* Dollar strengthens after Bernanke testimony
* Escondida annual copper output soars 28 pct to 1.1 mln
* U.S. Senate to hold hearing on banks owning commodities
* Zinc falls after large rise in inventories
By Maytaal Angel and Eric Onstad
LONDON, June 17 Copper slipped to its lowest
price in a week on Wednesday after the dollar strengthened on
fresh comments about scaling back the U.S. stimulus programme
and following news of an sharp increase in output at the world's
biggest copper mine.
Base metals markets had been nervous ahead of the testimony
of U.S. Federal Reserve Chairman Ben Bernanke, who affirmed the
central bank would start later this year to prune its
$85-billion-a-month bond-buying programme, which has been
supporting financial markets.
But he also sounded a dovish tone, leaving open the option
of changing that plan if the economic outlook shifted.
Three-month copper on the London Metal Exchange
closed down 1.5 percent at $6,890 a tonne and touched a session
low of $6,867.25, the weakest since July 10.
Copper climbed as high as $7,046 a tonne in the morning on
short-covering, within reach of a near one-month high hit July
Weighing on copper was a stronger dollar against a basket of
currencies, which makes metal priced in the greenback
more costly for European and other non-U.S. investors.
Copper prices have failed to find momentum above $7,000 a
tonne, though they rose to those heights earlier this month
after comments favouring looser U.S. monetary policy for longer
triggered a cross-commodity rally.
Credit Suisse analyst Tom Kendall said the copper market was
still short so there was potential for more bursts of
short-covering in coming months.
"But once you get through the summer period, we are still
bearish on copper and expect to see additional supply coming
through at a faster pace than demand can absorb."
BHP Billiton, majority owner of Escondida in Chile,
the world's single-largest copper mine, said copper output at
the mine rose 28 percent to 1.1 million tonnes in the 2013
The news added to expectations that the copper market will
record a surplus in 2013 for the first time in three years.
The surplus could be moderated, however, since China's
consumption of refined copper is likely to rise in the second
half, buoyed by expected government backing for power sector
investments to support economic growth.
China is the world's largest copper consumer, accounting for
about 40 percent of demand. Its economic growth slowed to 7.5
percent in the second quarter, from 7.7 percent in the first
quarter, leaving a big dent in copper prices, which are down
nearly 13 percent this year.
Elsewhere, the U.S. Senate committee will hold a hearing on
whether banks should control physical commodities storage, a
practice that detractors argue has resulted in long queues to
get metals out of LME warehouses.
The queues have prompted rising spot premiums on physical
markets, and have also spurred producers to crank up output in
spite of falling demand, weighing on LME benchmark prices.
In other metals, zinc closed down 1.8 percent at
$1,854 a tonne after daily LME stocks data showed
a sharp 75,900 tonne increase in inventories to 1.077 million
tonnes, near their highest level in over a month.
Lead finished down 2.2 percent at $2,030 a tonne and
aluminium edged down 0.6 percent to $1,804 a tonne but
other metals bucked the weaker trend.
Nickel ended 1.45 percent stronger at $13,970 a
tonne and tin rose 0.4 percent to $19,525.