METALS-Copper retreats as supply worries abate

* Shanghai copper down 2.7 pct, LME off 1.6 pct

* Chile's mines reopen, focus returns to thin demand

* For a factbox on Chile's mines, see: [ID:nN28135112]

* US nonfarm payrolls report due Friday eyed

* Coming Up:Euro zone inflation 1000 GMT, US Redbook 1355
GMT
Updates prices, adds data due Tuesday)

By Manolo Serapio Jr.

MANILA, March 2 (Reuters) - Copper fell on Tuesday, after
surging to five-week highs in the previous session, as concerns
over supply from top producer Chile eased after the mines there
reopened following a massive weekend earthquake.

Shanghai copper futures slid 2.7 percent and London prices
dropped 1.6 percent, dragging the rest of the base metals
complex, as investors turned their attention to the slow
recovery in global demand, highlighted by bulging stocks of the
industrial metal.

"Most people are of the view that that copper output from
Chile doesn't look like it's going to be significantly impacted
by the earthquake," said David Moore, commodity strategist at
Commonwealth Bank of Australia.

Chile's mines returned to service on Monday after an
8.8-magnitude quake on Saturday briefly shut nearly a quarter
of the top copper producer's output, with improving power
supply easing concerns of further disruption. [ID:nN0199057]

Despite heavy damage to Chile's infrastructure near the
epicentre, there was no serious damage reported to the copper
mines around the capital that were shut by power outages, while
the biggest deposits some 600 miles (1,000 km) to the north
were unaffected.

Shanghai's benchmark third-month copper SCFc3 fell 1,630
yuan to 59,000 yuan ($8,641) a tonne at the close. It touched a
five-week high of 61,050 yuan on Monday.

Third-month Shanghai zinc SZNc3 fell 3.8 percent to
17,905 yuan per tonne and aluminium SAFc3 dropped 1.8 percent
to 16,550 yuan, tracking copper's losses.

Three-month copper on the London Metal Exchange CMCU3
dropped $115 to $7,285 a tonne at 0702 GMT. It jumped as much
as 5.6 percent to $7,600 in the previous session, its loftiest
since Jan. 20.

"Investors were initially alarmed by the Chile news. But
when they found out that no big harm has come to the mines and
that there is still so much material in the market, they
realised prices should not have gone up so quickly," a metals
trader in Shanghai said.

Copper stocks in Shanghai warehouses stood at 149,478
tonnes last week, up 28 percent from before China's week-long
New Year holiday and the highest level since late September
2002. <0#SGH-STOCKS>

"Copper prices have risen a little bit above levels
currently justified by fundamentals," said Moore, who had
forecast LME copper to end 2010 at $6,825 a tonne, with an
expected global surplus of around 100,000 tonnes.

Outside of Chile, investors are eyeing U.S. economic data
for trading cues including the nonfarm payrolls report
scheduled for release on Friday.

Due later on Tuesday are the Redbook weekly retail sales
and ICSC chain stores sales in the United States and inflation
and producer price data in the euro zone. ECON
Base metals prices at 0702 GMT
Metal Last Change Pct Move End 2009 YTD pct
chg
LME Cu 7285.00 -115.00 -1.55 7375.00
-1.22
SHFE Cu* 59000.00 -1630.00 -2.69 59900.00
-1.50
LME Alum 2123.00 -20.00 -0.93 2230.00
-4.80
SHFE Alum* 16550.00 -295.00 -1.75 17160.00
-3.55
COMEX Cu** 329.00 -4.30 -1.29 332.75
-1.13
LME Zinc 2175.50 -44.50 -2.00 2560.00
-15.02
SHFE Zinc 17905.00 -705.00 -3.79 21195.00
-15.52
LME Nickel 21150.00 -300.00 -1.40 18525.00
14.17
LME Lead 2146.50 -23.50 -1.08 2432.00
-11.74
LME Tin 16950.00 -75.00 -0.44 16950.00
0.00
LME/Shanghai arb^ -804
Dollar/yuan 6.8278 \ 6.8302
** 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
(Editing by Himani Sarkar)