Shanghai copper drifts lower, weighed by higher prices and demand outlook

Copper dipped slightly on Tuesday after a two-day rise as higher prices and uncertainty about the Chinese economy outweighed a softer U.S. dollar and lingering worries about supply disruptions.

The most-traded copper contract on the Shanghai Futures Exchange closed daytime trading down 0.25% at 79,930 yuan ($11,237.80) per metric ton, as of 0800 GMT.

The benchmark three-month copper on the London Metal Exchange was down 0.13% at $9,960 a ton by 0809 GMT.

The dip came as some traders closed long positions after SHFE prices closed above the key psychological level of 80,000 yuan per ton on Monday, according to a Singapore-based hedge fund analyst who spoke on condition of anonymity.

Also on Monday, China kept its benchmark lending rates unchanged for the fourth consecutive month, with authorities keeping markets guessing about further stimulus.

The combination of higher prices and uncertainty about stimulus and U.S. interest rates weighed on procurement appetite in China despite restocking demand, ahead of the National Day holiday from October 1-8, analysts at broker Everbright Futures said in a note on Tuesday.

A slightly weaker dollar helped limit the decline.A weaker dollar makes commodities traded in the greenback cheaper for traders using other currencies.

Uncertainty about the status of Freeport's Grasberg mine also clouded the outlook with uncertainty about the balance of supply and demand, analysts at Benchmark Mineral Intelligence said in a note. Among other SHFE base metals, nickel declined by 0.58%, aluminium dropped 0.36%, zinc tumbled 0.7%, lead was down 0.47% and tin saw a 0.55% decline.

Among LME metals, aluminium dipped 0.19%, zinc tumbled 1.07%, lead was down 0.58%, tin lost 0.4%, and nickel was little changed.