METALS-Copper carried higher by improved sentiment, aluminium gains on supply worries

By Eric Onstad

LONDON, Feb 12 (Reuters) - Copper prices rose on Thursday, supported by stronger appetite for risk across financial markets, while aluminium hit a near two-week high after Australia's South32 S32.AX confirmed that it would wind down a smelter in Mozambique.

Benchmark three-month copper on the London Metal Exchange CMCU3 added 0.5% to $13,237 a metric ton in official open-outcry trading after edging up by 0.5% on Wednesday.

Volatility in LME copper has declined since the contract hit a record peak of $14,527.50 a ton on January 29, fuelled by speculative buying. The price is still up 35% over the last six months.

"It's been a very bumpy ride, but right now the focus is probably mostly on position squaring," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

"We're heading into a quiet period for the Lunar New Year, so it's a question of the level of positions speculators in China want to carry into this period."

Physical demand has fallen in China, the world's top metals consumer, ahead of its nine-day Lunar New Year break starting February 15 when economic activity stalls.

The most-active copper contract on the Shanghai Futures Exchange SCFcv1 was up 0.4% to close daytime trading at 102,330 yuan a ton.

Aluminium CMAL3 was the best performer on the LME, climbing 1.4% in official activity to $3,145.50 a ton, its strongest since January 30, after Australia's South32 S32.AX reaffirmed it would put its Mozambique aluminium plant on care and maintenance next month after a drought hit power supply.

"Attention has really turned to the aluminium market where the options markets have seen predominantly bullish trades," broker Marex said in a note.

Buoyancy from other markets spilled into metals as Asian and European stock markets hit record highs. MKTS/GLOB

LME nickel CMNI3 slipped 1.2% to $17,660 a ton on profit-taking, having jumped 2.2% on Wednesday after Indonesia sharply cut this year's mining quota for PT Weda Bay Nickel, the world's biggest nickel mine.

Among other metals, LME zinc CMZN3 rose 0.3% to $3,417 a ton, lead CMPB3 edged up 0.2% to $1,996 while tin CMSN3 shed 1.2% to $49,050.

($1 = 6.9018 Chinese yuan renminbi)