METALS-London copper gains, firm Chinese demand supports
* Traders see prices softening over China holidays next week
* U.S. scrap dealer files for Chapter 11, blames weak nickel prices
* Coming up: U.S. pending home sales at 1400 GMT
(Recasts lead, updates prices)
SINGAPORE, Sept 26 (Reuters) - London copper reversed early losses to trade higher on Thursday, supported by firm demand in top consumer China, although renewed worries over a U.S. federal debt default kept gains in check.
Prices have been trapped in a tight range this week, and a broader range of $7,000-$7,500 for the past month, down nearly 9 percent for the year.
Uncertainty over U.S. fiscal policy is deterring companies from placing new orders and draining liquidity from the market, while strong seasonal demand in China is providing support.
"For some end uses, like electrical wire and consumer goods, demand is picking up seasonally because factories have started producing for Christmas holidays," said analyst Chunlan Li at consultancy CRU in Beijing.
"But overall demand is stable ... and supply is increasing at a steady pace. I expect prices to stay stable ahead of LME week as people wait to see what happens there," she added, referring to a key industry gathering in October.
Three-month copper on the London Metal Exchange had risen 0.7 percent to $7,248 a tonne by 0716 GMT, after hitting a session low of $7,169.50.
Copper prices have this week traded in a narrow band of $7,120-$7,260 a tonne, with chart patterns suggesting prices may test downside support, traders said.
"I guess there is an element of support that will disappear on dips," said a Hong Kong-based trader.
The most-traded December copper contract on the Shanghai Futures Exchange closed 1.1 percent higher at 52,280 yuan ($8,500) a tonne.
Orders for long-lasting U.S. manufactured goods barely grew in August in a possible sign that companies are holding back on investments due to uncertainty over government spending.
The U.S. Congress, already struggling to avert a government shutdown next week, turned its attention on Wednesday to the other fiscal bullet it had to dodge: a federal debt default.
The lack of confidence has spilled into metals markets which were suffering from low turnover, with barely 1,600 lots traded across the complex.
Reflecting tough conditions for the nickel market, Keywell LCC, a Chicago-based metals recycler, has filed for Chapter 11 bankruptcy protection. It blamed weak nickel prices and poor stainless steel demand, according to a court filing that outlined plans to sell the company to a larger rival.
Nickel prices, the worst LME performer, are down almost 20 percent so far this year.
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
($1 = 6.1200 Chinese yuan)
(Additional reporting by Manolo Serapio Jr.; Editing by Joseph Radford and Tom Hogue)