Copper Falls on China Interest-Rate Speculation; Nickel Drops
By Chanyaporn Chanjaroen
June 12 (Bloomberg) -- Copper fell in London on speculation that interest rates in China and the U.S. will increase, curbing demand in the world's largest users of the metal. Nickel dropped the most in more than three months on signs of slowing orders.
China's inflation accelerated at the fastest pace in more than two years in May, the National Bureau of Statistics said today, increasing the likelihood the central bank will raise rates for a third time this year. The U.S. Federal Reserve next meets to decide on interest rates on June 28.
``People are worried that rising interest rates will affect long-term demand,'' Michael Lewis, head of commodities research at Deutsche Bank AG in London, said in an interview.
Copper for delivery in three months fell $115, or 1.6 percent, to $7,245 a metric ton as of 10:30 a.m. on the London Metal Exchange. The metal, used in plumbing, has declined 13 percent from the 11-month high of $8,335 traded May 4.
The copper price has quadrupled in the past five years, stoked by demand from China. Imports of the metal and related products into the world's most populous country rose to 220,561 tons in May, 48 percent higher than a year earlier, the Beijing- based customs office said today.
On a monthly basis, imports fell 28 percent, from 304,672 tons in April, according to customs.
``The underlying Chinese market is strong,'' Lewis said. The speculation about the impact of higher interest rates on demand ``will be short-lived.''
Strike Threats
The acceleration in China's inflation was led by food prices, casting doubt on whether an interest-rate increase would be the solution, John Kemp, an analyst at Sempra Metals Ltd. in London, said in an e-mailed note.
Possible strikes at mines in Chile, the world's largest source of copper, and Mexico, may limit copper's losses. Miners have increased salary demands after copper prices jumped 16 percent this year, boosting profit for companies including Chile's Codelco, the world's largest producer. Contract workers at Codelco are preparing for a strike next week, a labor spokesman in Santiago said yesterday.
At Dona Ines de Collahuasi, Chile's third-largest copper mine, a union president said yesterday that negotiations will continue during a strike. Management has rejected demands for owners Xstrata Plc and Anglo American Plc to make a new wage proposal before negotiations resume.
At Xstrata Plc's Montreal copper refinery, 430 unionized workers walked off the job yesterday to put pressure on the company to accept wage and pension demands, union officials said. In Mexico, workers at six operations owned by Grupo Mexico SAB, the world's seventh-largest copper producer, plan to strike June 15.
Nickel Falls
Nickel dropped $2,400, or 5.7 percent, to $40,100 a ton, the largest intraday decline since March 6. Orders for the metal to be withdrawn from LME-monitored warehouses dropped 8.6 percent to 444 tons, according to daily exchange data. That brought the decline this month to 32 percent.
``Current prices are still too high,'' Andrew Silver, a trader at Natixis Commodity Markets Ltd., said today by telephone, adding the metal probably will extend declines as supply increases.
Stockpiles of nickel monitored by the LME climbed 42 tons to 8,922 tons, the exchange said today. Inventories have risen 34 percent this year. They are still enough for less than three days of global consumption.
Among other LME-traded metals, aluminum fell $14 to $2,710, lead declined $24 to $2,321 and zinc slid $80 to $3,670. Tin lost $25 to $13,950 a ton.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at [email protected] or
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