Copper falls on US rate worries

SINGAPORE: Copper fell on Tuesday on worries of potential growth headwinds from a Federal Reserve interest rate hikes after the closely watched US-Iran talks concluded yesterday.

Benchmark three-month copper on the London Metal Exchange fell 0.51% to $13,580 a metric ton by 0300 GMT.

The most-traded copper contract on the Shanghai Futures Exchange was down 0.61% at 104,060 yuan ($15,353.97) a ton.

More banks predicted the Fed would raise interest rates this year due to persistent inflation and a more hawkish stance from new Chair Kevin Warsh. Higher interest rates dampen the outlook for growth-sensitive industrial metals by increasing borrowing costs and stifling economic activity.

Meanwhile, refined copper output in China rose 2.2% year-on-year to 1.26 million tons, data from the National Bureau of Statistics showed.

“Output was supported by higher sulphuric acid by-product prices, which boosted smelter margins and encouraged stronger operating rates,” analysts from ING wrote in a note.

Aluminium fell by 1.38% on the LME and 0.94% on the SHFE, as traders weighed Gulf supply disruptions against stronger output from China and rising Chinese exports.

The US war against Iran has disrupted shipments through the Strait of Hormuz and cut Gulf production, which remains well below pre-war levels.

Still, global primary aluminium output rose 3.5% year-on-year to 6.2 million tons in May, IAI data showed, helped by stronger Chinese production.

China’s exports of aluminium stranded wire, increasingly used as a route to ship aluminium abroad because of its tax advantage over unwrought metal, more than tripled from April to 50,224 tons in May. “However, the aluminium market is still expected to remain in deficit this year,” ING analysts wrote.

Among other LME metals, zinc lost 0.97%, lead lost 0.53%, nickel lost 0.98% and tin fell 2.73%.

Elsewhere on SHFE, zinc dipped 0.1%, lead dipped 0.18%, nickel lost 0.68% and tin plunged 3.26%.