METALS-Copper skids on Fed caution, worries on Chinese demand

By Eric Onstad

LONDON, Oct 30 (Reuters) - Copper prices retreated on Thursday from the previous day's record highs on cautious remarks by the Federal Reserve on U.S. interest rate cuts and concern about Chinese physical demand.

Three-month copper on the London Metal Exchange CMCU3 slid 2.6% to $10,893.50 per metric ton by 1715 GMT, after hitting a record high of $11,200 on Wednesday on supply concerns.

U.S. Comex copper futures HGc2 dropped 3.2% to $5.10 a lb.

"Copper is pulling back today because Fed sentiment for a December rate cut is not as strong and Chinese brokers are bearish on Shanghai prices with physical demand lacklustre," said Robert Montefusco at broker Sucden Financial.

Fed Chair Jerome Powell surprised markets on Wednesday by casting doubt on the prospects of an interest rate cut at the central bank's next meeting in December, saying such a move was "not a foregone conclusion".

That helped propel the dollar index =USD to a three-month high, making commodities priced in the U.S. currency more expensive for buyers using other currencies. [FRX/]

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 edged 0.1% lower to 87,960 yuan ($12,348.73) a ton.

Physical demand in top metals consumer China has shown signs of weakness as prices surge, with the premium paid over SHFE prices to buy copper in the spot market SMM-CU-PND flipping to a discount of 55 yuan per ton on Thursday from a premium of 90 yuan on October 15.

Major miners reported lower copper output in the first nine months of the year, with a series of disruptions leading analysts to hike their price forecasts for next year according to a Reuters poll.

Dan Smith, managing director at Commodity Market Analytics, said the underlying market was bullish, but it might be held back by some miners seeking to sell forward to lock in the high prices.

"I'd imagine there's a fair bit of hedging from copper producers, which is preventing prices from really taking off. These are pretty good numbers for a lot of copper producers."

Among other metals, LME aluminium CMAL3 dropped 0.9% to $2,861 a ton, nickel CMNI3 eased 1% to $15,220, zinc CMZN3 slid 1.6% to $3,034, lead CMPB3 dipped 0.2% to $2,022.50 and tin CMSN3 shed 1.3% to $35,730.

For top stories in metals, click TOP/MTL

($1 = 7.1230 Chinese yuan)

 For related news and prices, click on the codes in brackets: LME price overview      RING= COMEX copper futures  0#HG: All metals news         MTL   All commodities news      C 
 Foreign exchange rates FX=SPEED GUIDES LME/INDEX