February 23, 2018 / 11:09 AM / in 2 years

METALS-Copper and zinc slip on profit-taking, firmer dollar

* LME/ShFE arb: bit.ly/2wZSAEz (Updates with closing prices)

By Eric Onstad

LONDON, Feb 23 (Reuters) - Copper, zinc and other base metals prices fell on Friday as investors locked in profits and the dollar firmed amid uncertainty over demand in top metals consumer China.

Benchmark copper gained about 8 percent earlier this month in a rally that lifted the metal to its highest in a month last Friday at $7,253 a tonne.

But some analysts argue that prices have overshot supply and demand fundamentals, with record high inventories indicating excess supply.

“We have seen a sentiment cycle which has run ahead of the business cycle, so prices are painting a too rosy picture of the reality that makes them very vulnerable to profit-taking,” said Julius Baer analyst Carsten Menke.

“We need to keep a close eye on China rather than on the global economy, in particular the infrastructure and property sector, the metals-intensive sectors, that’s where we would expect some weakness ahead.”

Menke forecast that copper will extend its correction to below $6,500 a tonne by mid-year.

* COPPER: London Metal Exchange three-month copper closed 0.9 percent down at $7,095 a tonne after logging a small gain in the previous session. * DOLLAR: Weighing on metals was a slight strengthening of the dollar against a basket of currencies as global investors gingerly dipped their toes back into riskier assets amid rapidly shifting views on U.S. monetary policy.

* ZINC: LME zinc shed 0.8 percent to end at $3,503 a tonne. Zinc inventories on the Shanghai Futures Exchange jumped 12 percent this week to 114,887 tonnes, data showed on Friday.

* ALUMINIUM: LME aluminium was the biggest LME faller with a drop of 2.1 percent to finish at $2,140 a tonne. LME aluminium inventories rose again on Friday, bringing the gain of on-warrant stocks - those not earmarked for delivery - to 39 percent in just over two weeks. MALSTX-TOTAL

CHINESE ALUMINIUM: Commerzbank said in a note that it expected Chinese aluminium manufacturers to further expand production in the next few months.

“This will no doubt also be reflected in higher exports, so the global aluminium market will remain amply supplied. The high prices are not justified in our opinion,” the bank said.

* NICKEL: LME nickel fell 0.5 percent to close at $13,765 a tonne. Nickel continues to exhibit the largest speculative long position on the LME, according to estimates by broker Marex Spectron, a note from Marex’s Alastair Munro said.

Nickel should see strong support at $13,200/$13,000 on any further retracement, Stéphanie Aymes, head of technical analysis at Societe Generale, said in a note.

“Nickel ... should head towards up the sloping channel limit near $14,587 with the possibility to reach next projections at $15,090.”

PRICES: LME lead declined by 0.6 percent to close at $2,531 while tin edged up 0.4 percent to $21,650.

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Reporting by Eric Onstad; Editing by David Evans and David Goodman

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