Bloomberg News

Copper Drops as Global Interest-Rate Increases May Erode Demand

June 09, 2011

June 9 (Bloomberg) -- Copper fell to a one-week low on speculation that demand will wane as central banks worldwide raise borrowing costs to curb inflation.

European Central Bank President Jean-Claude Trichet signaled an interest-rate increase next month, saying “strong vigilance” is warranted to contain consumer prices. Last month, nations from Norway to India boosted borrowing costs. Inflation risks in the U.S. are “clearly to the upside,” Philadelphia Federal Reserve Bank President Charles Plosser said today.

“There is certainly a lot of reaction to any noise from the macro side for the metals,” said Charles Cooper, an analyst at Oriel Securities Ltd. in London. “Any sort of negative news on interest rates rising could potentially impact manufacturing demand.”

Copper futures for July delivery declined 0.1 cent to close at $4.1075 a pound at 1:16 p.m. on the Comex in New York, after touching $4.045, the lowest for a most-active contract since June 2.

The metal has dropped 12 percent from a record $4.6575 on Feb. 15 as manufacturing slowed in China and the U.S., the largest consumers.

“Macro concerns continue to weigh on the various markets,” particularly base metals, Edward Meir, a senior analyst at MF Global Holdings Ltd. in Darien, Connecticut, said in a report. Chinese copper imports might be “somewhat on the softer side of estimates” for May, he said.

China will release import data tomorrow.

“We will see a significant acceleration in Chinese scrap supply,” Michael Jansen, the head of metals research at JPMorgan Chase & Co., said yesterday at a conference in New York. “Nothing is tight.”

On the London Metal Exchange, copper for delivery in three months added $24, or 0.3 percent, to $9,055 a metric ton ($4.11 a pound).

Aluminum and zinc dropped in London, while nickel, lead and tin rose.

--Editors: Steve Stroth, Millie Munshi

To contact the reporters on this story: Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net; Yi Tian in New York at ytian8@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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