Copper prices fell on Tuesday as a stronger dollar offset data that hinted at economic recovery, while investors weighed falling inventories against a decline in warehouse material tagged for delivery. Copper for delivery in three months on the London Metal Exchange MCU3 ended at $4,535 from $4,600 on Friday. Earlier, the metal used in power and construction touched a day's high of $4,750, its strongest since the middle of April, as prices caught up with Shanghai gains after a three-day weekend. But a firmer U.S. currency helped reverse copper's gains, making metals priced in dollars more expensive for holders of other currencies. Providing some support, copper stocks at LME warehouses fell 3,775 tonnes to 394,925 tonnes. But cancelled warrants -- material tagged for delivery -- dropped to 79,450 tonnes, down from 83,100 tonnes at the end of last week. Gains in cancelled warrants this year have given copper prices a big boost. "It does seem to track dollar movements closely these days," said Gary Mead, senior commodities analyst at Virtual Metals on copper. "Prices seems to have got out of sync with what the real underlying supply-demand fundamentals are telling us." "A lot of the money in the copper price is about over exuberance about small indications of positive data out of the U.S. and continued hopes that China is going to help us all." The market widely believes this year's rise in material tagged for delivery -- increasingly in European warehouses -- has reflected metal destined for China, the world's biggest copper consumer. But analysts voiced doubts about the sustainability of the recent surge in Chinese demand that helped spur copper more than 30 percent higher in the first quarter. "Chinese influence has been key to short-term copper gains, but analysts believe those supportive factors will not last," UBS said in a note. "China's State Reserve Bureau (SRB) was widely thought to be buying copper, with many traders viewing those purchases as an inventory shuffle and that it would land back in the market." Although buying by the SRB has received the lion's share of attention in recent months, a shortage of copper scrap has also contributed to the upturn, analysts said. "While there are clearly cyclical elements, we believe scrap is likely to remain structurally tight, with favorable implications for refined metal demand," said Morgan Stanley. SUPPORTIVE DATA Data underpinned upside in the market. Pending sales of previously owned U.S. homes rose for a second straight month in March, while construction spending edged higher, suggesting moderation in the long housing slump. That fed into the positive sentiment generated by a survey of Chinese manufacturing that provided new evidence the massive fiscal and monetary stimulus is reviving the world's third-largest economy. [ID:nOSL010182] [ID:nN04391664] Among other industrial metals, aluminium MAL3 closed at $1,542 a tonne from $1,537 on Friday, discouraged by yet another record high in stocks at LME warehouses, which climbed 4,825 tonnes to 3,797,125 tonnes. Nickel MNI3 ended at $12,000 from $11,900. The market has been battered by a collapse in stainless demand, but the world's biggest stainless steel producer, Acerinox (ACX.MC: Quote, Profile, Research), said on Monday it saw the market recovering in the third quarter after poor sales and weak prices pushed the Spanish firm into a first-quarter loss. [ID:nL167732] Zinc MZN3 rose to $1,530 a tonne from $1,510. The metal jumped more than 6 percent on Friday in a broad industrial metals rally inspired by data suggesting some stabilisation in the U.S. factory sector. Tin MSN3 closed at $12,625 versus $12,350 and also hit its highest since level early December, while battery material lead MPB3 was at $1,415 a tonne from $1,400. Worries about short-term tin supplies persisted and were reflected in a premium for cash over three-month contracts in backwardation. Lead supplies were also a concern, with a dominant position controlling more than 50 percent of cash warrants on LME stocks. Metal Prices at 1611 GMT Metal Last Change Pct Move End 2008 Ytd Pct move COMEX Cu 207.00 -7.50 -3.50 139.50 48.39 LME Alum 1530.00 -7.00 -0.46 1535.00 -0.33 LME Cu 4515.00 -85.00 -1.85 3060.00 47.55 LME Lead 1405.00 5.00 +0.36 999.00 40.64 LME Nickel 11800.00 -100.00 -0.84 11700.00 0.85 LME Tin 12645.00 195.00 +1.57 10700.00 18.18 LME Zinc 1505.00 -5.00 -0.33 1208.00 24.59 SHFE Alu 12675.00 -200.00 -1.55 11540.00 9.84 SHFE Cu* 37590.00 -590.00 -1.55 23840.00 57.68 SHFE Zin 12680.00 -460.00 -3.50 10120.00 25.30 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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