SINGAPORE: Shanghai copper fell more than 1 percent on Thursday, while prices headed down for a third straight session in London, as investors worried about further tightening policies from China amid expectations of high March inflation numbers.
Chinese data due Friday is expected to show the economy grew less quickly in the first quarter than the last quarter of 2010 but still strongly, and consumer inflation climbed to a 32-month high.
Earlier this week, the Chinese government reiterated its resolve to use all possible tools to stabilise prices and bring inflation under control.
"The metals market will focus on whether liquidity will further diminish, as consumption has not been great so far this year," said a Shanghai-based trader.
"There's no sign that the government will loosen up, as price control has become an all-important issue."
Shanghai's most-active copper futures contract
Three-month copper on the London Metal Exchange edged down 0.3 percent to $9,485 a tonne.
However, technical analysis indicated a rebound was on the cards for copper in the next 24 hours, with LME copper seen climbing to $9,600 a tonne and Shanghai copper to 72,000 Yuan, said Reuters market analyst Wang Tao.
Open interest in LME copper has been on a steady decline since mid-January, reflecting cautious mood among investors faced with a cloudy economic outlook and implications of the Japan earthquake and Middle East unrest.
LME copper open interest declined more than 10 percent from its peak of 324,420 lots on Jan. 14 to 289,215 lots on Tuesday, while copper prices had largely been trading in the range of about $1,000 around $9,500.
The front to three-month spread in Shanghai copper widened to a 300 yuan backwardation, from about 200 Yuan on Wednesday, as prices fell towards 100-day moving average at 70,602 Yuan.
"Once price dips below 70,500 Yuan, many end-consumers will show interest in buying," said Guo Yong, an analyst at Jinrui Futures in China.
"Overall, the confidence is still there, even though a new record is probably unlikely any time soon."
Indications that governments across the world may be getting closer to rolling back easy monetary policies also weighed on market sentiment.
Earlier this week, top US and European central bank officials agreed their institutions must withdraw some of the extraordinary support they provided to help their economies recover from a deep crisis.
The Jinrui analyst expects LME copper to range around $9,500 in the near term, with the $9,000 level offering strong support.
The Singapore Mercantile Exchange (SMX) will launch cash-settled gold, silver and copper futures contracts on April 15.
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