LONDON, Nov 12 (Reuters) - Base metals tumbled on the London Metal Exchange on Friday, as talk of an interest rate rise by China and renewed fears of over a European sovereign debt crisis encouraged hot money to flee risky assets.
Benchmark copper on the London Metal Exchange steadied at $8,670 at 1103 GMT, down from a close of $8,830.
The metal used in power and construction hit a record high of $8,966 a tonne on Thursday, passing the heights scored in a commodity boom before the Lehman collapse in late 2008 heralded a stinging global economic downturn.
"The Chinese are using all the tools they need now to accelerate some of the controls. If inflation threatens to get out of control they'll stamp on it very quickly," said RBC analyst Alex Heath.
"It's been fire-fighting these last two days. If we do get another wave of selling it could get ugly."
Steps by China, the world's top consumer of industrial metals to slow down its overheating economy, eroded demand expectations for base metals.
China started to signal monetary tightening intentions on Tuesday when it unexpectedly raised the yield on bills at a central bank auction.
Meanwhile, concerns about Ireland and fears its woes could drag down other euro zone countries like Portugal and Spain have weighed on the euro currency, which hit its lowest level against the dollar since late September on Friday. A stronger dollar makes commodities more expensive for holders of other currencies.
However, concerns of competitive devaluation have kept hard assets such as commodities attractive for investors.
"The currency is the bigger picture and the general consensus still is that the dollar's not going to retain any real medium to longer term strength," added RBC's Heath.
In other economic news, quarterly euro zone economic growth more than halved in the third quarter against the previous three months in line with market expectations.
Economic releases that could impact metals via currencies include the U.S. University of Michigan consumer sentiment index for November, due at 1455 GMT.
Next week, U.S. data includes retail sales for October, industrial production, and housing and building starts. It is also the week of the prompt date for the prime LME contracts so inventories might rise as metal is brought in against short positions.
VOLUMES SURGE
Three-month copper on the LME has seen strong volumes, suggesting appetite for the red metal remains keen even at high price levels, as trade and investors seek to buy on dips.
"A pull back has been due. You'd have thought with that sort of volume overnight, copper would have been smashed - but we've seen buying today from industrial consumers," a London metals trader said.
Volumes on the LME stood at over 15,000 lots, more than the total daily average. Also, premiums for the cash copper contract have climbed against the three-month contract of late to $5 from a $10 discount one week ago, signalling tight nearby supply. Tight supply has underpinned copper prices, with week-long strike action threatening to further curtail output from the world's No 3 copper mine, Chile's Collahuasi.
Across other metals, zinc, which fell by more than five percent at one point was last at $2,455.75, down from its $2,542 close.
China sold almost all of the 50,000 tonnes of zinc up for sale at an auction of state reserves on Nov 9, with an average sale price of 19,511 yuan per tonne. Aluminium was more supported, at $2,454 versus $2,458, while lead at $2,550 dropped from $2,610. Lead had hit a ten-month high of $2,650 on Thursday.
Tin flagged to $26,680, falling from $27,000, and nickel eased to $23,650 from $24,000, weighed by rising inventories and a dearth of demand from key consumers, the stainless steel sector.
Metal Prices at 1106 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2009 Ytd Percent
move COMEX Cu 394.45 -7.80 -1.94 334.65 17.87 LME Alum 2455.00 -3.00 -0.12 2230.00 10.09 LME Cu 8830.00 70.00 +0.80 7375.00 19.73 LME Lead 2590.00 -20.00 -0.77 2432.00 6.50 LME Nickel 23800.00 -200.00 -0.83 18525.00 28.48 LME Tin 26800.00 -200.00 -0.74 16950.00 58.11 LME Zinc 2530.00 -12.00 -0.47 2560.00 -1.17 SHFE Alu 16520.00 -445.00 -2.62 17160.00 -3.73 SHFE Cu* 65340.00 -3410.00 -4.96 59900.00 9.08 SHFE Zin 19680.00 -1090.00 -5.25 21195.00 -7.15 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
