Copper May Fall on Chinese Inflation Curbs

Source: Bloomberg  (6/15/11)

"Chinese inflation has topped the government's 4% target each month this year."

Bloomberg

Copper may fall in London on concern China, the world's largest consumer of the metal, will take more steps to curb inflation that's above the government target.

The Chinese central bank yesterday increased lenders' reserve requirements to a record after growth in consumer prices sped up to the fastest pace in almost three years. Interest rates may rise "in weeks, if not days," according to an unsigned editorial in the China Daily today.

"Monetary tightening remains a concern," said Nic Brown, analyst at Natixis Commodity Markets Ltd. in London. "The high levels of inflation remain a concern. They haven't gone away."

Copper for three-month delivery dropped $15, or 0.2%, to $9,154 a metric ton by 9:53 a.m. on the London Metal Exchange. Prices gained the most since May 18 yesterday. September-delivery copper fell 0.3% to $4.163 a pound on the Comex in New York.

Chinese inflation climbed to 5.5% in May, figures showed yesterday. It has topped the government's 4% target each month this year. Inflation may reach 6% this month, according to banks from Societe Generale SA to UBS AG, prompting speculation interest rates may rise further after four increases since September.

Still, industrial production in China advanced 13.3% from a year earlier in May, little changed from the prior month.

Copper stockpiles in China may have halved over the past two months as users drew down reserves in bonded and exchange- monitored warehouses. Inventories in bonded warehouses, which are undisclosed, may have dropped to about 300,000 tons, according to estimates from traders and analysts in the country including Shanghai East Asia Futures Co.

Inventories tracked by the LME fell for a third day, dropping 1,050 tons to 472,625 tons, daily exchange figures showed. Canceled warrants, or orders to remove copper from warehouses, fell 775 tons to 16,000 tons.
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