SHANGHAI, Feb 18 (Dow Jones)--Base metals on the Shanghai Futures Exchange settled mixed Friday, with copper lower for the third consecutive session, as concerns resurfaced over a short-term supply surplus and the possible effects on demand from Beijing's steps to tame the real-estate sector.
The benchmark May copper contract settled 0.5% lower at CNY74,720 a metric ton.
Copper investors initially cheered upbeat U.S. manufacturing data overnight, pushing the benchmark to an intraday high of CNY75,340/ton.
Talk in the market of a sharp 20,000-ton increase in SHFE copper inventories this week started to weigh on investor sentiment in late trade, however, providing further evidence that current price levels don't match the red metal's supply-and-demand fundamentals.
Investors were already concerned that--especially at high current prices--Chinese copper consumers have been slow to resume restocking, which usually picks up pace after the Lunar New Year holidays as manufacturers restart operations.
London Metal Exchange three-month copper is off the record high of $10,190/ton it hit earlier this week, but it's still at very high levels.
Beijing's broad-based measures to crack down on speculation and curb prices may continue to weigh on prices in the coming months if it leads to a softening in the property market, limiting copper demand for housing construction, analysts say.
Late last month, Beijing raised the down payment for second-home purchases to 60% from 50%, and extended limits on second-home purchases to more cities.
"Concerns from property policies never go away, it's just that when the market has no direction, those concerns will come to the spotlight again," said Zhuo Guiqiu, an analyst with Minmetals Futures.
"Monetary tightening on a global basis will also keep investors uneasy," Zhuo said.
However, analysts said that although a short-term correction is necessary before the red metal can head north again, it is likely to do so given underlying demand from government spending on infrastructure, housing and mass transit.
Copper traded at the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, was quoted at CNY73,800-CNY73,950/ton, down from CNY73,950-CNY74,100/ton Thursday.
Three-month LME copper ended Thursday's afternoon kerb down $36 at $9,805/ton.
It was quoted 0.3% lower at $9,780/ton around 0700 GMT, when the SHFE closed.
Shanghai aluminum settled 0.2% lower and zinc settled 0.6% higher.
Friday's settlement prices in yuan a metric ton and LME late kerb prices from Thursday in dollars a ton:
Copper May 74,720 Dn 390 3Mo 9,805 Dn 36
Aluminum May 17,150 Dn 40 3Mo 2,512 Up 8
Zinc May 20,065 Up 125 3Mo 2,511 Up 25