* Some buyers cash in gains after Wednesday’s 1.7 pct rally
* Goldman sees supply issues underpinning copper market
* GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl (Updates with closing prices)
By Jan Harvey
LONDON, Feb 9 (Reuters) - Copper fell on Thursday as a bounce in the dollar and concerns over whether the supply and demand backdrop justified its recent rally sparked profit-taking, but prices remained underpinned by the threat of supply disruptions.
Workers at the world’s largest mine in Chile went on strike from 0800 local time (1100 GMT) on Thursday, with the union saying that night workers would not be replaced. In Indonesia, Freeport-McMoRan Inc’s Grasberg mine has yet to be granted a new export permit.
Three-month copper on the London Metal Exchange closed down 1.2 percent at $5,822 a tonne, having climbed by 1.7 percent the previous day.
Copper hit $6,007 on Feb. 1, its highest since Nov. 28, and the metal used in construction has risen by 12 percent since the U.S. election in November, partly on the back of U.S. President Donald Trump’s pledge to lift spending on infrastructure.
With positioning in the futures market looking overdone, prices were prone to profit-taking, Julius Baer’s head of commodity research Norbert Ruecker said.
“We think copper is trading at the upper end of its fundamentally justified range, and that prices look excessive at current levels,” he said.
“The price move we’ve seen over the past few months is really the poster child of reflation euphoria and we question that, especially to what extent infrastructure spending expected from the States will really affect copper demand.”
Strength in the dollar also pressured the metal. The currency surged more than 1 percent against the yen after U.S. President Donald Trump said that he would release a “phenomenal” tax plan in the next few weeks.
Copper remained supported, however, by a threats to supply, which have been an increasing focus in copper markets in the past month, Goldman Sachs said in a report.
“Downside risks to supply appear increasingly likely to materialise and translate into copper production losses ... these supply-side dynamics appear increasingly likely to support our tactically bullish 1H17 copper view,” Goldman said.
BHP Billiton has begun halting operations at the Escondida copper mine in northern Chile ahead of the planned strike on Thursday, a union leader told Reuters.
Freeport said it would scale back activities at its Grasberg copper mine, an official at Indonesian copper smelter PT Smelting said, amid a workers’ strike and other issues.
Traders are also looking ahead to Chinese trade data on Friday for signals of the strength of the world’s second-biggest economy and for numbers on copper imports.
Among other metals, LME aluminium closed up 0.1 percent at $1,850 a tonne, while nickel ended the day down 2.1 percent at $10,280.
Zinc closed down 0.6 percent at $2,830, lead closed down 2.2 percent at $2,335.50 and tin was 0.3 percent higher at $19,075.
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
Most active ShFE nickel
Three month LME tin
Most active ShFE tin
Additional reporting by Melanie Burton in Melbourne; Editing by David Goodman and David Evans