MARKETS-METALS (UPDATE 3)
* Focus on demand prospects
* U.S. data flatlining, China demand seen subdued
* Copper cancelled warrants rising
(Recasts, adds comment/details, changes dateline from MANILA)
By Pratima Desai
LONDON, March 2 (Reuters) - Copper slipped on Tuesday as worries about supplies from top producer Chile eased and the market started to fret about poor demand prospects in major world economies such as the United States.
Benchmark copper on the London Metal Exchange was trading at $7,332 a tonne at 1109 GMT compared with $7,400 at the close on Monday when the metal used in power and construction hit $7,600 a tonne, the highest since Jan. 20.
Monday's gains were triggered by a massive earthquake in Chile, which hit about a quarter of the country's copper output.
But news that mines had returned to work sparked a bout of profit taking which took copper to a low of $7,255 a tonne on Tuesday.
"There was an overreaction to Chile, a very important supplier of copper. But it looks like the impact is going to be minimal in terms of copper supply disruptions," said Dan Brebner, an analyst at Deutsche Bank.
"There hasn't been too much serious infrastructure damage ... OECD restocking looks like its happening, but slowly."
Chile produces about 35 percent of global mined copper. Countries such as China, India and Japan rely on copper concentrate from the country to keep their smelters going.
Traders said a shortage of concentrate if deliveries do not make it to Chile's ports because of damage to roads or railways could put downward pressure on smelter treatment charges.
"The unfortunate earthquake in Chile, highlights the potential threat to the copper production base from incidents such as this," investment bank Fairfax said in a note.
DEMAND SUBDUED
Also weighing on industrial metals was the stronger dollar against the euro, which is under pressure because of fiscal problems in Greece.
A higher dollar makes metals priced in the U.S. currency more expensive for holders of other currencies and in the longer term it also means producers try to protect profit margins by raising prices.
"The dollar is quite strong against the euro and sterling, markets are looking at Greece and the potential for a hung parliament in Britain," Brebner said.
Copper prices, up about 140 percent last year were boosted by demand from China -- the world's largest consumer.
This year Chinese government and consumer demand is expected to be subdued. Analysts had expected the difference would be made up by stronger demand in other major economies such as the United States, Japan and Germany.
But talk of a double-dip recession in the second half of this year is gathering momentum.
"U.S. data has been positive, but it's not getting more positive," Brebner said. "It's flatlining and so it's difficult to see where the catalyst for taking metal prices significantly higher will come from."
Weak demand for copper can be seen in stocks of the metal in LME warehouses at above 552,000 tonnes, the highest since October 2003 and more than double the levels seen in July 2009.
However, traders and analysts are watching copper cancelled warrants -- LME stock already tagged for delivery -- up at 29,800 tonnes from 4,600 tonnes at the start of February, which could be an early indicator of higher demand.
Aluminium was at $2,130 from $2,143, zinc at $2,202 from $2,220, lead at $2,159 from $2,170, tin at $17,000 from $17,025 and nickel at $21,344 from $21,450 at the close on Monday.
Metal Prices at 1110 GMT Metal Last Change Percent Move End 2009 Ytd Percent
move COMEX Cu 330.60 -2.70 -0.81 332.75 -0.65 LME Alum 2124.00 -19.00 -0.89 2230.00 -4.75 LME Cu 7330.00 -70.00 -0.95 7375.00 -0.61 LME Lead 2155.00 -15.00 -0.69 2432.00 -11.39 LME Nickel 21300.00 -150.00 -0.70 18525.00 14.98 LME Tin 16950.00 -175.00 -1.02 16950.00 0.00 LME Zinc 2198.00 -22.00 -0.99 2560.00 -14.14 SHFE Alu 16550.00 -295.00 -1.75 17160.00 -3.55 SHFE Cu* 59000.00 -1630.00 -2.69 59900.00 -1.50 SHFE Zin 17905.00 -705.00 -3.79 21195.00 -15.52 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
