Jan 27 (Reuters) - Industrial metals fell to multi-week lows on Wednesday and remained depressed in late trade as the dollar extended gains against the euro after the U.S. Federal Reserve kept interest rates at record lows near zero to help the economy recover and boost employment. "They said economic activity is strengthening and household spending is improving and the labor market is a little bit better, but the key word is 'moderate' ... it's a continuation in the tone from the previous statements,"said Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey.
Benchmark copper for March delivery HGH0 on the New York Mercantile Exchange's COMEX division sank 11.70 cents, or 3.5 percent, to settle at $3.2225 per lb. In after-hours trade, the price of the metal used in power and construction hit $3.1820, its lowest level since Dec. 23. On the London Metal Exchange (LME), copper for three-month delivery MCU3 shed $165 to finish at $7,230 a tonne, and fell further in electronic business to $7,035.75 a tonne. The Fed voiced cautious optimism on the U.S. economy in a somewhat brighter policy statement than the one from its December meeting. "This (Fed statement) will not change the focus that we have had over the last few days that has put the markets on the defensive," LOGIC Advisors' O'Neill said. The main concern has been Chinese monetary tightening. China's largest bank, Industrial and Commercial Bank of China, said it had stopped rolling over some loans to slow credit growth. But some analysts remained positive, betting the measures would focus on the fiscal side and would not harm domestic consumption. "Government-led infrastructure projects have always been a priority and China is only trying to sustain its booming growth to evade inflation," VTB Capital said in a note.
U.S. plans to rein in proprietary bank trading also pressured metals prices. Paul Volcker, a member of the Obama administration's economic team and a former chairman of the Federal Reserve, will testify on Feb. 2 to a U.S. Senate committee on the latest White House bank regulation proposals. "This could be a red herring, we need to see more detail, but the market is trying to price it in already," a metals trader said. Also in the spotlight are rising LME stockpiles. A 5,025-tonne rise in copper stocks caused some consternation, but traders pointed to the rise in canceled warrants -- material already earmarked for delivery -- up at 11,900 tonnes from 3,125 tonnes on Jan. 4.
"Canceled warrants are in Busan, Singapore and Korea ... the metal is going to China," the trader said. But for zinc the rise in stocks -- 2,275 tonnes to 496,200 tonnes -- reinforces a Reuters survey published on Tuesday showing expectations for a market surplus this year of 209,500 tonnes.
Three-month zinc MZN3 closed at $2,236 a tonne from $2,318.50 on Tuesday. Losses extended down to a near nine-week low at $2,202 in electronic trade. Tin MSN3 ended down $125 at $17,850 and battery material lead MPB3 ended at $2,125 tonnes from $2,200. Lead stocks jumped to 155,775 tonnes, the highest since 2003, while nickel stocks hit a record high of 163,704 tonnes. Nickel MNI3, a key ingredient for stainless steel, eased $5 to finish $18,195 a tonne, but extended losses late to a two-week low at $17,737. Aluminum MAL3, used widely in the transport and packaging industries, closed at $2,180 from $2,221 on Tuesday. In electronic trade, it tumbled to a seven-week low at $2,146.