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METALS-Benchmark copper prices drop ahead of ECB meeting

(Recasts, updates prices)

Sept 10 (Reuters) - Copper prices dropped on Thursday, with the Shanghai benchmark contract erasing early gains, as caution prevailed ahead of the European Central Bank’s (ECB) interest rate decision and policy statement later in the day.

Three-month copper on the London Metal Exchange was down 1.2% to $6,656 a tonne by 0707 GMT.

The most-traded October copper contract on the Shanghai Futures Exchange closed down 0.4% at 51,700 yuan ($7,560.14) a tonne.

“The ECB will continue to support fiscal stimulus at an EU and national level, and work to encourage the expansion of credit,” said analysts at ANZ in a note.

However, they said working against a strong euro is “likely a bit more challenging” for the ECB given that policy rates are already deeply negative.

Global economic stimulus measures rolled out in the wake of the coronavirus pandemic have helped copper rebound more than 40% from lows in March, making it the best-performing base metal this year so far.

“Copper looks well supported by both demand and supply,” said ANZ commodity strategists in a separate note. “Ample stimulus is paving the way for strong consumption, while mining disruptions are keeping supply tight.”

INVENTORIES: Copper stocks on the LME dropped to the lowest since November 2005, while inventories in warehouses monitored by the Shanghai exchange rose to their highest since May. MCUSTX-TOTALCU-STX-SGH

PRICES: In Shanghai, aluminium slipped 0.3% to 14,340 yuan a tonne, while nickel dropped 0.8% to 115,770 yuan. Zinc dropped 1.6% to 19,055 yuan, lead slumped 2.3% to 14,970 yuan a tonne, and tin lost 1% to 143,310 yuan.

On the LME, aluminium was down 0.4% at $1,777.50 a tonne, lead dropped 0.6% to $1,883.50, zinc lost 1% to $2,398, while nickel fell 0.7% to $14,820 and tin fell 0.8% to $17,875. (Reporting by Enrico Dela Cruz in Manila; Editing by Rashmi Aich and Christopher Cushing)