Copper slips from highs but supply risks lend support

Copper eased on Thursday as concerns over whether the supply and demand backdrop justified its recent rally prompted some to cash in the previous day's gains, though it 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 was down 0.4 percent at $5,870.50 a tonne by 1500 GMT, having climbed by 1.7 percent the previous day.
Copper hit $6,007 on February 1, its highest since November 28, and the metal used in construction has risen by 12 percent since the US election in November, partly on the back of US President Donald Trump's pledge to lift spending on infrastructure. With positioning in the market looking overdone, prices were prone to profit-taking, said Julius Baer's head of commodity research, Norbert Ruecker.
"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."
The metal 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 warned that 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 was up 0.3 percent at $1,854.50 a tonne, while nickel fell 1.4 percent to $10,350. Zinc gained 0.7 percent to $2,868, lead was down 0.4 percent at $2,381.50 and tin rose 0.8 percent higher to $19,185.