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Copper rallies to 10-month high

An employeee at the BHP Billiton copper mine at Escondida works amid sheets of copper.

Copper prices scaled new 10-month highs Wednesday, as investors continued to bid prices up amid expectations of stronger global economic growth and demand.

Expectations of rising demand from auto makers and a shortage of material for nearby delivery drove aluminum to $2,115 a tonne, its highest since last November, while nickel leapt to $20,410, a level last seen in August, 2008.

Copper for September delivery on the New York Mercantile Exchange's Comex division ended up 1.65 cents at $2.8120 a pound, after dealing between $2.7490 and $2.8385, a new high dating back to early October.

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Three-month copper on the London Metal Exchange hit $6,235 a tonne, the highest since last October and ended bid at $6,199, up $149 from Tuesday's close.

Prices of the metal used in power and construction have doubled so far this year.

Deutsche Bank analyst Joel Crane cited increased sentiment that the world is coming out of recession much faster than originally anticipated as a key factor in the run-up.

"Until that [economic optimism]trade slows down, until I see evidence that fund money is going to slow down entering the complex, I don't expect a turnaround in sentiment at least in the very near term," he said.

Still, others sided with caution, feeling the heady gains recorded during the past month have well exceeded fundamentals.

"Copper at $2.80 [a pound] approaching $3, is way overdone," said Zachary Oxman, managing director with TrendMax Futures in Encinitas, Calif.

"ISM this morning and the private sector jobs number showed us that we still have a good trudge ahead of us," he said.

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U.S. private employers cut more jobs than expected last month and the vast services sector contracted again, raising concerns about the strength of a U.S. recovery.

The weak services and labour market data overshadowed an unexpected rise in U.S. June factory orders.

Aluminum ended at $2,070, just below the day's peak and sharply up from $1,990 a tonne at the close on Tuesday.

The metal used in transport and packaging is up more than 40 per cent since April, despite record high stocks - above 4.56 million tonnes in LME warehouses.

Price gains have partly been triggered by shortages as about 70 per cent of the LME stocks are thought to be tied up in financing deals to release cash for producers.

Also behind this week's gains was news that U.S. auto sales jumped to their highest level in 2009 in July as Americans rushed to take advantage of the government's "cash for clunkers" program.

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"It looks as if the worst hit sectors - autos and construction - in the United States may be on the brink of recovery," a trader said.

Stainless steel ingredient nickel ended at $20,450 a tonne from Tuesday's final $19,375 a tonne.

"Stainless steel destocking by distributors has been subsiding, and this has provided increasing support," Bank of America said in a note.

"However, distributors have so far not started to re-stock in significant amounts, though this may change as the economic recovery unfolds. End user demand remains weak in many countries, but we expect a rebound through 2010."

Tin ended at $15,300 a tonne from Tuesday's last bid at $14,750. The market was focused on a large position holder, which has bought tin for delivery in September and sold it for December.

Worries that those who sold to the entity will be caught short of the metal pushed the premium for the September contract over the December contract to $1,500 a tonne on Friday. On Tuesday it traded at $1,000 a tonne.

Zinc ended at $1,920 a tonne from $1,853 and lead at $1,945 from $1,921.

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