* Sell-off in copper on China concerns seen overdone
* No evidence of deals unravelling in China-industry
* European industrial consumers see attractive prices
(Updates with official prices)
By Eric Onstad and Harpreet Bhal
LONDON, March 12 Copper rebounded from earlier
losses on Wednesday as a sell-off triggered by concerns about
the impact of credit problems in China was considered overdone,
but further gains were capped by lingering worries about the
outlook for demand.
Three-month copper on the London Metal Exchange (LME) ended
at $6,505 a tonne, up 0.5 percent from Tuesday's close.
It hit a session high of $6,544.75 in afternoon trade, after
falling to its lowest in 44 months at $6,376.25 earlier in the
day. Three-month LME copper has shed more than 11 percent this
year, including a 2.6 percent drop on Tuesday.
Prices bounced off lows on bargain hunting from European
industrial consumers but analysts say prices may slide further
before heavy buying kicks in from consumers in China, which
accounts for 40 percent of global demand.
"The sell-off was overdone, and things have calmed down a
bit," said Andrey Kryuchenkov, analyst at VTB Capital.
"Most people are still cautious so we can't expect a quick
rebound. On a fundamental point of view we have to wait and see
in the second quarter how China stimulates its economy."
One European trader said there was extensive hedging by
consumers in Europe due to the weak LME prices combined with a
strong euro. "Every consumer I know is hedging like hell right
now. It's just too attractive to pass up," he said.
The copper market was rattled by a bond default by a Chinese
solar panel company last week, which ignited worries about risk
in the country's credit market.
A good deal of copper held in China's bonded zones is tied
up in financing deals where importers sell copper on domestic
markets to raise credit for more lucrative investments
elsewhere, and there are fears these deals may unravel.
"As you get on the one hand a freeing up of the official
channels through the deregulation of the market, you also get a
drying up and clamping down on those unofficial shadow banking
channels," said Nic Brown, head of commodities research at
French bank Natixis.
Copper inventories in Shanghai bonded warehouses are
estimated to have more than doubled over the past five or six
months to 750,000-800,000 tonnes from 350,000, Brown added.
But recent selling appeared to be driven more by sentiment
than a reflection of the actual market in China, traders said.
Demand is weaker than usual but still reasonable, while the
strongest quarter for consumption is about to get underway.
"People are afraid of a knock-on effect to commodities -
it's a reflection of how bad sentiment towards China is," said
Sijin Cheng, an analyst at Barclays in Singapore.
"But if you're actually talking about facts, or what people
are seeing right now, it doesn't point to any unravelling of
financing deals," she said.
In other metals, aluminium ended 1.6 percent higher
at $1,778.50 a tonne, nickel was up 0.6 percent at
$15,650 and tin was up 0.4 percent at $22,950.
Lead slipped 0.6 percent to $2,038 and zinc
closed 0.6 percent lower at $1,988.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(Additional reporting by Melanie Burton; Editing by Anthony
Barker, Susan Fenton and David Evans)