China's Rate Tightening Threatens Copper


"Some of the world's biggest copper miners are warning of lower prices for up to a year on China's moves to curb inflation."

China's moves to rein in inflation are likely to knock copper's spectacular bull run, with some of the biggest miners warning of lower prices for up to a year.

Diego Hernández, chief executive of Codelco, the Chilean state-owned copper giant that is the world's top miner of the red metal, told the Financial Times that China was a "worry" in the short term because of the government's measures to cool the economy and the high level of copper inventories in the country.

China, the world's largest copper consumer accounting for 40% of global demand, has been largely absent from the copper market for months as a combination of high prices and tightening credit conditions forced manufacturers to cut back on purchases.

In the latest move to combat high inflation, China's central bank on Tuesday raised benchmark interest rates for the fourth time in five months.

"Three or four months ago our figures showed that the market, because of China, would be very tight in 2011 and 2012," Mr Hernández said. "The concern now is that in the short term we could have some volatility in the price."

His comments, pointing to a short-term correction in the copper price, encapsulated a mood of caution and confusion over the outlook for copper at Cesco week, the annual industry gathering in Santiago.

The red metal shot to a record high of $10,190 a tonne in February, buoyed by unbridled enthusiasm from investors, but since then has slipped 8%.

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