Metalnewsnet 28 Jan:

Shanghai copper prices were steady on Wednesday, but the firmness in the U.S. dollar, as well as fears of further policy tightening in China and U.S. plan to tighten bank trading rules weighed on sentiment.

U.S. economic data released on Tuesday painted a mixed picture of the economic recovery. U.S. consumer confidence in January hit its highest level in nearly a year and a half, but a closely watched housing index showed an unexpected decline in November home prices.

U.S. President Barack Obama is expected to propose a three-year freeze on many domestic spending programs and outline other measures to try to tame record budget deficits in his State of the Union speech on Wednesday.

A U.S. Senate committee has scheduled a hearing with Paul Volcker, a former chairman of the Federal Reserve, on February 2. He will testify on the latest White House bank regulation proposals.

But U.S. moves to stop banks trading for themselves in markets and new rules on over-the-counter (OTC) trades are both probably at least a year away, Societe Generale's global head of commodities research said on Tuesday.

"Metals prices are stuck in the conflicts -- if prices rise much higher, policy may become tighter, but when prices fall buying interest emerges," a Shanghai-based trader said.

Shanghai's benchmark third-month copper futures contract edged higher 0.3 percent to 59,540 yuan a tonne by 0228

GMT.

The most-active contract for May delivery was little changed at 59,200 yuan a tonne.

Three-month copper on the London Metal Exchange fell 0.8 percent to $7,335 a tonne, extending losses from the previous session when it was pressured by China's move to implement a hike in bank reserves and a strong dollar.

The dollar index, a gauge of the currency's value against a basket of currencies, was up 0.05 percent on Wednesday.

Analysts expect economic recovery and strong demand from China to propel base metals higher this year, although tighter monetary and fiscal policies will weigh on prices in the second half, a Reuters survey showed.

Average cash copper prices will rise by 37 percent year-on-year to $7,077 in 2010, while aluminium will gain 25 percent at $2,094, analysts said.

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"Copper prices are likely to move sideways in the range between $7,300 and $7,600 a tonne, as confidence of investors is being tested by policy moves," said Guo Yong, an analyst at Jinrui Futures.

Guo also pointed out that a more than 20 percent cut in grid investment by China's leading grid operator, State Grid Corp of China, was unlikely to have a great impact on the country's copper demand this year.

"At least some of 2010's demand comes from investment in 2009 due to delay between investment plans and actual consumption of the metal. In addition, the lower consumption of the grid can easily be replaced by rising demand in other sectors," Guo said.

Shares in Russia's UC RUSAL fell sharply in their debut on Wednesday amid a broad market slump across the region, after the world's largest aluminium producer raised $2.2 billion in a landmark Hong Kong IPO.

LME aluminium edged up $2 to $2,223 a tonne, and Shanghai aluminium rose 0.4 percent to 17,040 yuan.

(From Reuters) -