Copper Falls for Third Day as Dollar's Advance May Slow Demand

By Claudia Carpenter

Aug. 12 (Bloomberg) -- Copper fell for a third day in London on expectations the dollar's rebound will erode demand for the metal in Europe amid signs of slowing economic growth. Aluminum dropped to its lowest since February.

The German economy, Europe's biggest, may have contracted in the second quarter, economists said before a government report scheduled for Aug. 14. The dollar headed for its longest rally against the euro since October 2006. Investor demand for copper may also slow as lower oil prices spur selling of commodity indexes that include the metal.

``If you've got a stronger dollar, then copper becomes more expensive for non-dollar buyers,'' said William Adams, an analyst at London-based Basemetals.com. ``The weaker oil price is dragging metals lower as well because investors who were buying commodity baskets the past five years are selling everything now.''

Copper for delivery in three months fell $100, or 1.4 percent, to $7,230 a metric ton as of 1:34 p.m. in London and earlier dropped to $7,207, the lowest since Feb. 6. Crude oil futures in New York slid 79 cents to $113.66 a barrel.

Stockpiles of copper in warehouses monitored by the LME increased 75 tons to 151,700 tons, the highest since Feb. 14.

Mexico's copper output may rise 8.4 percent this year as new mines come online, said Sergio Almazan, director of Mexico's Mining Chamber of Commerce. Output may increase to 350,000 tons this year from 323,000 tons last year, he said yesterday.

Zinc fell $15 to $1,675 a ton. Inventories jumped 5,775 tons, or 3.6 percent, the biggest increase since June 19.

Stainless Steel

Nickel declined $275, or 1.5 percent, to $17,725. Posco, Asia's biggest maker of stainless steel, cut prices as much as 10 percent from Aug. 18, the first reduction this year, after the cost of nickel declined. Stainless steel makers are the biggest users of nickel.

``Some customers tend to hold back orders on expectations that falling nickel prices will lead to lower prices,'' said Posco spokeswoman Ko Min Jin.

Aluminum dropped $32, or 1.1 percent, to $2,801 a ton, the lowest since Feb. 15. Tin decreased $475 to $18,275 a ton and lead dropped $5 to $1,920 a ton.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net