LONDON, Oct 9 (Reuters) - Copper eased on Friday to drift away from three-week highs hit in the previous session, as concerns over demand and inventory levels hit sentiment.
By 0939 GMT, copper for three month delivery MCU3 on the London Metal Exchange fell to $6,270 a tonne from $6,330 at the close on Thursday and compared with a session low at $6,240.
"We need to see a steady trickle of (stock) draw downs consistently coming out, which will give us an opportunity to say restocking and consumption levels have begun," said Alex Heath, head of base metals at RBC Capital Markets.
"There was so much hype in the summer...consumers are reluctant to go in at these levels when they really don't see any signs of their order books filling up."
Despite the improving macro picture, doubts over demand outside of China remain, with LME copper stocks falling 250 tonnes to 346,600 tonnes but remaining near five month highs.
Base metals prices also shifted lower, as the dollar firmed following comments on monetary policy from Federal Reserve Chairman Ben Bernanke. [USD/] [ID:nN08545619]
"Bernanke put the brakes on the market by supporting the dollar, Heath added.
On Thursday, copper rose to three week highs at $6,363 a tonne, as improving U.S. data and strong earnings from U.S. aluminium producer Alcoa boosted prices. [ID:nN08516353]
The company, which has curtailed metal production by more than 20 percent since the economic downturn began a year ago, also said there were signs that key markets are stabilizing.
But analysts remained cautious. "While headline figures looked good, the figures were boosted by a major asset disposal and by strangely elevated aluminium prices, driven by excel liquidity and investment allocations," said Fairfax in a note.
"When the dust settles, some smart investors may be seen riding for the hills and leaving the headline traders behind."
TALKS CONTINUE
Investors are also keeping tabs on developments in Chile, where workers at the world's biggest copper mine, Escondida, are likely to accept an early wage deal offered by owner BHP Billiton (BHP.AX: Quote, Profile, Research) (BLT.L: Quote, Profile, Research) and avert a strike. [ID:nN08538059]
The BHP discussions could have a longer-term impact on prices if negotiations continue for some time, and also give indications as to what may happen at other labour talks.
"BHP can ill-afford to have a prolonged strike," said RBC Capital Markets' Heath. "It's not over until it's over."
In other metals, aluminium shed $12 to $1,897. LME inventories in the metal, used in transport and packaging, dipped 7,950 tonnes but remained in touching distance of record levels above 4.6 million tonnes.
Steel making ingredient nickel MNI3 traded at $19,100 from $19,495 while battery material lead MPB3 was at $2,262 from $2,285.
Zinc MZN3 traded at $2,052.25 a tonne from $2,080 and tin MSN3 was at $14,750 from $14,945.
Investors in tin, used in electrical solder, remain concerned about supplies because of a dominant position controlling more than 90 percent of cash warrants on LME stocks. [ID:nL1509642]
Industrial metal markets were little-affected by Chinese markets re-opening after a week-long break, analysts said.
Metal Prices at 0944 GMT Metal Last Change Pct Move End 2008 Ytd Pct
move COMEX Cu 284.75 -3.95 -1.37 139.50 104.12 LME Alum 1890.00 -19.00 -1.00 1535.00 23.13 LME Cu 6255.00 -75.00 -1.18 3060.00 104.41 LME Lead 2252.00 -33.00 -1.44 999.00 125.43 LME Nickel 18975.00 -520.00 -2.67 11700.00 62.18 LME Tin 14625.00 -50.00 -0.34 10700.00 36.68 LME Zinc 2045.00 -35.00 -1.68 1208.00 69.29 SHFE Alu 14845.00 10.00 +0.07 11540.00 28.64 SHFE Cu* 48830.00 640.00 +1.33 23840.00 104.82 SHFE Zin 15730.00 400.00 +2.61 10120.00 55.43 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
