METALS-Demand worries pull copper lower, lead tumbles

* Copper falls on demand worries, recovery uncertainties

* Lead tumbles on surplus China forecast

(Updates with closing prices)

By Humeyra Pamuk and Kylie MacLellan

LONDON, Sept 10 (Reuters) - Industrial metals tumbled on
Thursday, with copper dropping as much as 3 percent as doubts
about the pace of recovery and persistent increases in
inventories triggered a sell-off.

Analysts have been cautious about the rally that has seen
copper's price more than double since the start of the year and
have repeatedly warned that the market is due for a correction
as the fundamentals do not justify current levels.

A report showing China's lead market in surplus despite
smelter shutdowns in the country further weighed on lead,
sending prices down more than 12 percent. [ID:nPEK288741]

Nickel and zinc prices also dropped more than 5 percent amid
the broad sell-off in industrial metals.

Copper MCU3 for three month delivery on the London Metal
Exchange closed at $6,294 a tonne, versus $6,415 a tonne at the
close on Wednesday. It earlier hit a session low of $6,212.

The red metal pared some if its earlier losses after U.S.
data showing the number of new jobless claims fell over the last
week [ID:nN10384112], but remained sharply lower on the day.

"It is just a sense that maybe things had got a bit
overcooked," said Stephen Briggs, analyst at RBS Global Banking
and Markets.

"There is going to be a debate for a long time about the
pace of recovery," he added. "Metals had been pricing in the
best of all possible worlds so there are always going to be
periods where people have to stand back and say 'hang on, are we
pricing in a bit too much'."

The International Monetary Fund said on Wednesday that
economic recovery may come three months earlier than forecast.
But cautious investors watched economic data closely for further
clues on the health of the global economy.

In China, government data showed investment growth in the
real estate sector accelerated sharply in August while prices
and sales continued to rise. [ID:nPEK277181]

That bodes well for copper, used largely in power and
construction.

NO DEMAND

A rise of nearly 25 percent in copper stocks since early
July has been troubling investors, who are wary of a correction
in the price, which rose to an 11-month high at the end of
August. [ID:nL8550447]

"When you break down the rises, most of them come from
warehouses in Asia. There's no demand and Chinese are not buying
and the open interest has completely tumbled at the end of
August," said Andrey Kryuchenkov, analyst at VTB Capital.

In a sign demand remains sluggish, the premium for copper
ready for use is now around $32.50 a tonne versus the usual
premium of $80-$100, said a trader in Shanghai who expects
demand to pick up from November for the end-of-year surge.

Battery making material lead MPB3 was the worst performer
among the metals, as it tumbled to close at $2,120 a tonne
versus Wednesday's close of $2,405. It earlier hit a one-week
low of $2,100.

"The Antaike report has been weighing on the metal," said
Alex Heath, head of base metals at RBC Capital Markets,
referring to a report by China's state-run research body
Antaike, showing the lead surplus is expected to grow this year
and widen further in 2010. [ID:nPEK288741]

Aluminium MAL3 closed at $1,854 from $1,888. LME stocks of
the metal, used in transport and packaging, slipped 4,900 tonnes
but remained near record levels above 4.5 million tonnes.

Steel making ingredient nickel MNI3 closed at $17,200 a
tonne versus Wednesday's $17,950 a tonne, having earlier hit a
6-week low of $17,000. Zinc MZN3 closed at $1,920 a tonne
versus $1,980, while tin MSN3 was untraded at the close but
was last bid at $14,150 from $14,700.

Metal Prices at 1613 GMT
Metal Last Change Pct Move End 2008 Ytd Pct

move
COMEX Cu 284.50 -6.10 -2.10 139.50 103.94
LME Alum 1853.00 -35.00 -1.85 1535.00 20.72
LME Cu 6285.00 -130.00 -2.03 3060.00 105.39
LME Lead 2115.00 -290.00 -12.06 999.00 111.71
LME Nickel 17250.00 -700.00 -3.90 11700.00 47.44
LME Tin 14200.00 -680.00 -4.57 10700.00 32.71
LME Zinc 1905.00 -75.00 -3.79 1208.00 57.70
SHFE Alu 15085.00 -5.00 -0.03 11540.00 30.72
SHFE Cu* 50200.00 70.00 +0.14 23840.00 110.57
SHFE Zin 15515.00 -15.00 -0.10 10120.00 53.31
** 1st contract month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07

(Additional reporting by Manolo Serapio Jr.; Editing by Keiron
Henderson)