March 18 (Bloomberg) -- Copper in London fell as the dollar rose and because of concern that the outlook for demand from China, the world’s largest user, may not justify recent gains. Metal for delivery in three months dropped as much as 0.8 percent to $7,474 a metric ton on the London Metal Exchange, before trading at $7,482 at 3:02 p.m. in Shanghai. The June contract on the Shanghai Futures Exchange fell 1 percent to close at 59,540 yuan ($8,721) a ton. Copper, used in homes and power grids, rose this week as a decline in the dollar increased the metal’s appeal as an alternative investment. The metal fell to a two-week low on March 15 because of expectations of tighter monetary policy in China. “Chinese demand hasn’t picked up strongly enough to sustain the gains,” Li Peiying, an analyst at Anxin Futures Co., said from Beijing today. “Concerns about an imminent interest rate hike are always here.” Shanghai spot copper prices widened a discount to the futures today from earlier this week, according to Shanghai Metals Market, a unit of commodities researcher CBI China Co. The so-called contango usually implies demand is lagging supplies. The World Bank indicated in a report yesterday that China should raise interest rates to help contain the risk of a property bubble and allow a stronger yuan to help damp inflation expectations. The Dollar Index rose as much as 0.5 percent, after falling 0.8 percent in the previous two days. Commodities priced in the dollar usually move in the opposite direction to the currency. Aluminum last traded 0.6 percent down at $2,280.25 a ton in London and decreased 0.9 percent to 16,675 yuan a ton in Shanghai. ‘Supply Imbalance’ The ratio between aluminum prices in Shanghai and London has dropped to the lowest in months, Li said, without being more specific. That indicates “a worsening supply imbalance” between China and the market outside the country, she said. Stockpiles of the lightweight metal in China rose to close to 1 million tons, including those monitored by the Shanghai exchange and those not covered by the bourse, according to CBI. Out of the 4.5 million tons of inventories on the LME about 70 to 75 percent are tied into financing deals and not available to the market, according to CRU estimates. Nickel was 0.2 percent down at $22,200. BHP Billiton Ltd., the world’s biggest mining company, said its Kwinana nickel refinery in Western Australia may not be restarted for two weeks after shutting down on a lack of hydrogen gas on March 15. Zinc dropped 1 percent to $2,323.25, lead was down 0.6 percent to $2,241, and tin declined 0.8 percent to $17,610. --Li Xiaowei. With reporting by Jason Scott in Perth and Anna Stablum in London. Editors: Aaron Sheldrick, Jake Lloyd- Smith.

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