METALS-Copper dragged off record high by subdued physical demand

(Adds analyst comment and London dateline, updates prices)

By Polina Devitt

LONDON, May 21 (Reuters) – Copper prices fell on Tuesday, drifting away from the previous session’s record high as investors assessed the sustainability of the price rally while physical demand remains subdued.

Three-month copper on the London Metal Exchange (LME) lost 0.2% to $10,860.50 a metric ton by 0950 GMT, but the contract remains 27% up this year.

Copper, used in power and construction, hit a record $11,104.50 on Monday as a rally triggered by short covering created momentum for speculators and funds to bet on a potential long-term shortage of copper in the transition to green energy.

COMEX copper prices hit a record high of $5.1985 per lb, or $11,460 a ton, on Monday and were up 0.4% at $5.1075 on Tuesday.

“Given the scale of the speculative-driven move in copper, prices are becoming increasingly detached from the near-term fundamentals,” said Warren Patterson, head of commodities strategy at ING.

“While it is difficult to call a top in the current market, we do not believe the recent move higher is sustainable.”

Demand in top metals consumer China remains soft, with copper inventories in warehouses monitored by the Shanghai Futures Exchange <CU-STX-SGH> at seasonal record highs and Chinese refined copper output rising despite low treatment charges (TCs), he added.

China’s April refined copper production rose 9.2% year on year.

Meanwhile, LME aluminium added 1.4% to $2,665.50 a ton, buoyed by a drop in on-warrant stocks in LME-registered warehouses to a two-week low of 556,100 tons after 82,000 tons of cancellations. <MALSTX-TOTAL> <0#MALSTX-LOC>

Rio Tinto declared force majeure on third-party contracts for alumina exports from its refineries in Queensland, Australia.

In other metals, zinc was up 0.4% at $3,127.00 a ton, lead dipped by 0.1% to $2,337.50, tin fell 0.8% to $34,315 and nickel nickel dropped by 1% to $21,550. (Reporting by Polina Devitt in London Additiontal reporting by Mai Nguyen in Hanoi Editing by David Goodman )

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