Copper fell on Monday as a firmer dollar prompted some profit taking in the metal after its biggest weekly rise in more than a year, while aluminium rose as the United States said it was considering import tariffs on the metal. Copper, widely used in construction, surged 7 percent last week as a rebound in stock markets showed increasing appetite for risk, and as the dollar tumbled, boosting the appeal of assets priced in the US currency.

"Financial markets have had quite a volatile month, and that has also been the case for copper," Danske Bank analyst Jens Pedersen said. "Today it could simply be a case of the dollar strengthening a bit, and that weighing on base metals." "We are heading for another round of manufacturing PMIs this week, which is a gauge of how industrial activity is doing - whether it is still moving ahead at a relatively strong pace, which should cap downside for copper and other base metals, or whether it is close to a peak. That is what the market is looking at right now."

London Metal Exchange copper closed down 1.6 percent at $7,118 a tonne. With many Asian markets closed for the Lunar New Year break and US markets also shut for Presidents Day, volumes were exceptionally light across base metals. Copper stocks in LME warehouses rose another 5,500 tonnes to 338,275 tonnes, exchange data showed on Monday, their highest since May last year.

The dollar index recovered to rise 0.1 percent on Monday as investors bought back the greenback following its plunge to three-year lows. Hedge funds and money managers cut their net long positions in COMEX copper contracts in the week to February 13, US Commodity Futures Trading Commission (CFTC) data showed on Friday.

US Commerce Secretary Wilbur Ross unveiled options on Friday for hefty US steel and aluminium import restrictions. The Section 232 reviews contained global tariff options of at least 24 percent on steel products, and at least 7.7 percent on aluminium products. LME aluminium finished 0.3 percent higher at $2,214 a tonne. Nearly 90 percent of US aluminium demand last year was met by imports, according to Commerzbank.

The premium for cash over three-month aluminium jumped to its highest since late August at $10 a tonne on Monday, from a discount of $1.50 at the end of last week, suggesting near-term tightness in the market. LME nickel ended the day down 2.3 percent at $13,600 a tonne after rallying 7 percent last week.

LME zinc closed down 0.6 percent at $3,555 a tonne, while lead ended 1.5 percent lower at $2,575 a tonne and tin finished down 0.8 percent at $21,575 a tonne.

Copyright Reuters, 2018