Aluminum Falls to Six-Month Low on Stockpiles; Lead Erases Drop

By Claudia Carpenter

Sept. 1 (Bloomberg) -- Aluminum fell to a six-month low on increased inventories of the metal used in beverage cans and aircraft. Lead erased an earlier decline.

Aluminum faces ``downward'' pressure in the second half because of oversupply and slowing demand growth, Aluminum Corp. of China Ltd., the country's biggest producer, said. Inventories of aluminum in warehouses monitored by the London Metal Exchange have risen 26 percent this year to the highest since April 2004.

Supplies are ``massive,'' said Michael Khosrowpour, a trader in London at Triland Metals Ltd., one of 12 companies trading on the floor of the exchange.

Aluminum for delivery in three months dropped $7 to $2,707 a metric ton as of 11:10 a.m. on the LME and earlier declined to $2,700, the lowest since Feb. 13.

``Demand in the developed world has been weak for a long time: in the U.S. since mid 2006, in Japan and Europe since early 2007,'' Citigroup Inc. analyst Alan Heap wrote in a report today. ``It is the timing of recovery which is most problematic, and we have delayed the expected recovery until 2010.''

Global supply will fall short of demand by 340,000 tons in 2009, down from a previous estimate of 490,000 tons, because of slower consumption growth, Citigroup said. It lowered its aluminum price forecast for next year to $1.80 a pound ($3,968 a ton) from $2 a pound.

Production of aluminum from China jumped 14 percent in the first seven months this year from a year earlier, according to the National Bureau of Statistics.

Chinese Smelters

Prices have climbed 12 percent this year after China's largest smelters announced plans in August to cut output by more than 10 percent until the end of the year.

The LME is ``monitoring the situation'' as Hurricane Gustav approaches New Orleans warehouses holding metal traded on the exchange, said spokesman Thom Lant. New Orleans is home to 61,000 tons of zinc, or 38 percent of total inventories.

Copper dropped $155 to $7,355 a ton. Citigroup lowered its 2009 copper price forecast to $4.75 a pound ($10,472 a ton), from $5 previously, saying the global supply deficit will be 70,000 tons, down from 150,000 tons previously estimated.

Lead gained $10 to $1,985 a ton after earlier falling as much as $27.

Ivernia Inc., seeking to resume exports from its Magellan mine, faces ``strong local opposition,'' the Citigroup report said. ``We expect further delays.''

Lead, used to make batteries, rose to a record in October last year after Ivernia was banned from exporting 3 percent of the world's mined lead from its pit in Australia.

Zinc declined $31 to $1,780 a ton. Nickel dropped $625 to $19,600 a ton.

The UBS Bloomberg CMCI Index of 26 commodities has gained 14 percent this year.

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