* Speculation of March rate rise drives dollar higher
* LME aluminium at risk of near term correction -JP Morgan
* Coming Up: U.S. Markit Mnfg Flash PMI Feb at 1445 GMT (Adds closing prices)
By Maytaal Angel
LONDON, Feb 21 (Reuters) - Copper prices slipped on Tuesday due to a rise in the dollar and as investors locked in gains after a rally to above $6,000 a tonne, driven by the prospect of major supply disruptions in Chile and Indonesia.
The dollar was on course for its steepest gain against the euro in more than a month following hawkish comments from Federal Reserve officials, while European political uncertainty also boosted the greenback.
A stronger dollar erodes the buying power for those paying for dollar-denominated commodities with other currencies.
Three-month copper on the London Metal Exchange slipped 0.2 percent to close at $6,060 a tonne, after rising 1.9 percent on Monday. Copper hit its highest level in 1-1/2 years earlier this month on the prospect of disrupted supply.
“The market has priced in a lot of the disruptions and is vulnerable to corrections. All these (supply) events have attracted speculative interest and as soon as they die down so will that interest,” said Warren Patterson, commodities strategist at ING.
In Chile a government-mediated meeting between BHP Billiton and striking workers at its Escondida copper mine has failed without any future talks planned.
Meanwhile U.S. mining giant Freeport-McMoRan has warned it could take the Indonesian government to arbitration and seek damages over a contractual dispute that has halted operations at the world’s second-biggest copper mine.
In demand side news, China’s central bank said on Tuesday it would extend a preferential scheme for some banks that would free up additional funds for lending, as long as the banks channel money to weaker sectors of the economy.
China accounts for nearly half of global copper demand.
Aluminium ended down 0.7 percent at $1,886.
There are supply concerns in aluminium, where a major producer offered a $125 per tonne premium to Japanese buyers for April-June shipments, up 32 percent from the last quarter.
Still, aluminium is at risk of a correction lower, JP Morgan said in a note.
“Chinese inventories of aluminium look set to continue to increase over the coming weeks.”
Nickel closed down 2.7 percent at $10,855, having hit its highest since Dec. 19 on Monday amid a mining crackdown in the Philippines.
The worldwide nickel market registered a deficit of 49,700 tonnes which compared with a surplus of 91,400 tonnes in 2015, industry data showed.
Zinc ended down 0.3 percent at $2,875, lead ended down 2 percent at $2,265, while tin closed down 0.5 percent at $19,800.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin ($1 = 6.8826 Chinese yuan) (Additional reporting by Melanie Burton; Editing by Greg Mahlich and Susan Thomas)