METALS-Copper falls on US rate hike worries, strong dollar

SINGAPORE, June 23 (Reuters) - Copper fell on Tuesday on worries of potential growth headwinds from expected Federal Reserve interest rate hikes as well as a stronger U.S. dollar. Benchmark three-month copper on the London Metal Exchange was down 1.36% at $13,463 a metric ton by 0701 GMT. The most-traded copper contract on the Shanghai Futures Exchange fell 1.07% at 103,580 yuan ($15,277.29) a ton. More banks have predicted the Fed will raise interest rates this year due to persistent inflation and a more hawkish stance from new Chair Kevin Warsh.

Higher rates dampen the outlook for growth-sensitive industrial metals by increasing borrowing costs and stifling economic activity. A stronger U.S. dollar also weighed on copper. A rise in the dollar makes greenback-denominated commodities more expensive for buyers using other currencies. Adding to the pressure, refined copper output in China rose 2.2% year-on-year to 1.26 million tons, data from the National Bureau of Statistics showed. Aluminium plunged 3.54% on the LME and 2.23% on the SHFE , as traders weighed Gulf supply against stronger output from China and rising Chinese exports. The Iran war 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% month-on-month 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 in a note.

Among other LME metals, zinc dropped 2.16%, lead lost 1.04%, nickel dropped 2.25% and tin dropped 3.87%.

Elsewhere on SHFE, zinc lost 0.63%, lead dipped 0.15%, nickel dropped 1.68% and tin dropped 4.1%.

($1 = 6.7800 Chinese yuan renminbi) (Reporting by Solomon Cefai; Editing by Janane Venkatraman and Sonia Cheema)