Copper slips on dollar recovery, China demand worry

Copper slipped on Monday, reversing earlier gains, as investors turned cautious on the stronger dollar and concerns about slowing growth in China.

Three-month copper on the London Metal Exchange was down at $4,810.25 a tonne at 1414 GMT, after rising to a high of $4,950 earlier as buyers took advantage of prices that had dropped by a third in the past three weeks on recession fears.

The metal -- often seen as a key gauge of real economic activity -- closed at $4,806 on Friday and on Thursday copper touched the lowest since January 2006 at $4,545.

The dollar rallied against the yen, after Federal Reserve Chairman Ben Bernanke told Congress another stimulus plan may be needed to boost the sluggish economy, making dollar-priced metals more expensive for holders of other currencies.

Copper prices have fallen more than 25 percent this year.

Weak data signalling a slowdown in China capped prices, but analysts said some softness had to do with the Olympic Games.

China's annual GDP growth fell to 9 percent in the third quarter from 10.1 percent in the second quarter, and factory output dropped to a six-year low.

China's production of refined copper rose 4.7 percent on the year in September on expanded production capacity in the world's top consumer of the metal.

SLUGGISH DEMAND OUTLOOK

The soft economic outlook prompted Deutsche Bank to slash its commodity forecasts, slicing nearly 40 percent from its 2009 forecast for copper to just $4,161 a tonne.

The report added aluminium could fall 16 percent from current prices to average $1,874 next year and nickelwould average $10,279, 43 percent down from previous forecast.

Credit Suisse cut its forecasts and the investment bank expected a surplus in copper for next year.

Sanford C. Bernstein also revised its forecasts downwards, adjusting the figures to slower global economic growth.

"We are allowing for 2-2.5 percent global GDP," analyst Andrew Keen at investment management firm Bernstein said.

In 2009, copper was seen at $4,200 a tonne, down from a previous forecast at $5,800, Bernstein's report said.

Lead dropped as much as 4.8 percent to a low of $1,390 a tonne from $1,460 at the close on Friday. Cancelled warrants -- contracts already reserved for delivery -- account for 22 percent of stock levels on the LME.

Nickel fell as low as $10,400 from Friday's last quote of $10,750/10,850 on worries about demand from stainless steel producers.

Aluminium was trading at $2,163 from $2,225, zinc was unchanged at $1,225, while tin was last at $12,900 against $12,900/13,000 on Friday.

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