SINGAPORE, Jan 4 (Reuters) - Shanghai copper and aluminium futures dropped by their 4 percent daily limits on Thursday trying to catch up with falls in London after a lengthy Chinese New Year holiday break.
The most active March contract dropped 2,700 yuan at the start of trade to 57,380 yuan ($7,344) a tonne and stayed there all day, as the market reacted to a drop of 10 percent in LME futures since the start of the year.
The most active March Shanghai aluminium contract was down 830 yuan at the close at 19,720 yuan, having touched its downside limit at 19,710 earlier.
"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 $5,680 a tonne by 0705 GMT, down from $5,855 at the close in London on Wednesday when the market dropped more than 4 percent.
"The market perception was that we would see some bargain hunting when Asia came back in today, but that failed to materialise and people were caught a little long and are selling out now," an LME dealer said.
Copper prices have fallen on growing concern 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.
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
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.
LME aluminium was down $16 at $2,724, and zinc lost 2.4 percent or $99 at $4,050.
Lead , which rose 4 percent on Wednesday to $1,720, gave up those gains, falling 3.6 percent to $1,660.
Tin was at $10,800, down $75.
Nickel futures were down $25 at $32,725 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 0705 GMT
Metal Last Net Chang
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