Copper stumbled on Thursday as investors retreated after news of slower economic growth in China, the world's largest consumer of the industrial metal, but falling stocks are expected to support prices.
Three-month copper on the London Metal Exchange was trading at $4,765 a tonne at 1000 GMT compared with $4,819 at the close on Wednesday.
The metal used in power and construction hit a six-month high of $4,925 a tonne on Tuesday, a gain of about 69 percent since late December last year.
China's economy grew at its slowest pace on record in the first quarter -- 6.1 percent compared with forecasts of 6.3 percent and averages around 10 percent in previous years -- prompting investors to take profits.
But Michael Widmer, an analyst at BNP Paribas, said the market was still hoping for stronger Chinese copper demand and that would help sentiment and prices.
"The bets are on China's stimulus package," he said. "But I don't think all the inventory drawdown is going into underlying demand, some of it is going into stockpiles...Outside of China demand continues to be weak."
Stocks of copper in LME warehouses fell 5,200 tonnes to 475,200, down about 10 percent since the middle of February.
PRODUCTION RAMP
Cancelled warrants -- stock already tagged for delivery -- rose to 66,275 tonnes on Wednesday from 57,525 the previous day.
Analysts say this material is probably heading for China given the price premium of about $150 to $200 a tonne for copper in China over London Metal Exchange prices.
"Stocks have been falling, predominantly in Asian warehouses and in Singapore in particular, fuelling speculation of ongoing reserve purchases in China," Commerzbank said in a note.
But analysts say copper price gains of about 50 percent since the start of the year could encourage suppliers to ramp up production and attempt to boost revenues, despite expectations overall demand will shrink this year.
That is also likely to be the case in aluminium used in transport and packaging. China, the world's largest producer and consumer of the metal, is expected to help its local industry with tax rebates on some aluminium products.
Aluminium was trading at $1,499 a tonne from $1,515 at the close on Wednesday. Steel making ingredient nickel rose to $12,720 a tonne, its highest since January 7 and was last at $12,260, down from $12,500.
Zinc was at $1,515 a tonne from $1,520. Earlier zinc touched $1,548, the highest since early October, while tin and lead hit $11,474 and $1,570 respectively, their highest levels since late October.
Dominant positions controlling more than 90 percent of cash warrants on LME stocks has bolstered tin and lead prices.
Supply worries for both metals are reflected in the premium for cash material over the three month contract, which for tin is around $110 a tonne. That is below levels above $200 seen last week, but it is above the $32.5 seen in early February.
The premium for lead is small at about $3, but it compares with a discount of about $16 in late March. Metal Prices at 0951 GMT Metal Last Change Percent Move End 2008 Ytd Percent
move COMEX Cu 220.35 0.00 +0.00 139.50 57.96 LME Alum 1494.00 -21.00 -1.39 1535.00 -2.67 LME Cu 4761.00 -58.00 -1.20 3060.00 55.59 LME Lead 1509.00 -36.00 -2.33 999.00 51.05 LME Nickel 12240.00 -260.00 -2.08 11700.00 4.62 LME Tin 11235.00 -115.00 -1.01 10700.00 5.00 LME Zinc 1513.00 -7.00 -0.46 1208.00 25.25 SHFE Alu 12810.00 50.00 +0.39 11540.00 11.01 SHFE Cu* 40290.00 930.00 +2.36 23840.00 69.00 SHFE Zin 13730.00 605.00 +4.61 10120.00 35.67 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
