SINGAPORE (Reuters) - Copper prices softened on Wednesday under technical selling pressure after attempts to break above a recent trading range failed, while a stronger dollar also weighed on market sentiment.
London copper rallied to a one-week high of $8,608.75 in the previous session on upbeat data from the United States and Germany, which also helped push Wall Street to its highest level since June 2008.
The momentum faded after prices struggled to break above $8,600, the top of a range copper has held this month, while concerns lingered about high copper stocks and a weak recovery in demand in China, the world's top consumer of the metal.
"Demand is recovering, but remains soft," Standard Chartered said in a research note.
"Copper, aluminum, lead and zinc trading firms reported increasing business flows since end-February, but at a very slow pace. The magnitude of recovery is significantly lower than the comparable period last year."
LME copper stocks fell 1019.6 tons to 300,931 tons by March 12, the lowest since July 2009, while copper stockpiles monitored by the Shanghai Futures Exchange rose to a decade-high of 247,779 tons last week.
Shanghai copper remained at a discount of nearly 2,500 yuan a tonne (1.102 ton) versus LME, making imports profitable.
Three-month copper on the London Metal Exchange fell 0.9 percent to $8,482 a tonne by 3.02 a.m. EDT.
The most-traded June copper contract on the Shanghai Futures Exchange lost 0.8 percent to 60,530 yuan ($9,600) a tonne.
Shanghai, LME copper arbitrage:
Investors will be watching a speech by Fed Chairman Ben Bernanke later on Wednesday for clues to policy changes, after the Fed acknowledged recent signs of recovery but refrained from indicating it would take further monetary easing measures.
The dollar hit an 11-month high against the yen and 1-month high on the euro, and held near a seven-week high against a basket of currencies .DXY.
The cautious tone regarding policy loosening in comments by China Premier Wen Jiabao dampened expectations of imminent policy easing for the property sector, a key copper consumer.
"Despite the fact that China has been on the path to loosen its monetary policy by cutting the required reserves ratio, its property market is saturated now," said a Singapore-based trader.
"Copper will likely be stuck in a range until massive news comes out and helps prices break either way, with a bigger chance of breaking lower."
On the supply side, heavy rains in northern Chile have cut off roads at No. 3 copper mine Collahuasi (AAL.L) XTA.L and Cerro Colorado BHP.L, but operations have been little affected, worker and company sources said on Tuesday.
LME tin fell 1 percent to $24,000 a tonne following a rise of more than 3 percent on Tuesday, since Indonesia's Koba Tin began loading a 280-tonne shipment after demonstrators blocked the producer's exports this week over a pay dispute.
Base metals prices at 3.02 a.m. EDT
Metal Last Change Pct Move YTD pct chg
LME Cu 8482.00 -78.00 -0.91 11.61
LME Alum 2245.00 -13.00 -0.58 11.14
LME Zinc 2087.75 -22.25 -1.05 13.16
LME Nickel 19375.00 -75.00 -0.39 3.55
LME Lead 2141.00 -13.00 -0.60 5.21
LME Tin 24000.00 -250.00 -1.03 25.00
LME/Shanghai arb^ 2512
Shanghai and COMEX contracts show most active months
^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month
($1=6.3270 Chinese yuan)
Editing by Clarence Fernandez