METALS-Aluminium at month low as LME stocks hit record high
* LME aluminium stocks hit fresh record of 5.28 mln tonnes
* Copper stocks up 11,400 tonnes
* India's top copper smelter restarts after 2 months
(Updates with official prices)
LONDON, June 17 (Reuters) - Aluminium prices slipped to a one-month low on Monday after a heavy market surplus pushed up inventories monitored by the London Metal Exchange (LME) to a fresh record high.
Copper also fell as the dollar firmed slightly, its stocks rose as well and amid uncertainty ahead of a Federal Reserve meeting that was expected to clarify its monetary stimulus policy.
The aluminium sector, burdened by overproduction, was jolted on Monday when LME data showed an inflow of 59,600 tonnes of stocks <MALSTX-TOTAL> into warehouses sent the total to a new record of 5.28 million tonnes.
It's the highest level since LME inventories touched a record of 5.24 million tonnes on Dec. 20. (http://link.reuters.com/fuf35s)
Three-month aluminium on the LME turned negative after the data, falling 1 percent to a session low of $1,832.50 a tonne, the weakest since May 15. It failed to trade in official midday open-outcry activity, but was bid at $1,835.
Aluminium has shed 11 percent this year and analyst George Adcock at broker Marex Spectron in London said investors were continuing to add short positions, expecting further losses.
"A fundamental commodity investor would be finding the current environment very challenging, but quantitative flows and investor sentiment are driving the market and those who are able to successfully gauge these are doing very well," he said.
"We have been telling clients to short aluminium since June 7, but our message is to re-adjust your stop with every leg lower to crystallise some gains."
Copper initially rose more than 1 percent as some investors covered short positions, but gains fizzled after LME stocks in copper <MCUSTX-TOTAL> increased by 11,400 tonnes, reminding investors of an expected surplus in that market as well, and in the wake of news that an Indian smelter reopened.
India's top copper smelter run by Sterlite Industries re-opened on Sunday after complaints from residents forced a two-month shutdown.
Three-month copper fell 0.35 percent in official trading to $7,060 a tonne after finishing last week down nearly 2 percent, their steepest weekly decline since mid-April.
Trading has been volatile ahead of a U.S. Federal Reserve meeting on Wednesday where Chairman Ben Bernanke is expected to indicate the economy is still performing too poorly to justify slowing the pace of its $85-billion-a-month bond buying right away.
"The wider markets are really keen for some clarity and the FOMC (Federal Open Market Committee) will be aware their recent communication has led to some turbulence in markets so maybe they will try to calm that," said Stephen Briggs at BNP Paribas in London.
Rising inflation figures could prompt the Fed to rein in stimulus sooner than expected, sapping the liquidity available to metals producers and commodities investors, said Jonathan Barratt, chief executive of Barratt's Bulletin, a Sydney-based commodity research firm.
"If inflation numbers are a little higher than expectations, then the Fed might come out and say they will taper sooner. I think that would be taken negatively for copper," he said.
So far, data shows underlying U.S. inflation pressures have remained well below the central bank's 2 percent target. U.S. CPI data for May is due on Tuesday.
Demand remains steady and is likely to support prices, Barratt said.
"We're at that point where the market is pretty happy to be here, and not to push too much lower. China's 7 percent growth still requires copper as does the housing market in the States," he said.
Hedge funds and money managers turned far more negative on the copper market in the week to June 11, increasing net short positions in copper futures and options for the first time in four weeks and by the most in more than six months.
In other metals, zinc fell 0.5 percent to $1,851 a tonne in official trading, lead edged down 0.1 percent to $2,105 in official rings, tin shed 0.2 percent to $20,350 and nickel slid 1.1 percent to $14,175.
(Additional reporting by Melanie Burton in Singapore; editing by Jason Neely)