Copper down, on track for largest monthly fall since November

Copper fell on Tuesday to be on track for its biggest monthly drop since November, pressured by a resurgent dollar, surplus supplies of the metal and slack demand growth in China.

Benchmark copper traded down 0.4 percent at $4,675 a tonne in official rings. Prices of the metal used in power and construction have dropped by more than 7 percent in May.

A higher U.S. currency makes dollar-denominated metals more expensive for non-U.S. firms — a relationship used by funds to generate buy and sell signals from numerical models.

The dollar’s latest rise was triggered by Fed Chief Janet Yellen on Friday, whose comments suggested an interest rate rise in the coming months if the economy picks up as expected.

That was echoed on Monday by St. Louis Fed President James Bullard, who said that global markets appear to be well prepared for a summer rate increase.

Julius Baer analyst Carsten Menke said the stronger dollar was reinforcing negative sentiment fuelled by oversupply.

“The supply cuts people were expecting last year haven’t happened. Producers chose to focus on cutting costs and maintaining production,” Menke said.

Also undermining copper is sluggish demand growth in China, which accounts for nearly half of global consumption estimated at about 22 million tonnes this year and where inventories of metal and products are high.

“Some major copper tube manufacturers reported flat … demand growth (year on year) so far in the second quarter — usually a peak demand season,” JPMorgan analysts said in a note.

“While air conditioner inventories are below record levels reached last spring, they stood at around 40 million units at the end of the first quarter of this year and further inventory has likely been added so far in the second quarter.”

Three-month aluminium was up 0.2 percent at $1,559 a tonne, zinc rose 1.4 percent to $1,925, lead was bid down 0.1 percent to $1,696, tin was flat at $16,200 and nickel rose 1.1 percent to $8,510.

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