Copper down on firm dollar, China demand uncertainty

LONDON, May 7 (Reuters) - Copper prices on the London Metal Exchange fell on Wednesday as the dollar strengthened against other currencies dampening sentiment and as uncertainty over Chinese consumption cast a pall over the market.

"The fall across metals is lead by copper and short term it looks like it could go down further," said John Meyer, head of resources at Fairfax IS. "The dollar is strengthening which has a dampening effect on metal prices."

Copper for delivery in three months fell $70, or 0.8 percent, to $8,450/8,470 by 1049 GMT, after gaining 1.3 percent on Tuesday.

"Codelco was rumoured to be buying copper in the market in recent weeks which no-doubt helped prices," Meyer said.

But on Wednesday, prices eased as the strike at Chile's top producer Codelco had come to an end with the impact estimated at around 24,000 tonnes of copper, according to Fairfax.

Chilean copper giant Codelco's subcontract miners on Monday agreed to end their strike, after voting to accept a government proposal. Production will resume on Friday. [ID:nN05372495]

The dollar rose ahead of a European Central Bank meeting on Thursday, heading towards a two-month high against a basket of currencies after a Federal Reserve official's comments added to a view that the cycle of aggressive U.S. interest rate cuts may be ending. A firmer U.S. currency makes dollar-priced metals more expensive for holders of other currencies.

Adding to downward pressure on prices was the uncertainty about future Chinese demand, the top consumer of copper.

China's exports will probably grow just 10 percent this year due to weakening overseas demand, slowing from 25.7 percent in 2007, a government research body said on Monday. [ID:nPEK79045]

But another government think-tank said on Tuesday China's annual economic growth could accelerate to a 10.8 percent rate in the second quarter from 10.6 percent in the first, driven by expansion of investment and consumption. [ID:nPEK148916]

Meanwhile analysts were wondering about the possible impact of a slowdown in the U.S. economy on emerging market growth.

"The U.S. has certainly been sidelined, not just in copper, but in most metals markets," said Daniel Hynes, metals strategist at investment bank Merrill Lynch. [ID:nL07924344]

"It's providing no growth at all to world consumption and is certainly much less a factor these days in copper."

Concerns over tight supplies continued to give prices a floor with copper prices up some 27 percent so far this year.

Copper in LME-registered warehouses stand at 109,025 tonnes, having almost halved since the start of this year and only enough for less than three days' of global consumption.

In other metals, aluminium eased $43 to $2,930/2,935 per tonne, while lead was down $50 at $2,505/2,525.

Nickel was down $600 at $28,300/28,400. The metal is expected to remain sluggish in the near future given news that leading Chinese stainless steel makers are cutting production and slashing spot sales in this month.

Tin was up $100 to $24,200/24,400, nearing its all time high of $24,600 recorded on April 24.

(Additional reporting by Alfred Cang in Shanghai; editing by Chris Johnson)

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