* Fed start reining in stimulus later this year if economy improves
* Copper price touches lowest level since May 3
* Aluminium inventories rise to new record
By Josephine Mason and Susan Thomas
NEW YORK/LONDON, June 19 (Reuters) - Copper slid to six week lows on Wednesday after Federal Reserve chief Ben Bernanke outlined plans for reining in the U.S. central bank’s massive bond-buying program, comments that boosted the dollar and knocked assets considered more risky.
Bernanke said the Fed’s policy-setting committee will begin to pull back later this year on its $85 billion in monthly asset purchases if the economy grows as expected. He said the eventual goal would be to end the program by the middle of 2014.
The stimulus which has bolstered industrial metal prices in recent years, so Bernanke’s blueprint for ending it surprised some investors after the Fed’s earlier statement was virtually unchanged from last month.
“He fully articulated the changes of the QE program. For metals, it’s not bullish,” Jason Schenker, president of Prestige Economics Jason Schenker, said.
Investors worry that a pull-back may derail a recovery in the construction industry, a key to industrial metals demand.
The Fed’s stance could also strengthen the dollar, making commodities priced in the greenback more expensive for holders of other currencies.
The most-active September contract on COMEX fell back close to six-week lows after the Fed statement, then settled down 0.5 percent at $3.1515 per lb, its lowest since May 3.
Dropping for a third-straight day, three-month copper on the London Metal Exchange slid 1.1 percent to a session low of $6,925 a tonne, its weakest since May 3. It failed to trade in closing open-outcry activity, but was last bid at $6,960 a tonne.
Safe-haven assets including bonds benefited from Bernanke’s comments. Gold fell more than 1 percent.
Copper has dropped 12 percent so far this year and is heading towards its third straight quarterly decline in the second quarter.
Market participants will watch for HSBC Flash Chinese Manufacturing purchasing managers index (PMI) on Thursday for a further reading on the health of the world’s second-largest economy, which is the biggest enduser of copper.
Since Chinese growth has been weak and sentiment has deteriorated, even a modestly positive PMI report could push industrial metals prices higher, Schenker said.
Some fundamental issues were supportive for copper prices.
The world’s second-largest copper mine, Freeport McMoRan Copper and Gold Inc’s Grasberg in Indonesia, remains closed five weeks after a training tunnel collapse killed 28 workers.
Also, a shortage of cash in top commodity consumer China is boosting imports of copper as a financing tool, resulting in premiums paid for spot refined metal supplies from overseas climbing to near four-year highs.
But inventories of copper in warehouses monitored by the LME have been climbing, which has contributed to the metal’s almost 12 percent fall so far this year.
LME data showed stocks jumped 6,174 tonnes, reminding investors of an expected surplus this year. Many analysts say production outages including Freeport’s Grasberg mine should make the surplus lower than they had expected.
Aluminium inventories in LME-monitored warehouses have also surged this week, with data on Wednesday showing Detroit accepting almost 60,000 tonnes of the metal, setting a new record high for total stocks at 5.4 million tonnes.
Benchmark three-month aluminium lost 0.6 percent to close at $1,830 a tonne, the weakest since May 15.
“Two days of consecutive closes below $1,838 will likely set the complex up for a retest of the May low of $1,809,” Meir said in a note.
Among other metals, lead was the biggest loser, closing 1.1 percent lower at $2,066 a tonne, a three-week low.
Zinc edged down 0.2 percent to $1,861 a tonne, tin dipped 0.1 percent to finish at $20,100 and nickel gave up 0.35 percent to $14,200.