Copper closed lower on Thursday, hurt by a strengthening dollar, after hitting a two-month high earlier in the day on concerns about potential supply disruptions in Indonesia and Chile. Zinc retreated after touching a 1-1/2 month peak on expectations of continued supply shortages.
Freeport-McMoRan, the world's biggest listed copper miner, warned on Wednesday it would need to start slashing output at its Indonesia mine to about 40 percent of capacity if it fails to get a government export permit.
Freeport's Indonesian copper concentrate exports have been halted since January 12 when a ban on shipping semi-processed ore came into effect. The ban has removed more than 2 percent of supply from the global copper market, Jefferies estimates.
Meanwhile, unionised workers at BHP Billiton-run Escondida in Chile, the world's biggest copper mine, on Tuesday rejected the firm's latest wage offer and asked workers to vote for a strike and prepare for an extended conflict.
"The last time (Freeport) had export difficulties in 2014 the disruption amounted to 180,000 tonnes," said Macquarie analyst Vivienne Lloyd.
"Fundamentally I don't think the (copper) market is that strong. It's just we've got these two interesting supply risks but premiums around the world are weak, we've got Chinese new year coming up so no one wants to hold metal," she added.
Three-month copper on the London Metal Exchange rose as far as $5,981.50 a tonne, its strongest level since November 28, but ended down 1.4 percent at $5,858. Trading in Asia was thin with many in China already away ahead of the week-long Lunar New Year break, which begins on Friday.
Putting pressure on copper, the dollar rose versus a currency basket, making dollar-priced metals costlier for non-US investors. Also, Anglo American said it would report a 2 percent increase in copper production for 2016. Zinc rose to its highest level since mid-December at $2,847 but ended down 1.4 percent at $2,763. The metal used to galvanise steel rose 60 percent in 2016 on fears of shortages after some major mines were closed or suspended. "Zinc has got a great story behind it, it's shown it's still got legs to come up a bit even though last year's performance was so strong," said Lloyd.
Aluminium ended down 0.7 percent at $1,820. It hit a 20-month peak of $1,883 on Tuesday amid talk about potential capacity cuts in China. Broker Marex Spectron said it was seeing the largest speculative long or buy positions in aluminium since 2016 - rising to 27 percent of open interest. Lead ended down 2.6 percent at $2,329; tin closed down 2.2 percent at $19,975, having hit its lowest since mid-November; while nickel ended down 3 percent at $9,410, having hit its lowest since last July at $9,350.
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