Copper prices extended losses on Thursday, pressured by concern that the market's surge to two-year highs was based on speculation while physical demand remains weak in China.

Three-month copper on the London Metal Exchange (LME) shed 1.2% to $9,782 a metric ton in official open-outcry trading, moving away from the two-year high of $10,208 touched on Tuesday.

"You may ask the question whether we have jumped out of the starting block too soon," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

"I'm stepping back into the neutral camp. I like the long-term view, but based on actual, on-the-ground demand, we could be at risk of consolidation or perhaps even a correction."

Hansen cited weak signals from top metals consumer China, such as the Yangshan copper premium , which reflects demand for copper imported into China.

That premium dropped to zero last week, from $42.50 a ton at the start of April, and was last quoted at $5.

On Tuesday data showed that growth slowed in China's manufacturing and services sectors in April, suggesting a loss of momentum for the world's second-biggest economy.

China's copper producers are planning to export up to 100,000 tons of the metal, the largest volume in 12 years, to cool a recent price rally that hit order books, sources told Reuters.

Hansen said a pull-back in prices could create a snowball effect, sparking a sell-off by funds.

"The big question is whether we retrace to levels where some of the recent, quite aggressive, fund buyers start to get nervous," Hansen said.

LME aluminium dropped 1% to $2,552.50 a ton.

Data showed that LME on-warrant inventories of aluminium in LME-registered warehouses rebounded by 88,625 tons, which a trader said was linked to recent UK and U.S. sanctions on Russian metal.

Last month the LME moved to stop traders from taking Russian aluminium from its approved warehouses and returning it at a later date to profit from rule changes to comply with the sanctions.

In other metals, LME zinc dipped 0.2% in official activity to $2,876 a ton and nickel slid 1.7% to $18,550 while lead added 0.4% to $2,188.50 and tin climbed 1.6% to $31,100.

(Reporting by Eric Onstad Editing by David Goodman)