METALS-Copper's rally slows at 9-1/2 year highs as equities struggle

(Updates prices)

LONDON, Feb 23 (Reuters) - Copper touched a new 9-1/2 year high on Tuesday before slipping back as equities markets fell and investors wondered whether strong demand and tight supplies were enough to extend a breathtaking rally.

With U.S. stock markets down around 1%-2%, benchmark copper on the London Metal Exchange was 0.3% higher at $9,120 a tonne at 1523 GMT, having reached $9,305, the highest since August 2011.

Prices have shot up 16% in February, the biggest monthly rise since November 2016, taking gains since the start of 2020 to around 50%.

Many analysts expect demand from the power and construction industries to overwhelm supply, potentially pushing prices into record territory above $10,190 a tonne.

Copper may need to pause in the short term, but the outlook is bullish, said independent analyst Robin Bhar. “I would expect corrections to be pretty short-lived,” he said.

POWELL: Federal Reserve Chair Jerome Powell said U.S. economic recovery remains “uneven and far from complete” and it will be “some time” before the Fed considers changing policies.

DEFICIT: The roughly 24 million tonne a year refined copper market is already in deficit and was undersupplied by 589,000 tonnes in the first 11 months of 2020, the International Copper Study Group (ICSG) said.

POSITIONING: Speculators have piled into the market with net longs in LME copper at 54% of open contracts and in Shanghai Futures Exchange (ShFE) copper at 39% of open contracts by the end of last week, brokers Marex Spectron said.

Shanghai Dalu Futures, a brokerage, amassed a $1 billion long position in four days after the Chinese New Year celebrations ended last week, ShFE data shows.

CHINA: Yangshan copper import premiums rose to $75 a tonne, the highest since August, pointing to solid demand in top consumer China. SMM-CUYP-CN

STOCKS/SPREAD: Inventories in LME-registered warehouses are near their lowest since 2005 and traders are paying premiums for quickly deliverable metal. MCUSTX-TOTALCMCU0-3

COPPER/NICKEL SUPPLY: Zambian copper output rose 10.8% last year to 882,061 tonnes and Philippine nickel output increased 3% to 333,962 tonnes, according to government data.

PRICES: LME aluminium was down 1.6% at $2,133 a tonne, zinc was 1.6% lower at $2,853, nickel fell 1.6% to $19,175, lead slipped 1.3% to $2,123.50 and tin was down 0.3% at $26,530.

All are at or near multi-year highs.

Reporting by Peter Hobson with additional reporting by Mai Nguyen Editing by Mark Heinrich and David Evans