Copper declines as China bubble risk threatens to curb demand

Copper declined for a second day on speculation that demand may slow if China raises interest rates to cool accelerating inflation, while European policy makers struggle to contain sovereign debt risk in the region.

Three-month delivery copper on the London Metal Exchange fell as much as 1.7 per cent to $6,929.75 a tonne before trading at $6,960 a tonne at 1:19 pm in Shanghai. Aluminum, lead, nickel and zinc also dropped. Property prices in China, the world’s largest metals user, rose at a record pace in April and consumer prices climbed at the fastest rate in 18 months, figures showed yesterday. China’s benchmark equity index declined on concern that the government will raise borrowing costs and unveil more measures to curb housing prices. Copper also dropped as a stronger dollar reduced the investment appeal of commodities priced in the currency. The dollar strengthened for a second day against six major currencies as investors sought a refuge to protect their wealth. The Reuters/Jefferies CRB Index of 19 raw materials has slumped 4.6 per cent this month on concern that sovereign debt risks in Europe may slow the region’s economic recovery. Copper for August delivery in Shanghai added 0.7 per cent to 56,130 yuan ($8,221) a ton at midday after dropping 0.3 per cent earlier.