Mining Profits...Investing In Industrial Metals

Copper rose by more than $100 a tonne, or 1.5 percent, on Thursday after sharp losses earlier in the week left the metal looking cheap in the face of a declining supply surplus.

Copper for delivery in three months on the London Metal Exchange cost $7,140 a tonne by 0551 GMT versus $7,030 at the last London close, when the contract lost $310, or 4.2 percent of its value.

"Copper looks cheap near $7,000," a trader said.

Commodity-specific investment funds in the first half of the year bought up copper on forecasts of strong demand and limited supply, driving prices as high as $8,800 a tonne by May -- double the price in early January -- only to stage steady exits from the market in favour of profits over the last several months.

Copper prices have been in near-steady decline since July.

"The professional money appears to be switching out of copper into aluminium," BNP Paribas commodities analyst David Thurtell said in a report.

Traders said below around $7,200 a tonne copper could attract wide buying interest, particularly given dwindling supplies of the metal.

The latest inventory data shows LME warehouse stocks -- regarded as a supply source of last resort -- totalling only 116,975 tonnes, which is less than three days worth of global usage.

"From a support standpoint, $7,170 is an important level," a trader said.

However, trading was light across Asia due to a week-long holiday in China that has idled the Shanghai Futures Exchange.

Copper for December delivery on the New York Mercantile Exchange's COMEX division was up 3.45 cents at $3.2400 a lb.

U.S. crude oil futures traded higher after heavy losses earlier in the week, underpinning positive sentiment across commodities markets, traders said.

A modest $3 per ounce rise in spot gold prices also added to bullishness among investors in base metals.

Firmer metals prices also underpinned a rise in the heavily mining-weighted Australian Stock Exchange.

Australia's benchmark S&P/ASX 200 Index gained about 1.3 percent.

The world's top miner BHP Billiton rose 1 percent, while the second biggest, Rio Tinto Ltd., was up 1.9 percent.

Three-month aluminium was up $17 at $2,492 a tonne.

Dealers said the metal, widely used in construction and aerospace, was finding some support on modest declines in inventories held in LME warehouses, which were 13 percent below the 52-week high of 793,625 tonnes.

Three-month zinc was $20 higher at $3,325 a tonne.