Copper sinks to 3-week low on profit-taking, demand angst

* LME/ShFE arb:

* Discount for cash over 3-month copper highest since 2009

* Nickel slides on talk of higher supplies from Indonesia (Adds dollar, closing prices)

By Pratima Desai

LONDON, Sept 13 (Reuters) - Copper prices fell to three-week lows on Wednesday on profit-taking, rising stocks in London Metal Exchange warehouses, nervousness about demand in China and a higher dollar.

Benchmark copper ended down 1.9 percent at $6,543 a tonne from an earlier low at $6,529. Prices are up around 18 percent so far this year, partly due to a speculative frenzy in July and August.

"It looks like profit-taking, we could see more of this before it settles," Capital Economics senior commodities economist Caroline Bain said.

"China demand has surprised a little on the upside, but looking more closely at the data, construction has been contracting, that will drag on demand."

SPECULATORS: LME data shows funds' net long copper position at 71,827 lots, or more than 1.8 million tonnes, is down from a peak of 78,527 lots late in August but still near its highest since last December. <LME-CA-MNET>

DOLLAR: A higher U.S. currency makes dollar-denominated metals more expensive for non-U.S. firms, which could subdue demand from manufacturers.

STOCKS: Copper stocks in LME approved warehouses are up 38,150 tonnes at 246,575 tonnes since last week.

DISCOUNT: Higher stocks and worries about an oversupplied copper market helped push the discount for the cash over the three-month contract <MCU0-3> to above $40 a tonne, its highest since December 2009. Traders say this suggests more metal will be delivered over coming days.

CONSTRUCTION: China's new property construction starts fell 7 percent in July year-on-year, the first fall since last September. Real estate investment in China rose 7.9 percent in January-July from the same period a year earlier, easing from 8.5 percent in the first half of this year.

DATA: Markets are looking ahead to data from China on new loans, investment and industrial production due this week for clues on the strength of demand over coming months.

ZINC STOCKS: Stocks of zinc in LME warehouses are up 25,250 tonnes at 267,050. A small premium for the cash over the three-month contract <CMZN0-3> on Sept. 4 has over the last week turned into a $5 a tonne discount. Benchmark zinc was down 1.2 percent at $3,023.

NICKEL: Nickel ended down 5.2 percent to $11,360. Earlier, it fell to a 3-week low at $11,330 a tonne on talk of higher supplies from Indonesia, a top exporter.

SPREAD: The discount for cash nickel over the three-month <CMNI0-3> at a 3-year high near $90 a tonne also suggests large deliveries to LME warehouses, traders said.

ELSEWHERE: Aluminium was down 1.3 percent at $2,110, lead fell 0.9 percent to $2,290 and tin slipped 0.8 percent to $20,515.

(Editing by Mark Potter, Greg Mahlich)

2017-09-13 18:24:49 SAST

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