Copper prices in London surged almost 6 percent, the most in a month, on speculation demand will outpace supplies in the second half of 2006. Zinc, nickel and aluminium also gained.

Inventories of copper monitored by the London Metal Exchange have tumbled 16 percent this month. Supplies of copper, used in plumbing and wiring, will fall short of demand by 200,000 metric tons this year, Mitsui Bussan Commodities, a unit of Japan's second-largest trading company, said yesterday.

"The market is coming back to the view that supply is tight," said Peter Hickson, a strategist at UBS AG in London.

Copper for delivery in three months jumped $400, or 5.8 percent, to $7,300 a metric ton on the LME, the biggest percentage gain since May 23. Prices reached a record $8,800 a ton on May 11.

A gain above $7,200 a ton triggered more buying by investors who follow price charts, said Michael Skinner, a London-based analyst at Standard Bank London Ltd. Purchases by funds also boosted prices, said Scott Meyers, a New York-based trader at Man Financial Ltd.

Copper closed at $6,709 on June 22, down 24 percent from the mid-May record on concern higher global interest rates intended to combat inflation will slow economic growth and curb demand for commodities.

Nickel prices rose $350, or 1.7 percent, to $20,750 a ton. Prices have climbed 41 percent from a year ago.

"There's no question that fundamentals are looking pretty attractive," said Tony Warwick-Ching, an analyst at CRU International, a London-based consulting company. "The markets are still saluting that."
Nickel inventories

Inventories plunged 70 percent this year to 10,548 tons, equal to less than three days of global use. Demand will exceed output by 15,000 tons in 2006, Credit Suisse Group said earlier this month. Nickel is used to make stainless steel rustproof and malleable.

Stainless-steel production is soaring in Asia on demand for the metal used in construction, kitchen appliances and cutlery. Global stainless-steel output will rise 8.9 percent to 26.4 million tons this year, led by a 10 percent gain in Asia, the International Stainless Steel Forum said June 19.

Aluminium gained $72, or 2.9 percent, to $2,555 a ton. Zinc climbed $155, or 5.3 percent, to $3,100 a ton.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery surged 13.4 cents, or 4.2 percent, to $3.305 a pound. Prices have more than doubled in the past year.