KUALA LUMPUR/SHANGHAI, Jan 11 (Reuters) – London copper fell on Wednesday, erasing some of the previous session's gains, as Chinese consumers held back purchases ahead of the Lunar New Year holidays.
Prices were up more than 3 percent on Tuesday on record imports from top consumer China in December that brightened the demand outlook for industrial metals.
Three-month copper on the London Metal Exchange lost 0.67 percent to $7,693 a tonne by 0401 GMT. Copper shed a fifth of its value last year, the first annual decline in three years.
The most-traded March copper contract on the Shanghai Futures Exchange gained 0.9 percent to 56,380 yuan ($8,900) a tonne.
Imports of copper by China, which accounts for 40 percent of the refined metal's global consumption, rose 12.6 percent to record levels of 508,942 tonnes in December, according to customs data.
The subsequent price rally has deterred Chinese buyers, said Nick Trevethan, senior commodities strategist, at ANZ Research in Singapore.
"The Chinese have been happy buyers between $7,450 and $7,650. The price spike up has dampened their buying enthusiasm.
They probably don't need that much copper right now moving into the end of the year, so they're holding tight," he said.
China's offices and exchanges will be shut in the last week of January because of the Lunar New Year holidays, traditionally a weak period for copper consumption.
LME copper faces a resistance at $7,738.50 a tonne, provided by a descending trendline, and may fall to $7,520, according to Reuters technical analyst Wang Tao.
Cushioning metals, the euro clung to modest gains against the greenback ahead of the European Central Bank policy meeting and debt sales from Spain later this week.
A weaker U.S. currency makes dollar-based commodities cheaper for holders of other currencies.
Later on Wednesday, German Chancellor Angela Merkel and Italian Prime Minister Mario Monti meet to discuss the euro zone crisis, while German annual gross domestic product data will be released, with 3 percent growth forecast in 2011.
Spot demand for copper and aluminium was also weak, with front-dated futures prices on the Shanghai Futures Exchange slipping into discount against three-month prices from a premium in December.
"In February, near-term consumption will go up and people will get physical metal from the exchange or the bonded market, so the bonded premium will improve and support prices," said a trader.
Base metals prices at 0401 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7693.00 -52.00 -0.67 1.22
SHFE CU FUT MAR2 56380 510 +0.91 1.84
HG COPPER MAR2 349.45 -1.75 -0.53 1.70
LME Alum 2152.25 -11.75 -0.54 6.55
SHFE AL FUT APR2 16195 100 +0.62 2.21
LME Zinc 1910.00 -20.00 -1.04 3.52
SHFE ZN FUT MAR2 15030 110 +0.74 1.59
LME Nickel 19400.00 -105.00 -0.54 3.69
LME Lead 1992.50 3.50 +0.18 -2.09
SHFE PB FUT 15335.00 60.00 +0.39 0.33
LME Tin 20300.00 25.00 +0.12 5.73
LME/Shanghai arb^ 478
Shanghai and COMEX contracts show most active months
^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month
($1 = 6.3150 Chinese yuan)