SHANGHAI, April 29 (Reuters) - Shanghai copper fell for a fourth straight session on Wednesday to a near 4-week low, on worries over a slump in demand and fears that the spreading swine flu outbreak could exacerbate the economic downturn.
China's copper demand traditionally tumbles towards June, and with high imports expected for April and May, investors are worried the likely oversupply of metal will depress prices in coming weeks.
The benchmark third-month copper futures contract at the Shanghai Futures Exchange edged down 0.7 percent to 34,210 yuan a tonne, the lowest since April 2.
"The market expects copper prices to fall in May, partly as a correction after the previous rally which was too strong and had been inflated by speculation," said Zhu Yanzhong, an analyst with Jinrui Futures.
Shanghai copper has surged 40 percent this year.
Front-month Shanghai copper for May delivery fell 2 percent to 35,300 yuan, squeezing the spread between it and the benchmark contract to 1,090 yuan backwaration from 1,330 yuan when copper hit a six-month high on April 14.
"With the expectation of lower prices in coming weeks, traders who had been reluctant to sell are now willing to sell, so long as they can make a profit," Zhu of Jinrui Futures said.
London copper edged down 0.4 percent to $4,205 a tonne by 0331 GMT, after hitting a three-week low of $4,158 in the previous session. The cash to three months spread widened to a $2 contango, from a $9 backawardation a week earlier.
Copper stocks at London Metal Exchange fell by 5,000 tonnes on Tuesday, hitting a three-month low of 420,275 tonnes.
Cancelled warrants -- material earmarked for delivery -- rose 4 percent to 70,125 tonnes, equivalent to 16.7 percent of total stock.
Zhu added that London inventories are likely to continue to slide in the next week or two, as the cancelled material is removed from warehouses.
"There will be a lot of copper imports through May, likely to add to the pressure on copper prices," said a Shanghai-based trader, who expected copper prices to continue falling in the next month or two.
FLU FEARS
The swine flu outbreak has killed up to 159 people in Mexico and rekindled worries that a global pandemic which could put out signs of nascent economic recovery.
"Obviously, this is a problem that no one has a good handle on, so markets will be adrift until the situation gets clearer. In the meantime, the likely trading tendency would either be to sell first and ask questions later, or more likely, to do nothing at all," said Edward Meir of MF Global in a research note. Base metals prices at 0331 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 4205.00 -15.00 -0.36 3060.00 37.42 SHFE Cu* 34210.00 -250.00 -0.73 23840.00 43.50 LME Alum 1430.00 -6.00 -0.42 1535.00 -6.84 SHFE Alum* 12375.00 65.00 +0.53 11540.00 7.24 COMEX Cu** 193.15 1.55 +0.81 139.50 38.46 LME Zinc 1360.00 19.00 +1.42 1208.00 12.58 SHFE Zinc 12070.00 155.00 +1.30 10120.00 19.27 LME Nickel 10875.00 -45.00 -0.41 11700.00 -7.05 LME Lead 1295.00 3.00 +0.23 999.00 29.63 LME Tin 11850.00 -50.00 -0.42 10700.00 10.75 LME/Shanghai arb^ -675 Dollar/yuan 6.8243 \ 6.8253 ** 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 (Editing by Ben Tan)
