Copper, Aluminum Fall on Indications China's Growth May Slow

By Chanyaporn Chanjaroen

Aug. 1 (Bloomberg) -- Copper and aluminum fell in London on indications demand growth in China, the world's largest consumer of all industrial metals, may slow as manufacturing contracted for the first time since a survey began in 2005.

The Purchasing Mangers' Index fell to a seasonally adjusted 48.4 in July from 52 in June, the China Federation of Logistics and Purchasing said today. China accounted for about a third of world aluminum usage last year, and about a quarter in copper.

``For years the Chinese have tried to slow down the economic growth to avoid a bubble and that's probably taking effect now,'' said Andrew Silver, a trader at Natixis Commodity Markets in London. ``Once the slowdown takes hold, we will see impacts on consumption,'' he said today by phone from London.

Copper for delivery in three months fell $83, or 1 percent, to $7,972 a metric ton as of 10:56 a.m. on the London Metal Exchange. Aluminum declined $34, or 1.1 percent, to $2,945 a ton.

The LME index tracking the six main metals traded on the bourse dropped 4.8 percent in July, led by declines in copper and aluminum, the most-traded contracts on the exchange. Industrial- metals demand tracks global manufacturing activity.

The euro's 1 percent drop against the dollar last month also contributed to the decline, curbing the appeal of dollar- denominated commodities as an alternative investment and making them more expensive to holders of other currencies.

Copper inventories expanded 2,250 tons, or 1.6 percent, to 144,650 tons, the highest since Feb. 28, according to the exchange's daily data. Including those monitored by exchanges in Shanghai and New York, they total 187,225 tons, or 3.6 days of global consumption, according to Bloomberg calculations. Last year's average was 4.9 days.

Limited Supply

Limited supply growth will limit declines in copper and aluminum, according to a Deutsche Bank AG report dated yesterday. ``Global copper inventories are also at critically low levels, leaving the market vulnerable to supply shocks,'' the bank said in the report.

``The global aluminum market is vulnerable to energy crises'' in China and South Africa, which are major production areas, the report said.

Among other LME-traded metals, nickel rose $22 to $18,372 and lead lost $75, or 3.4 percent, to $2,135 a ton. Tin lost $550, or 2.5 percent, to $21,650 a ton and zinc fell $25, or 1.4 percent, to $1,876 a ton.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net