Shanghai copper gives up early gains on demand concerns
* Shanghai stockpiles down 11 pct, first fall since mid-Jan
* Base metals see downside pressure on economic crisis
* China's state reserves buy 290,000 tonnes of aluminium (Adds comments, updates prices to Shanghai close)
SHANGHAI, Feb 20 - China copper futures fell on Friday, giving up earlier gains, as investors sold the metal on demand concerns, ignoring news of declining stockpiles in Shanghai warehouses.
The most active Shanghai May copper contract inched down 160 yuan to 26,540 yuan ($3,883) a tonne at the daily close, falling from a 1 percent gain during morning session, while London Metal Exchange copper for three-month delivery dropped $40 to $3,250 a tonne by 0700 GMT.
"Shanghai copper fell in the afternoon as some investors took profit after the technical rebound for almost two days," said Cai Luoyi, a senior analyst at China International Futures.
On the supply side, stockpiles of copper at London Metal Exchange warehouses rose again on Thursday, up 2,950 tonnes after their first big fall since October on Wednesday.
But in Shanghai, copper inventories fell 11 percent from a week earlier to 30,105 tonnes, marking a first decline since mid-January, when stockpiles were just half the current level.
"I think copper prices will fall to the $3,000 level and then head south further, to the $2,800 level in coming months, before there is support," said a Shanghai-based LME trader, noting that consumption was unlikely to pick up soon because of the worsening economic slump.
With employment, housing and credit conditions in the United States showing no signs of turning around, the Federal Reserve forecast the world's largest economy would shrink by between 0.5 percent and 1.3 percent this year.
"Risk-averse sentiment on global markets is likely to influence the general trend at the moment, while we think that persistently negative economic data will also limit gains in industrial metals," VTB Capital's Commodities Analyst Andrey Kurenchenkov said in a recent note.
"Unfortunately, we have not seen any positive developments that could revive the market, especially with LME copper, aluminium and nickel stocks still on the rise."
Aluminum stocks in LME warehouses rose 30,850 tonnes on Thursday to another record high of 3.11 million tonnes, having increased more than 80 percent in the past three months.
SRB PURCHASE DISAPPOINTS
Shanghai May aluminium fell 3.2 percent to 11,580 yuan at the close, while London three-month futures fell $5 to $1,345, after sinking to a six-year low of $1,314 on Wednesday as stockpiles soared.
Low prices and weakened demand have forced China's cental government to buy metals as reserves, as part of a plan to shore up smelters.
On Friday, the State Reserves Bureau (SRB) bought 290,000 tonnes of primary aluminium from local smelters at 12,490-12,500 yuan per tonne, a source familiar with the purchase said, the SRB's second move in less than two months.
However, analysts said the purchase prices were disappointing and would not offer enough support to domestic physical prices.
"The prices stood at the lowest level of a range that the market has expected," said analyst Pang Ying at trading house Runtop. Metal Prices by 0700 GMT: Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 3250.00 -40.00 -1.22 3060.00 6.21 SHFE Cu* 26540.00 -160.00 -0.60 23840.00 11.33 LME Alum 1340.00 -10.00 -0.74 1535.00 -12.70 SHFE Alum* 11580.00 -385.00 -3.22 11540.00 0.35 COMEX Cu** 146.80 0.00 +0.00 139.50 5.23 LME Zinc 1115.00 -17.00 -1.50 1208.00 -7.70 SHFE Zinc 10100.00 -75.00 -0.74 10120.00 -0.20 LME Nickel 9830.00 -70.00 -0.71 11700.00 -15.98 LME Lead 1065.00 -5.50 -0.51 999.00 6.61 LME Tin 10750.00 -100.00 -0.92 10700.00 0.47 LME/Shanghai arb^ -350 Dollar/yuan 6.8351 \ 6.8361 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month ($1=6.835 yuan)
