RPT-METALS-Copper up, creeping optimism after China comments

* Copper up 1.4 pct in London, 0.8 pct in Shanghai

* Sentiment lifted by China's Premier Wen's comments

SINGAPORE, March 13 - Copper prices rose 1.4 percent in London and 0.8 percent in Shanghai, supported by creeping optimism about China's domestic demand growth.

Investors were also comforted by comments from Chinese Premier Wen Jiabao, who said 595 billion yuan had been allocated in this year's budget for stimulus moves and the country could issue new measures if needed. For highlights, please double-click on.

"There is a feeling of optimism in China. The equity markets have been doing well and the government can inject new stimulus at any time," a dealer in Shanghai said.

High levels of lending by Chinese banks, the first three-day rally on Wall Street since the start of February and better-than-expected U.S. retail sales data offset a collapse in China's exports in February.

The trader added: "Remember, China's priority has always been China. They used export markets to fuel their growth and now those have dried up they will focus on driving domestic demand."

Shanghai copper for delivery in May rose 220 yuan to 29,200 yuan by midday, while copper on the London Metal Exchange rose $50 to $3,630, having ticked down $10 on Thursday.

"People have been caught a little by surprise in the West. They have been trading from the short side and are now covering. This is a patch of consolidation and not the end of the rally," another dealer said.

Traders are looking ahead to weekly Shanghai stocks data released after the market closes. Expectation are for a rise as merchants close out short position for the expiring March contract by delivering metal.

Estimates vary from an increase of 8,000 to 12,000 tonnes from sources in China to 25,000 tonnes from traders in London.

"People are rolling positions and delivering into warehouses ahead of the contract expiry on Monday and the talk is for a pretty big increase," the second dealer said.

"But we have been selling physical material at a premium this week and March-April spread is pretty wide $100 backwardation, so the physical market still looks tightish."

The March copper contract traded at a premium of 770 yuan a tonne to the second month, April.

Copper stocks in LME warehouses rose 2,450 tonnes to 504,325, the first uptick in about three weeks, and the level of cancelled warrants -- an indicator of future deliveries out of warehouses -- fell to 37,175 tonnes from 40,825 tonnes.

The proportion of cancelled warrants has fallen to 7.6 percent of the total stock, down from 12 percent last week.

Of the total stock only 45,000 tonnes are held in Asian locations and more than a quarter of that has been cancelled.

LME aluminium rose $10 to $1,350 and in Shanghai it gained 1 percent at 11,880 yuan.

Prices saw support from a surge in oil which rose more than 11 percent the previous day ahead of the weekend meeting of the OPEC producer group.

Sentiment has also been lifted by a fall in China's aluminium stocks by about 500,000 tonnes from 1.1-1.2 million tonnes in early December and by an 16 percent fall in Chinese output of the metal in the first two months of the year.

"In aluminium, China matters," ANX's senior commodities analyst Mark Pervan said.

"It's a little early to go long right now, but of major base metals, aluminium is probably the most heavily sold compared to the cost curve." "The supply side is heavily skewed to China, where they have sunk a lot of money into the sector and are ready to come on when prices firm. Some 35 percent of world aluminium production is in China so a big drop in production there will be positive." Base metals prices at 0402 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 3630.00 50.00 +1.40 3060.00 18.63 SHFE Cu* 29200.00 220.00 +0.76 23840.00 22.48 LME Alum 1350.00 10.00 +0.75 1535.00 -12.05 SHFE Alum* 11880.00 125.00 +1.06 11540.00 2.95 COMEX Cu** 161.75 0.00 +0.00 139.50 15.95 LME Zinc 1220.00 -2.00 -0.16 1208.00 0.99 SHFE Zinc 10635.00 -5.00 -0.05 10120.00 5.09 LME Nickel 9450.00 -50.00 -0.53 11700.00 -19.23 LME Lead 1230.00 -7.00 -0.57 999.00 23.12 LME Tin 10375.00 -20.00 -0.19 10700.00 -3.04 LME/Shanghai arb^ -81 Dollar/yuan 6.8374 \ 6.8382 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month