* Copper stocks in LME approved warehouses lowest since 2005

* Premium for cash over 3-month LME contract hits 18-month high (Recasts, adds comment, changes dateline from Melbourne)

LONDON, Sept 14 (Reuters) – Copper prices slipped on Monday as funds took profits on long positions, but strong demand in top consumer China, historically low inventories and a lower dollar are expected to fuel further buying over coming days.

Benchmark copper on the London Metal Exchange (LME) was down 0.3% at $6,718 a tonne at 1005 GMT.

Prices of the metal used widely in the power and construction industries earlier touched $6,792.5, not far from the 26-month of $6,830 hit at the start of September.

“China has been quick to recover, partly because of all the stimulus. When factories restarted, there was a lot of restocking, which has helped tighten the market,” said SP Angel analyst John Meyer.

“Copper has been leaving warehouses at an accelerated pace.”

DEMAND: Clues to the strength of Chinese demand will come from August industrial production and urban investment data due on Tuesday.

DOLLAR: A lower U.S. currency makes dollar-priced metals cheaper for holders of other currencies, which could boost demand. It also raises costs for miners in other currencies, so higher prices are required to protect margins.

These relationships are used by funds to generate buy and sell signals from numerical models.

INVENTORIES: Stocks of copper MCUSTX-TOTAL in LME-approved warehouses, at 74,875 tonnes, are at their lowest since 2005, when the commodity price bull run took off, triggered by accelerating Chinese demand.

Also fuelling worry about supplies on the LME are large holdings of warrants <0#LME-WHL> and cancelled warrants – metal earmarked for delivery and so no longer available to the market – at more than 50% of the total.

This is why since early July cash copper has traded at a premium to the three-month contract CMCU0-3. It closed at an 18-month high of $31.50 a tonne on Friday.

OTHER METALS: Aluminium was up 0.5% at $1,784 a tonne, zinc fell 0.1% to $2,468, lead was little changed at $1,889, tin added 0.2% to $18,070 and nickel gained 0.6% to $15,180. (Reporting by Pratima Desai; editing by Mark Potter)

source: reuters.com


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