Copper slips on profit taking, firmer dollar ahead of Fed

LONDON: Copper prices slumped on Tuesday as investors shed some of their bullish positions amid uncertainty ahead of central bank meetings.

Benchmark copper on the London Metal Exchange had dropped 1.8% to $8,979.50 a tonne by 1130 GMT.

Copper hit a 9-1/2 year peak last month of $9,617, having surged by 24% since the start of the year.

"There's lots of positive news already priced in, lots of positive expectations about electric vehicles. It's quite natural for some of the smart money to take profits or stay the sidelines," said Xiao Fu, head of commodity market strategy at Bank of China International.

The US central bank's two-day policy meeting concludes on Wednesday amid worries about inflation, driving US 10-year borrowing costs to the highest in over a year.

"Global central banks still have an easing bias, although the market is very worried about inflationary prospects, so you have this discrepancy and that introduces uncertainty."

A slightly firmer dollar index also weighed on metals, making dollar-priced commodities more expensive for buyers using other currencies.

LME copper inventories rose to a two-month high, having gained 41% over the past two weeks.

Aluminium on the Shanghai Futures Exchange hit a 9-1/2-year high as supply concerns rose after an aluminium hub in top consumer China ordered power cuts and output curbs.

CRU analyst Wan Ling said shutdowns in Inner Mongolia, a major aluminium producing region, could translate to a 100,000-tonne annual aluminium output reduction.

On the LME, three month aluminium dipped 0.5% to $2,206 a tonne.

The spread between LME and ShFE aluminium cash prices was last at $229.55 a tonne, compared to its highest since July 2020 of $267.50 a tonne.

LME nickel dropped 1% to $16,060 a tonne, zinc fell 1% to $2,830, lead added 0.1% to $1,964.50 and tin slid 2.1% to $24,775.