SINGAPORE, Jan 4 (Reuters) - Shanghai copper futures fell by the 4 percent daily limit on Thursday when the market reopened after the New Year holidays.
The most active March contract dropped 2,700 yuan at the start of trading to 57,380 yuan ($7,344) a tonne, as the market tried to catch up with the more than 7 percent drop in LME futures since the start of the year.
"The fall in Shanghai was to be expected. I think we will see some buying by the Chinese once the markets get closer to parity," a dealer in Hong Kong said.
LME copper for delivery in three months was at $5,853 a tonne by 0358 GMT, down slightly from $5,855 at the close in London on Wednesday, when the market dropped more than 4 percent.
Other Shanghai copper futures were also limit down.
"Technically, there will be a further fall in Shanghai copper tomorrow, as London copper dropped more than 7 percent during the Shanghai break," said Pang Ying, a senior analyst at Minmetal Star Futures in Shenzhen.
She added that traders could deliver more copper to settle the January contract, which would weigh on the spot market.
Shanghai spot copper was down 3,205 yuan at 58,640-59,100 a tonne.
COMMODITIES WEAKER
Copper prices have fallen on growing concerns about slowing growth and rising supplies of metal.
The minutes of the U.S. Federal Reserve's December policy meeting indicated the central bank sees increased downside risks to economic growth.
Supply also appeared to be easing with stocks of copper in LME-monitored warehouses up by nearly 10,000 tonnes in the first two days of 2007 alone to 192,550 tonnes and 650 percent higher than the cyclical low of 25,525 tonne in July 2005.
Commodities in general are on the defensive with the Reuters/Jefferies CRB index closing 2.8 percent lower at 298.49 on Wednesday due to falls in energy and base metals.
In May last year, the index, a basket of energy, livestock, grains and metals, scored a lifetime high of 365.45.
The most active March Shanghai aluminium contract was down 1.75 percent at 20,180 yuan.
LME aluminium was up $10 at $2,750, but zinc lost $39 at $4,110.
Nickel futures for delivery in three months on the London Metal Exchange were down $150 or 0.45 percent at $32,600 a tonne.
BHP Billiton said it had halted mining operations at its Mt. Keith and Leinster nickel mines in Western Australia due to heavy rains.
"Some very heavy rains have hit Western Australia and we have had to partially close two of our mines, Leinster and Mt. Keith," BHP Billiton spokeswoman Emma Meade said.
She said the rain was making the ground unstable and unsafe to operate heavy equipment, but the company's concentrators continued to run.
"The concentrators are still operating from stockpiles and it is business as usual with the exception of the actual open-cut mining operations," she said.
Between them, the two mines produce around 87,000 tonnes of nickel per year, or about 6 percent of world mine output.
While too much rain is affecting Australian production, too little rain is reducing output in Indonesia.
Production at PT Inco's 71,000 tonne-per-year operation is down by 130 tonnes per week, equivalent to 6,760 tonnes per year and is set to fall further unless water levels rise behind hydro-electric dams.
Metal Prices at 0421 GMT
Metal Last Net Change Pct Move
LME Cu 5850.00 -5.00 -0.09
SHFE Cu* 57380.00 -2700.00 -4.49
LME Alum 2752.00
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