NEW YORK/LONDON, March 29 (Reuters) - Copper bounced from a one-week low to end up on Tuesday, as supportive technicals and a rise in equities helped the red metal snap a three-day losing streak, albeit in ongoing thin trading.
Aluminium rose to a 2-1/2-year high as further turmoil in the Middle East fueled expectations of rising costs for the power-intensive metal.
Despite copper's positive turnaround, the move lacked conviction as seen by the drop-off in trading volume over the past few weeks -- a development that should remain in place until the end of the month and quarter, analysts said.
"Volume has been trending toward abysmal. I think everyone is in a holding pattern," said Zachary Oxman, managing director with TrendMax Futures in Encinitas, California.
"You're certainly not going to see people adding risk at this point.
There's not going to be a risk-on trade before the end of the month."
London Metal Exchange (LME) three-month copper CMCU3 closed up $55 at $9,590 a tonne, rebounding from a one-week low at $9,429.50.
COMEX copper HGK1 failed to sustain its late gains, easing 0.35 cent to settle at $4.3465 per lb, after running into some technical through its 20-day moving average at $4.3269.
Trading volume remained sluggish, with around 31,700 lots traded by 1:40 p.m. EDT (1840 GMT), nearly 40 percent below the 30-day norm, Thomson Reuters preliminary data showed.
With little in the way of fresh fundamental news, copper edged higher in tandem with U.S. equities, analysts said.
"The VIX is lower again ... U.S. stocks are up so we are just bouncing back up again," said analyst Andrey Kryuchenkov of VTB Capital, referring to the Chicago volatility index .VIX, a gauge of market uncertainty.
"Until I see substantial inventory drawdowns, China coming back, physical premiums going up, then I think we sustain this range," Kryuchenkov added.
Copper prices are down about 6 percent from their mid-February records at $10,190 per tonne in London and $4.6575 per lb in New York, as rising LME warehouse stocks and slack physical demand, especially from China, threw into
question market-wide forecasts for a production deficit in 2011.
"The scale of the refined inventory (in China) casts into doubt the size of the expected refined deficit in the copper market this year and raises the prospect of a balanced market, or even a small surplus," said Standard Bank bank in a recent note.
Chile's Collahuasi, the world's No. 3 copper mine, moved closer to ending its three-month force majeure on concentrate sales as repairs to its port could be finished by late April, joint owner Anglo American said on Tuesday.
Latest data showed LME copper stocks fell by 400 tonnes to 439,500 tonnes.
Despite the withdrawal, inventories have risen over 25 percent since mid-December, and remain at the highest level in eight months. MCU-STOCKS
As a result of the inventory builds, copper held a $14.50 contango -- discount for cash over three-month material -- compared with $70 backwardation, or a premium for cash material, in mid-December. MCU0-3 ENERGY-INTENSIVE ALUMINIUM
Aluminium pushed up to its highest level since September 2008, underpinned by brisk demand growth and soaring energy costs.
"(Aluminium) is the only metal that is produced in any quantity in the MENA (Middle East North Africa) region," said analyst Stephen Briggs of BNP Paribas.
"Secondly although Japan doesn't mean anything for aluminium production per say ... the whole nuclear story in Japan points towards rising energy costs worldwide, and aluminium is most exposed to that of all of the base metals."
For aluminium, power accounts for about 35 percent of total cash costs, said Briggs.
Aluminium CMAL3 finished at $2,648 per tonne from a last bid on Monday at $2,615.
Oil prices turned positive on Tuesday as Libyan lead Muammar Gaddafi's troops halted a rebel advance, raising doubts among investors over how quickly the conflict in OPEC member Libya could be resolved. [O/R]
Metal Prices at 1940 GMT
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
COMEX Cu 435.45 0.45 +0.10 444.70 -2.08
LME Alum 2648.00 7.00 +0.27 2470.00 7.21
LME Cu 9580.00 45.00 +0.47 9600.00 -0.21
LME Lead 2687.00 59.00 +2.25 2550.00 5.37
LME Nickel 26600.00 380.00 +1.45 24750.00 7.47
LME Tin 31550.00 -200.00 -0.63 26900.00 17.29
LME Zinc 0.00 -2340.00 -100.00 2454.00 -100.00
SHFE Alu 16830.00 80.00 +0.48 16840.00 -0.06
SHFE Cu* 70830.00 -240.00 -0.34 71850.00 -1.42
SHFE Zin 18280.00 -35.00 -0.19 19475.00 -6.14