* Copper pares previous gains on worries China inflation
under reported
* Technical outlook neutral with downside bias
* Copper seen up 28 percent from 2010, 1.5 pct from current
price
(Updates prices, adds quotes and details)
By Nick Trevethan
SINGAPORE, Jan 25 (Reuters) - London copper prices fell half
a percent on Tuesday, paring a one percent gain in the previous
session, weighed down by worries about Chinese inflation and a
more bearish technical outlook.
Three-month copper on the London Metal Exchange fell
$50.50 to $9,478.50 a tonne by 0351 GMT. The metal hit a record
high of $9,781 last week.
Shanghai's benchmark third-month copper futures contract
fell 0.4 percent to 71,500 yuan a tonne.
Traders raised fresh concerns about Chinese monetary
tightening -- something which has caused significant price
volatility since inflation and GDP data were released last week.
"My feeling there is a growing belief that Chinese inflation
is significantly higher than the published figure, which would
lead to the authorities to press down on lending more that
currently envisaged," said a Hong Kong trader.
"Inflation is a hard trade. You want to be long, but at the
same time there is a risk of a policy change that skews your
position."
Late last week, China reported growth rose in the fourth
quarter to 9.8 percent from 9.6 percent in the third and
inflation slowed less than expected.
Initially seen as bearish, then assessed more positively,
and now under scrutiny once more, the issue of Chinese policy is
throwing a spotlight on how China will manage its economy this
year.
In money markets last week, the seven-day repurchase rate
, the barometer of short-term liquidity, spiked 153
basis points to 7.64 percent, its highest level in more than
three years, battered by an unprecedented liquidity squeeze in
the wake of a slew of official increases in bank cash reserve
requirement ratios.
And it isn't just China where inflation is a worry. India's
central bank said inflation may stay high for longer than
earlier anticipated due to rising in commodities prices and
domestic supply pressures that have pushed up food prices.
Inflation in Britain is also rising, but Australia at least
saw consumer prices rise by far less than feared in the last
quarter and a key measure of underlying inflation ran at the
slowest pace in over a decade.
LME copper prices were expected to rise some 28 percent in
2011, versus average prices in 2010, but the median forecast of
a Reuters poll of 50 analysts, at $9,663, is only about 1.5
percent above current prices.
In the shorter term, technical indicators showed LME copper
has turned technically neutral, rangebound between $9,463 and
$9,575, but it is biased to fall.
The euro held near a two-month peak early in Asia on
Tuesday, with $1.37 firmly in its sight as the market showed
only the barest signs of fatigue after a 6-percent rally in the
past two weeks.
Aluminium was flat at $2,413, but it was tin
that was the weakest of the complex, down 1.4 percent at
$27,770, trading 16 lots.
Tin is forecast to rise almost 38 percent this year from
average prices in 2010, driven by dwindling reserves, rising
demand, and unusually wet weather in big producer Indonesia.
But the forecast of $27,000 is actually more than 2.5
percent down from current prices.
Base metals prices at 0351 GMT
Metal Last Change Pct Move End 2010 YTD pct chg
LME Cu 9478.50 -50.50 -0.53 9600.00 -1.27
SHFE Cu* 71500.00 -280.00 -0.39 71850.00 -0.49
LME Alum 2413.00 0.00 +0.00 2470.00 -2.31
SHFE Alum* 16845.00 -5.00 -0.03 16840.00 0.03
COMEX Cu** 429.00 -5.15 -1.19 443.95 -3.37
LME Zinc 2292.00 -10.00 -0.43 2454.00 -6.60
SHFE Zinc 18395.00 -440.00 -2.34 19475.00 -5.55
LME Nickel 26005.00 -145.00 -0.55 24750.00 5.07
LME Lead 2388.00 -17.00 -0.71 2550.00 -6.35
LME Tin 2700027700.00 -395.00 -1.41 26900.00 2.97
LME/Shanghai arb^ 1508
dollar/yuan 6.5833 \ 6.5839
** 1st contract month for COMEX copper
* 3rd contact month for SHFE aluminium, copper and zinc
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
