade sector are running at all-time highs and the day will come when they start to cover which will lead to a very short, sharp rally,” said Kingdom Futures in a note.

There have been emerging signs of a pick-up in copper demand from mainland China, said analyst Dan Morgan of UBS in Sydney.

“Merchant premia in China have lifted quite strongly which, with prices being relatively cheaper now, suggests we might see a little bit of a lift in copper imports.”

China’s top state planner said on Monday that the country’s power usage, train freight and property market have all shown improvement since August, indicating that the economy is stabilizing and potentially shoring up metals demand.

China has also given the green light to 77 billion yuan ($12.10 billion) worth of highway and bridge projects, the latest in a spate of such approvals as Beijing looks to infrastructure to support economic growth.

Still, keeping traders cautious, a flood of data from China in coming weeks is expected to point to further weakness reinforcing expectations that Beijing needs to roll out fresh stimulus measures.

Reflecting a slightly less bearish view on copper, hedge funds and money managers cut a net short position on copper for the fourth straight week to the smallest since mid-June, U.S. Commodity Futures Trading Commission data showed.

Other LME metals took a ride on copper’s coattails, with aluminium, zinc and lead all up around 1 percent.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

$1 = 6.3675 Chinese yuan Reporting by Melanie Burton; Editing by Joseph Radford and Biju Dwarakanath

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