* Worries about financing spur traders to offload copper
* Shanghai premiums steady after falling for past week
* StanChart says not pulling out of China commod financing (Updates with closing prices/details)
By Harpreet Bhal
LONDON, June 10 Copper dropped to a one-month low on Tuesday as an investigation into metal financing in China prompted concern that a crackdown could hit trade in the metal, while aluminium and zinc retreated from multi-month highs as traders cashed in on recent gains.
Benchmark copper on the London Metal Exchange (LME) hit a session low of $6,628, its lowest level since May 7. It was last bid at $6,675 a tonne on the kerb, up just 0.07 percent from the previous session.
Copper prices have been under pressure by worries about financing after a investigation into metals fraud at Qingdao, China's third-largest port.
The latest firm to be caught-up in the scandal, CITIC Resources Holdings, said that metal it owns at the port may be affected by the probe.
Some analysts said the market's fundamentals remained strong, helping cushion any downside to prices. The latest data from top consumer China showed encouraging signs of an economic recovery.
China's consumer inflation edged up to a four-month high of 2.5 percent in May while factory price deflation eased, reinforcing signs of economic stabilisation.
"The ongoing investigation (at Qingdao port) is still the main theme which is causing the selling pressure for the metal," sad Naeem Aslam, chief market analyst at Ava Trade.
"However, the fundamentals remain strong ... and we think any kind of sell-off could be a buy opportunity in the longer term."
Reassuring investors, Standard Chartered said it acknowledges there are issues in China around commodity financing and while it is monitoring the situation, it is not pulling out of its commodity financing business in the country.
In a move that suggests the impact of the financing probe in China may be becoming priced into the market, premiums for bonded copper in Shanghai steadied after falling for a week.
Premiums traded at $80-$100 on Tuesday, flat from Monday, and down from $105-$125 last Wednesday, according to China price provider Shmet. (www.shmet.com)
ALUMINIUM, ZINC SLIP
Aluminium and zinc prices retreated from recent highs as traders took profits, but analysts say the longer-term outlook for the metals remains upbeat.
Benchmark LME zinc closed little changed at $2,132 a tonne, up just 0.05 percent, having hit a 15-month peak of $2,145 in the previous session, while benchmark aluminium was last bid down 0.58 percent at $1,900 a tonne, after hitting its highest level in 9-1/2 months - at $1,918 - on Monday.
Improving global demand prospects have helped to support prices for zinc and aluminium in particular, led by stronger-than-expected consumption and tight supply, and bolstered by continued monetary easing by central banks.
"Generally economic performance is going better than people have expected ... And that will certainly help prices," said analyst Matt Fusarelli at AME Group.
Chinese zinc demand is seen growing by 8 percent this year, the fastest since 2010, driven by auto sales, Fusarelli said. This is expected to push the market into a deficit for the first time in several years, he added.
A small deficit in the aluminium market in the first half is however expected to disappear as large projects come on line, mostly in China, Fusarelli said.
At 5,146,525 tonnes, aluminium stocks held in LME-registered warehouses are at their lowest level in a year. MALSTX-TOTAL
Lead ended at $2,140 a tonne, down 0.05 percent, tin closed down 1.85 percent at $23,865 a tonne and nickel closed down 0.69 percent at $18,775 a tonne.
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 in Sydney and Polly Yam in Hong Kong; Editing by Mark Potter and David Evans)