Benchmark three-month copper on the London Metal Exchange (LME) was down 2.3% at $8,906.50 a tonne at 1705 GMT and on track for its biggest one-day fall since Dec. 15. Prices of the metal used in electrical wiring surged to a seven-month high of $9,550.50 a tonne in January as the dollar weakened.
However, U.S. economic data has remained surprisingly strong and minutes from the Federal Reserve's latest meeting reveal plans to slow - but not stop - interest rate increases. The dollar rose to its strongest since Jan. 6 and analysts said they expect higher-for-longer rates to push down global stock markets over the next three months.
"The Fed wants to kill inflation, and that means raising rates for longer. That is hurting base metals," said WisdomTree analyst Nitesh Shah.
"Dollar depreciation has turned around. On top of that, a lot of the enthusiasm on China reopening is fizzling out."
Speculators had hoped Chinese metals demand would rebound after the country abandoned COVID-19 controls late last year. But such demand has yet to materialise and metal is piling up in exchange warehouses. Chinese consumption will increase, boosting prices, but "a bit of caution is required for the next few months", Shah said.
On the supply side, Canadian miner First Quantum Minerals said its Minera Panama business had suspended ore processing operations at the Cobre Panama mine. Analysts at Bank of America said about 12% of global copper production has been affected by uncertainty or disruption so far this year. "If the supply performance does not improve meaningfully, we see a risk that the copper market will flip into deficit this year," they said.
LME aluminium was down 0.9% at $2,396 a tonne, zinc fell 1% to $3,026, nickel dropped 3.9% to $25,400 a tonne, lead was down 2.1% at $2,059.50 and tin lost 2.4% to $26,200 a tonne. (Reporting by Peter Hobson Additional reporting by Mai Nguyen in Hanoi Editing by David Goodman, Elaine Hardcastle)
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