Copper up on risk appetite

Benchmark copper on the London Metal Exchange was at $7,940.75 by 1443 GMT, up about 3 percent from $7,730 a tonne on Tuesday when it fell by more than three percent.

The metal rallied by a quarter last month from a 2011 trough of $6,635 to peak above $8,200 a tonne last week.

Supporting copper was data showing a supply decline and a pick up in employment in the world's largest economy, the United States, which underscored the view the economy is on a path of slow growth.

"The underlying fundamentals for copper are good; supply data is weak and demand from China is still robust," said Standard Chartered analyst Daniel Smith.

"Things look pretty strong for copper for the year-end. Base metals will keep bouncing around but copper will do better than other metals because of the fundamentals," he added underlining that feedback from customers indicated strong copper demand for the next couple of months.

Stressing the supply tightness for the metal, Freeport-McMoRan Copper & Gold Inc said late on Tuesday that production and processing rates at its strike-hit Grasberg mine in Indonesia have fallen below levels needed to meet fourth-quarter sales targets.

Supply from the world's copper top producer, Chile, was also declining, data showed on Friday.

Positive fundamental news offset worries about the euro zone debt situation.

"The rally overnight is just the market deciding that yesterday's story about Greece wasn't quite as bad as first feared because of the intricate politics this involves," said BNP Paribas analyst Stephen Briggs.

The euro zone debt crisis however, was still far from being resolved as Greece's Prime Minister George Papandreou won the backing of his cabinet on Wednesday to hold a referendum on a 130 billion euro bailout package, a decision that had sent markets into a tailspin in the previous session.

Underpinning copper was a rebound in the euro against the dollar, and options expiry for the LME's November copper contract. A weaker US currency makes dollar-based commodities cheaper for holders of other currencies.

Capping gains though, a business surveys showed the European downturn in euro zone manufacturing in October was deeper than previously reported, underlining how severely the currency union's debt crisis has choked new factory orders.

Demand for refined metal in top copper consumer China is expected to grow 6.4 percent in 2012, a slowdown from this year's 8.5 percent growth rate, a senior analyst at state-backed research firm Antaike said on Wednesday.

Real consumption of refined copper may rise to 7.85 million tonnes in 2012, from 7.38 million tonnes expected in this year, Yang Changhua said.

China is the world's largest consumer of base metals, accounting for almost 40 percent of copper demand last year.

"China's demand may be somewhat weaker in 2012 but it will sustain global demand for commodities," said Caroline Bain, commodities analyst with Economist Intelligence Unit (EIU). EIU expect China to begin relaxing monetary policy early next year.

"China is believed to have run down stocks of base metals in 2011, which coupled with markedly lower global prices, could spark a rush of Chinese buying in early 2012," she said in a note.

Also supporting copper prices was another draw from LME-registered stocks and ongoing strikes at Freeport-McMoRan Copper & Gold Inc operations in Indonesia and Peru.

Copper stocks have dropped around 10 percent in the last month.

Across other metals, lead was at $2,027.50 a tonne from $1,982 and aluminium was at $2,132 from $2,111. Nickel was at $18,750 from $18,700 while zinc, used in galvanizing was at $1,942 from $1,913  on Tuesday's close.

Tin was at $21,900 from a bid of $21,750.

A group of Indonesian tin smelters has agreed to set up pricing contracts in competition with the London Metal Exchange, the governor of Bangka Belitung Province said on Wednesday.