LONDON: Copper and aluminium dropped on Monday for a second session after lacklustre rises in Chinese home prices fuelled worries about demand in the world's top metals consumer.
Data on Monday showed home price rises in China slowed in June for a second straight month, adding to fears that a construction-led rebound in the economy may not be sustainable.
"This slowing increase in Chinese house prices we've seen over the weekend puts the focus back on the medium to longer term issues which is oversupply in the real estate market," said analyst Carsten Menke at Julius Baer in Zurich.
Benchmark copper, mainly used in the construction and power sectors, on the London Metal Exchange slid 0.8 percent to $4,879 a tonne by 1015 GMT. The most-traded copper contract on the Shanghai Futures Exchange closed 1.5 percent down at 37,850 yuan ($5,650.86) a tonne.
Copper had rallied 12 percent from mid-June to mid-July, topping out at $5,032 last week, partly on hopes for more stimulus from Chinese authorities.
"This euphoria that we've seen in the steel and iron ore markets is clearly fading again based on the (home price) data and you have some spill over in copper and aluminium," Menke added.
Chinese steel-related commodities futures dived on Monday, erasing last week's rally as investors felt the previous gains outpaced physical demand for steel in China.
Three-month LME aluminium dipped 0.2 percent to $1,656 a tonne.
A stronger U.S. dollar, especially versus the yen, also weighed on metals markets, making commodities priced in the U.S. currency more expensive to buyers using other currencies.
"The price action today is more to do with investors taking profit and a stronger dollar weighing on prices," said Chunlan Li, an analyst at CRU in Beijing. "There is not much change in the fundamental situation, it is summer season and demand seasonally low."
Zinc and nickel, however, managed to remain in positive territory, as speculators continued their buying spree, with concern about possible shortages in the two metals outweighing the macro-economic worries.
LME zinc added 0.3 percent to $2,211.50 and nickel also gained 0.3 percent to $10,300 a tonne.
Broker Marex Spectron said in a note that their speculative positioning estimates showed the long in nickel on the LME had climbed to heights not seen since July 2014.
Nickel, however, was still the second largest speculative long of the LME complex after zinc, Marex added in a note.
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