METALS-Copper drifts lower on firmer dollar

By Polina Devitt

LONDON, May 28 (Reuters) - Copper prices eased on Wednesday as a stronger dollar and signs of slowing import demand in China offset support from tighter nearby supply in the London Metal Exchange's system.

Benchmark three-month copper CMCU3 on the LME was down 0.4% at $9,553 a metric ton by 1603 GMT, after hitting a two-week high of $9,655 earlier in the session.

Copper, used in power and construction, is up 5% so far this month as global trade tensions eased compared to April when U.S. President Donald Trump announced reciprocal tariffs.

Providing support to the metal are declining stocks in LME-registered warehouses MCUSTX-TOTAL, down 43% since mid-February to 154,300 tons, the lowest in almost a year.

The spread between the cash LME and the three-month copper contract CMCU0-3 was last at a premium of $47 a ton compared with $3 a week ago, indicating tighter nearby supply.

However, signalling easing import demand from top consumer China, the Yangshan copper premium SMM-CUYP-CN fell 5% to $89 a ton on Wednesday, its lowest since April 24.

Meanwhile, Washington is continuing an investigation into whether to impose new copper import tariffs, keeping the premium of COMEX copper against the LME benchmark LMECMXCUc3 elevated and attracting more metal into COMEX-owned warehouses HG-STX-COMEX.

"If a tariff is applied, the incentive to move copper to the U.S. will cease, in our view prompting more physical flow into the LME, a price headwind," analysts at BNP Paribas said in a note.

"If there is no tariff or the potential tariff rate is far less than expected we think CME prices will collapse, with a negative knock-on impact on LME prices," it added.

BNP Paribas expects average LME copper prices at $8,610 in the third quarter before a rise to $9,180 in the fourth quarter.

From the global supply point of view, the copper market was in a surplus of 289,000 tons in January-March compared with 268,000 tons a year earlier, according to the International Copper Study Group.

Among other LME metals, aluminium CMAL3 was down 0.9% at $2,463 a ton, zinc CMZN3 fell 0.7% to $2,686.50, lead CMPB3 eased 0.2% to $1,980.50, tin CMSN3 dropped 3.3% to $31,455 and nickel CMNI3 lost 2.3% to $15,055.

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