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METALS-Copper ends down in reversal from 5-week peak

Published 04/11/2011, 03:01 PM
Updated 04/11/2011, 03:04 PM
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* Copper under pressure from dollar, growth worries

* Goldman Sachs advises clients to close copper longs

* China's copper imports up 29 pct in March

* Coming up: U.S. retail sales data on Tuesday (Recasts, adds New York dateline/byline, updates with New York closing copper price, adds details and analyst comments)

By Chris Kelly and Pratima Desai

NEW YORK/LONDON, April 11 (Reuters) - Copper retreated from an earlier five-week high on Monday, snapping a four day rally as the struggling dollar strengthened and a strong aftershock in Japan unnerved some investors.

Losses sped up later in the session after long-term commodity bull Goldman Sachs advised its clients in a note to close their long copper positions, which returned 23 percent since the investment bank's first recommendation to go long in October 2010.

"If one of the biggest players isn't buying and gets out of the market, we'll set back," said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago.

London Metal Exchange (LME) three-month copper peaked at $9,944.75 a tonne, its priciest level since March 4, before ending with a $20 loss, at $9,855.

COMEX May copper shed 4.15 cents to settle at $4.46 per lb, near the bottom of its $4.4555 to $4.5330 session range.

Trading volumes remained brisk. More than 50,500 lots exchanged hands by 2:25 p.m. EDT (1825 GMT), in excess of 20 percent above the 30-day norm, according to Thomson Reuters preliminary data.

The day began with Chinese trade data for the month of March, showing the metal-consuming giant's appetite for copper recovered strongly from February's weaker tone.

Copper initially jumped on the back of the data, but with little follow-through buying, gains were quickly rolled back as reports of another powerful aftershock in Japan surfaced.

"All the markets were up overnight and after good Chinese data," said RBC Capital's head of base metals Alex Heath.

"The aftershock was unnerving a market that was probably uncomfortable with the early gains on the back of so little news this morning."

Concerns about the sustainability of the global economic recovery from the International Monetary Fund added to the bearish tone.

With little in the way of fresh fundamental news, investors were left to take their directional cues from the currency markets.

The dollar bounced against the euro in a relief rally after the U.S. government averted a potential shutdown, triggering losses across the broader commodity spectrum.

Furthermore, stocks of copper in LME warehouses climbed 1,525 tonnes to 445,700 tonnes, up nearly 18 percent since the end of last year and the highest since early last July.

NEGATIVE ANOMALY

A 29.2 percent rise in copper imports during the month of March extended copper's rally overnight and many hold a positive outlook for demand and prices.

"Copper looks set to test the $10,000 a tonne mark again, supported by strong import figures from China," Commerzbank said in a note. "February appears to have been a negative anomaly ... and fears of a downturn of demand have not been confirmed.

The metal hit a record at $10,190 in February.

The data alleviated some fears that China's absence from the copper market would be prolonged, but doubts remain and many point to high stocks in Shanghai.

China is the world's largest consumer of copper, accounting for about 40 percent of global demand estimated at around 21 million tonnes this year.

Aluminum jumped to $2,720 a tonne, a level last seen in August 2008, before ending down $24 at $2,689 a tonne.

China's decision to halt plans for new aluminium plants in the country to tackle serious overcapacity added a positive tone for the market, traders said.

Tin hit a record at $33,600 a tonne as rains and police raids on illegal tin miners have hampered mining in Indonesia. (Additional reporting by Silvia Antonioli in London; Editing by Alden Bentley)

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