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METALS-Copper falls on doubts about Chinese demand

9 March 2009, LONDON, (Reuters) By Michael Taylor

* Copper tracks back from multi-month highs

* China stockpiles in focus as demand worries persist

* Aluminium stocks leap to new record

Copper fell nearly 4 percent on Monday on a poor demand outlook, as investors suspected material heading for China was merely being stockpiled at low prices rather than being used for consumption.

Copper for three month delivery MCU3 on the London Metal Exchange traded at $3,656 a tonne at 1525 GMT from $3,723 at the close on Friday, and up from its session low of $3,588.

"All this metal seems to be going into stocks rather than being consumed, and that's the worry," Robin Bhar, senior metals analyst at Calyon, said. He added it was too early to expect any significant pick-up in demand from China.

"It's unlikely we'll see (Chinese) stimulus supporting the economy until the second half of the year," he said, referring to the 4 trillion yuan ($585 billion) investment plan China unveiled in November as exports crumbled.

Copper stocks in LME warehouses fell 3,325 tonnes to 518,700, continuing the past week's trend.

The level of cancelled warrants -- metal tagged to leave LME stores -- fell to 10 percent of total stocks, from 12 percent on Thursday. Cancelled warrants were 54,100 on Monday.

"Everyone was getting terribly excited about cancelled warrants then two days of the cancelled warrants declining and no real significant change today," Briggs said.

"Suddenly, cancelled warrants declines suggest a possibility that there was a little bit of gamesmanship going on."

Copper, used in power and construction, rose about 8 percent last week.

TOO MUCH HOPE

An unexpected rise in Shanghai stocks last week, up more than 10,000 tonnes to 38,468 tonnes or more than a third has worried the market.

"There is too much hope being placed in Chinese refined copper imports," Gary Mead, senior commodities analyst at Virtual Metals, said.

He said recent buying by China's State Reserves Bureau was misleading and only resulted in moving a copper surplus from one part of the world to another.

"Is this copper actually being used or put into warehouses -- my suspicion at the moment is that it is being put into warehouses," Mead added. "I can't see this is a long-term basis for an improved copper price ... The macro economic data from just about everywhere, is awful."

Investors are trimming their exposure. The net long position in U.S. commodities fell nearly a third over the last fortnight,data released on Friday showed.

But analysts warned about reading too much into the data and are looking ahead to Chinese import data later this week.

"The SRB are genuine buyers and I do expect things to get a little bit tighter," said one bullish LME copper trader however. "I don't think it's a false dawn. The next $1,000 on copper will be higher ... I can see plenty of upside potential."

Other metals staged a mixed performance. Aluminium edged up to $1,313 versus $1,310 on Friday.

LME aluminium stocks jumped 6,100 tonnes to a record 3.27 million tonnes -- a reminder of weaker demand for the metal used in packaging and transport.

Nickel MNI3 traded lower at $9,775 from $9,850 at the close on Friday, while LME inventories rose 366 tonnes to 99,636 -- the highest level since June 1995.

Lead MPB3 traded at $1,250 from $1,215 on Friday, tin MSN3 at $11,200 versus $11,320, while zinc MZN3 traded at $1,226 from $1,230.

Metal Prices at 1525 GMT

Metal Last Change Pct Move End 2008 Ytd Pct move

COMEX Cu 164.85 -3.20 -1.90 139.50 18.17

LME Alum 1309.00 -1.00 -0.08 1535.00 -14.72

LME Cu 3650.00 -73.00 -1.96 3060.00 19.28

LME Lead 1242.00 58.00 +4.90 999.00 24.32

LME Nickel 9675.00 -150.00 -1.53 11700.00 -17.31

LME Tin 11050.00 -270.00 -2.39 10700.00 3.27

LME Zinc 1220.00 -10.00 -0.81 1208.00 0.99

SHFE Alu 11555.00 -185.00 -1.58 11540.00 0.13

SHFE Cu* 29020.00 -770.00 -2.58 23840.00 21.73

SHFE Zin 10465.00 -220.00 -2.06 10120.00 3.41

** 1st contract month for COMEX copper

* 3rd contract month for SHFE AL, CU and ZN

SHFE ZN began trading on 26/3/07

(Additional reporting by Nick Trevethan in Singapore and Alfred Cang in Shanghai; editing by Peter Blackburn)

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