METALS-Copper extends retreat from record highs; Chinese data helps steady market

By Eric Onstad

LONDON, Feb 2 (Reuters) - Copper prices extended their slide to a three-week low on Monday as speculators pulled back from a market that raced to record highs last week, but losses were cushioned by positive factory data from China.

Benchmark three-month copper CMCU3 on the London Metal Exchange tumbled as much as 5.6% during Asian trading to its weakest since January 9, eventually paring losses to a fall of 1.4% at $12,972 a metric ton by 1715 GMT.

U.S. Comex copper futures HGc2 dropped 1.1% to $5.86 per lb after hitting their lowest in nearly five weeks.

"I'm still fundamentally constructive on copper, but what we saw last week was too much, too fast. Once we get this healthy shake-out of some of these speculative flows, the market should settle," said Nitesh Shah, commodity strategist at WisdomTree.

Copper could keep dropping to about $12,000 in the short term, he added.

LME copper spiked 11% to a record peak of $14,527.50 a ton last Thursday, fuelled by bullish speculators and funds after warnings by analysts that the sharp gains were not fully supported by supply and demand fundamentals.

Despite the retreat, LME copper is up 33% over the past six months, with concern lingering over the potential for supply deficits because of mine disruptions this year.

A large portion of the speculative buying originated in China, where the reversal has been dramatic.

The most active copper contract on the Shanghai Futures Exchange SCFcv1 hit the lower price limit on Monday, slumping 9% to close daytime trading at 98,580 yuan ($14,183.56) a ton, its lowest since January 9.

Three other SHFE metals - aluminium SAFcv1, nickel SNIcv1 and tin SSNcv1 - also hit their lower price limits.

Data from top metals consumer China showing factory activity expanded at a faster pace in January helped to calm the market, with export orders rebounding and output growth accelerating.

"I don't think China is going to shoot the lights out in terms of economic growth this year, but I do think Chinese data will be decent," Shah said.

The Yangshan copper premium SMM-CUYP-CN, a gauge of Chinese consumers' appetite for imported material, rose to $39 a ton on Monday but is still low compared with $55 in late December.

Copper's Chinese demand prospects have weakened in the run-up to the nine-day Lunar New Year holiday starting February 15 and as industrial consumers baulked at high prices.

In other metals, LME aluminium CMAL3 dropped 2.4% to $3,068 a ton, zinc CMZN3 fell 2.3% to $3,322.50, lead CMPB3 lost 2% to $1,968, nickel CMNI3 slid 5.1% to $17,045 and tin CMSN3 slumped 12.3% to $45,570.

At their intra-day lows, lead hit its weakest since December 18, aluminium and nickel touched their lowest in more than four weeks while tin touched a three-week low.

($1 = 6.9503 yuan)