LONDON: Copper prices slipped on Tuesday due to a rise in the dollar and as investors locked in gains after a rally to above $6,000 a tonne, driven by the prospect of major supply disruptions in Chile and Indonesia.
The dollar rose sharply after two Federal Reserve policymakers pointed to the potential for U.S. interest rates to rise next month, returning investors' attention to the bullish fundamentals of the world's biggest economy.
A stronger dollar erodes the buying power for those paying for dollar-denominated commodities with other currencies.
Three-month copper on the London Metal Exchange was last bid down 0.4 percent in official midday rings at $6,045 a tonne, after rising 1.9 percent on Monday. Copper hit its highest level in 1-1/2 years earlier this month on the prospect of disrupted supply.
"The market has priced in a lot of the disruptions and is vulnerable to corrections. All these (supply) events have attracted speculative interest and as soon as they die down so will that interest," said Warren Patterson, commodities strategist at ING.
In Chile a government-mediated meeting between BHP Billiton
and striking workers at its Escondida copper mine has failed, with workers heading back to their encampment without any future talks planned.
Meanwhile U.S. mining giant Freeport-McMoRan Inc has warned it could take the Indonesian government to arbitration and seek damages over a contractual dispute that has halted operations at the world's second-biggest copper mine.
In demand side news, China's central bank said on Tuesday it would extend a preferential scheme for some banks that would free up additional funds for lending, as long as the banks channel money to weaker, cash-starved sectors of the economy.
China is by far the world's biggest metals consumer, accounting for nearly half the world's copper demand.
There are also supply concerns in aluminium, and a major producer has made an indicative offer of a $125 per tonne premium to Japanese buyers for April-June shipments, up 32 percent from the last quarter.
Still, aluminium is at risk of a correction lower, JP Morgan said in a note.
"Chinese inventories of aluminium look set to continue to increase over the coming weeks as physical fundamentals in China remain slack."
Aluminium traded down 0.5 percent in rings at $1,890, while nickel traded down 0.7 percent at $11,075, having hit its highest since Dec. 19 on Monday amid a mining crackdown in the Philippines.
Zinc traded down 0.1 percent at $2,880, lead was last bid down 1 percent at $2,287, while tin traded down 0.1 percent at $19,875.
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