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METALS-Copper, zinc slip on profit taking, firmer dollar

Kitco News

* LME/ShFE arb: (Updates with official prices, adds comments on nickel)

By Eric Onstad

LONDON, Feb 23 (Reuters) - Copper, zinc and other base metals prices fell on Friday as investors locked in profits and the dollar firmed amid uncertainty over demand in top metals consumer China.

Benchmark copper gained about 8 percent during a rally earlier this month that saw the metal touch the highest in a month last Friday at $7,253 a tonne.

But some analysts argue prices have overshot supply/demand fundamentals with record high inventories indicating excess supply. "We have seen a sentiment cycle which has run ahead of the business cycle, so prices are painting a too rosy picture of the reality that makes them very vulnerable to profit taking," said analyst Carsten Menke at Julius Baer in Zurich.

"We need to keep an close eye on China rather than on the global economy, in particular the infrastructure and property sector, the metals-intensive sectors, that's where we would expect some weakness ahead."

Menke forecast that copper will extend its correction to below $6,500 a tonne by mid-year.

* COPPER: London Metal Exchange three-month copper dropped 0.7 percent to $7,110 a tonne in official open outcry trading after logging a small gain in the previous session. * DOLLAR: Weighing on metals was a slight strengthening of the dollar against a basket of currencies as global investors gingerly dipped their toes back into riskier assets amid rapidly shifting views on U.S. monetary policy. * ZINC: LME zinc , untraded in official rings, was bid down 0.5 percent at $3,513 a tonne. Zinc inventories on the Shanghai Futures Exchange jumped 12 percent this week to 114,887 tonnes, data showed on Friday. * ALUMINIUM: LME aluminium was bid 0.9 percent weaker at $2,165 a tonne. LME aluminium inventories rose again on Friday, bringing the gain of on-warrant stocks - those not earmarked for delivery - to 39 percent in just over two weeks. * ALUMINIUM PREMIUMS: A global aluminium producer has offered Japanese buyers a premium of $135 per tonne for primary metal shipments during the April to June quarter, up 31 percent from the current quarter, sources said. * NICKEL: LME nickel bucked the weaker trend and traded up 0.1 percent at $13,845 a tonne in official activity. Nickel continues to exhibit the largest speculative long position on the LME, according to estimates by broker Marex Spectron, a note from Marex's Alastair Munro said.

Nickel should see strong support at $13,200/$13,000 on any further retracement, Stéphanie Aymes, head of technical analysis at Societe Generale, said in a note.

"Nickel ... should head towards up the sloping channel limit near $14,587 with the possibility to reach next projections at $15,090."

PRICES: LME lead was bid down 0.5 percent at $2,533 while tin traded down 0.2 percent at $21,530.

* For the top stories in metals and other news, click or <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Top Base and Precious Metals Analysis - GFMS LME/ShFE arb: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Eric Onstad, editing by David Evans)

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