Shanghai copper down 3 pct after LME rally stalls

Shanghai copper lost 3 percent on Wednesday, faltering after a rally in London futures stalled.

Shanghai August copper was at 62,220 yuan a tonne at the close, down 1,900 yuan from Tuesday, while July zinc fell 765 yuan to 30,130 yuan a tonne.

Early on Wednesday, August copper dipped as low as 61,920 yuan, just 40 yuan above its 4 percent downside limit.

"Shanghai's physical market has not been supportive of the futures prices. We see that spot metal trading in Shanghai is still inactive, while supplies are growing," said Jiang Ning, an analyst from Shanghai Nonferrous Metals Industry Association.

"China's copper consumers will purchase less of the metal in June and July versus May and the oversupply in the market could cause some pain," she said.

Spot copper fell 1,450 yuan to between 61,300 yuan and 62,000.

Copper for delivery in three months on the London Metal Exchange fell $61 to $7,200 at 0706 GMT. On Tuesday, copper touched $7,536 in electronic trading, up from Friday's seven-week low of $7,090.

"In general, markets remain somewhat nervous at the moment, and movements in both directions are being somewhat exaggerated," Standard Bank London said in a note.

"However, we still believe we remain in the broad consolidation phase with further upward forays still expected in the short term."

LME copper stocks fell, dipping below 140,000 tonnes for the first time since November 1.

Shanghai August aluminium was down 90 yuan at 19,880 while LME metal was $15 weaker at $2,840.

Investors shrugged off Alcan Inc.'s rejection on Tuesday of an unsolicited $27.6 billion takeover offer from rival aluminium producer Alcoa Inc.

LME zinc fell $30 to $3,680.

China will impose a 10 percent tax on exports of unwrought refined lead from June 1 and double the rate to 10 percent on exports of low-grade unwrought refined zinc that are less than 99.99 percent pure.

China's central bank said late on Friday that it was raising benchmark lending and deposit rates, lifting bank reserve ratios and widening the yuan's trading band, its strongest package of steps since it began tightening policy a year ago.

"We have seen a reversal of the tax situation in China from export tax rebates to export duties. But the country continues to suck metal and spit it out at an incredible rate," Andrew Harrington, analyst at Australia and New Zealand Bank, said.

"It is too early to assess the result of China's monetary tightening combined with the new taxation package."

But weaker global economic growth prospects and slower demand growth for metals could prompt some investors to withdraw from the market, he said.