MARKETS-METALS (UPDATE 4) * China story intact, despite tightening * U.S. bank plans, Fed decision on the radar * Nickel stocks hit record high (Adds official prices) By Pratima Desai LONDON, Jan 27 (Reuters) - Copper sagged on Wednesday as worries about China dominated sentiment, but analysts said demand from the world's largest consumer of industrial metals would stay strong. However, traders expect to see further losses for industrial metals prices due to U.S. plans to limit banks' trading activity and hefty rises in London Metal Exchange stocks. Benchmark copper on the LME traded at $7,267 a tonne in official rings compared with $7,395 at the close on Tuesday. The metal used in power and construction has lost nearly 7 percent since hitting a peak of $7,796 on Jan. 7. The latest trigger was news that China's largest bank, Industrial and Commercial Bank of China said it has stopped rolling over some loans to slow credit growth. "It looks like China is only moving from very loose policy to slightly less monetary policy ... The China story is intact and we are bullish for copper in the short term," said Max Layton, analyst at Macquarie. "China is leaving in place the majority of their measures on the fiscal side to encourage domestic consumption." ICBC later said it will not halt new loans. "Government-led infrastructure projects have always been a priority and China is only trying to sustain its booming growth to evade inflation," VTB Capital said in a note. RED HERRING Prices of industrial metals have also came under pressure from U.S. plans to rein in banks' proprietary trading. Paul Volcker, a member of the Obama administration's economic team and a former chairman of the Federal Reserve, will testify on Feb. 2 to a U.S. Senate committee on the latest White House bank regulation proposals. "This could be a red herring, we need to see more detail, but the market is trying to price it in already," a metals trader said, adding that a statement from the U.S. Federal Reserve was on the radar. The Fed ends a two-day meeting on Wednesday, which is expected to yield little in terms of a policy shift, but investors will scrutinise the statement for clues to the future direction of monetary policy and the dollar. Also in the spotlight are LME stocks, which with the exception of aluminium, rose for all metals on Tuesday. A 5,025-tonne rise in copper stocks caused some consternation, but traders pointed to the rise in cancelled warrants -- material already earmarked for delivery -- up at 11,900 tonnes from 3,125 tonnes on Jan. 4. "Cancelled warrants are in Busan, Singapore and Korea ... the metal is going to China," the trader said. But for zinc the rise in stocks -- 2,275 tonnes to 496,200 tonnes -- reinforces the results of a Reuters survey published on Tuesday, which showed expectations are for a market surplus this year of 209,500 tonnes from 12,000 in July. Three-month zinc traded at $2,275 a tonne from $2,318.50 on Tuesday, tin was bid at $17,945 from $17,975 and battery material lead was bid at $2,162 tonnes from $2,200. Lead stocks jumped to 155,775 tonnes, the highest since 2003, while nickel stocks hit a record high of 163,704 tonnes. Nickel, a key ingredient for stainless steel, traded at $17,985 a tonne from $18,200 on Tuesday. Aluminium, used widely in the transport and packaging industries, traded at $2,184 from $2,221 on Tuesday. Metal Prices at 1308 GMT Metal Last Change Percent Move End 2009 Ytd Percent move COMEX Cu 330.60 -3.35 -1.00 334.65 -1.21 LME Alum 2175.00 -46.00 -2.07 2230.00 -2.47 LME Cu 7275.00 -120.00 -1.62 7375.00 -1.36 LME Lead 2160.00 -40.00 -1.82 2432.00 -11.18 LME Nickel 17860.00 -340.00 -1.87 18525.00 -3.59 LME Tin 17850.00 -125.00 -0.70 16950.00 5.31 LME Zinc 2265.00 -53.50 -2.31 2560.00 -11.52 SHFE Alu 17000.00 25.00 +0.15 17160.00 -0.93 SHFE Cu* 59540.00 190.00 +0.32 59900.00 -0.60 SHFE Zin 19270.00 75.00 +0.39 21195.00 -9.08 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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