MARKETS-METALS (UPDATE 6) * Market starts to think about summer demand lull * Falling copper stocks help buoy sentiment * U.S. housing starts drop to five-month low in May (Updates prices, adds detail) By Pratima Desai and Rebekah Curtis LONDON, June 16 (Reuters) - Industrial metal prices fell on Wednesday, losing grip of two-week highs as weak U.S. housing data stoked concerns about the demand outlook, although copper rose in choppy trade as the euro came back from its day's lows. Benchmark copper on the London Metal Exchange traded at $6,636.25 a tonne at 1416 GMT from $6,600 at the close on Tuesday, having fallen to as low as $6,550 after the data. The metal used in power and construction earlier touched $6,775 a tonne, matching the high set on June 2. Base metals prices softened after data showed U.S. housing starts fell more than expected in May to their lowest level in five months, knocking confidence in the health of the U.S. economic recovery. "Risk aversion will keep pressure on these prices," Daniel Brebner, metals analyst at Deutsche Bank, said. "Our expectation is that prices are likely to weaken into the third quarter and then perhaps rebound into 2011," he said, citing concerns about the European demand outlook. "The longer term characteristics of copper look positive but I'm just very worried about near-term." Among other data, U.S. industrial production rose faster than expected in May. The euro softened against the dollar on fresh concerns about Spain's credit and banking system, but copper gained support as the single European currency recovered from the day's lows. Aluminium, used in transport and packaging earlier saw $2,043 a tonne, its highest since May 28, but later traded at $2,001 a tonne from Tuesday's $2,012. Some analysts were confident that the demand picture would improve gradually, thanks to expectations of ongoing strength in demand from China, the world's top base metals consumer. NAVIGATE SUCCESSFULLY Copper prices are up some 10 percent since an eight-month low of $6,037.50 a tonne on June 7, at the height of the debt crisis in Europe. Prices have been supported by recent, strong manufacturing data from China and the United States. "We are becoming much friendlier to the markets and suspect that the current move higher may hold up better than previous efforts," MF Global said in a research note. "When it comes to existing uncertainties, such as the European sovereign debt crisis and fears of a Chinese slowdown, there is better than 50-50 chance that we will successfully navigate through both these issues." Also helping buoy sentiment are stocks of copper in LME warehouses, down about 20 percent at 459,150 tonnes since the middle of February. LME tin stocks at 20,430 tonnes are also on the radar, as they have fallen nearly 25 percent since January. Tin hit $17,789 a tonne, the highest since June 3. It was later at $17,750 a tonne from $17,500 on Tuesday. Worries about near-term supply have narrowed the discount or contango for the cash contract compared with the three-month contract, which is around $60 a tonne from levels around $83 at the end of March. Steel ingredients nickel and zinc hit $20,550 and $1,876 a tonne respectively and battery material lead rose to $1,785.50 a tonne, their highest levels since early June. Nickel later traded at $19,950 a tonne from $20,225 at the close on Tuesday, lead was at $1,760 from $1,759 and zinc traded at $1,821 from $1,840. Metal Prices at 1419 GMT Metal Last Change Percent Move End 2009 Ytd Percent move COMEX Cu 299.25 -1.20 -0.40 334.65 -10.58 LME Alum 1997.00 -15.00 -0.75 2230.00 -10.45 LME Cu 6636.00 36.00 +0.55 7375.00 -10.02 LME Lead 1756.00 -3.00 -0.17 2432.00 -27.80 LME Nickel 19900.00 -325.00 -1.61 18525.00 7.42 LME Tin 17625.00 125.00 +0.71 16950.00 3.98 LME Zinc 1818.00 -22.00 -1.20 2560.00 -28.98 SHFE Alu 14565.00 160.00 +1.11 17160.00 -15.12 SHFE Cu* 51450.00 760.00 +1.50 59900.00 -14.11 SHFE Zin 14295.00 175.00 +1.24 21195.00 -32.55 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Editing by James Jukwey)

Source