Copper Erases Advance in London as Slower Growth Trims Demand

By Claudia Carpenter

Oct. 20 (Bloomberg) -- Copper and aluminum fell in London on speculation slower economic growth will erode demand for industrial metals.

Industrial production in China, the world's largest copper buyer, expanded at the slowest pace in six years, figures from the statistics bureau in Beijing showed today. Copper, used in pipes and wires, has dropped 28 percent this year.

``The fundamentals for most commodities are not impaired other than on a cyclical demand basis,'' investor Jim Rogers told reporters in London today. ``Everything that is happening ensures there will be even less supply going forward and the bull market in commodities is going to be even bigger and last longer probably.''

Copper for delivery in three months fell $30, or 0.6 percent, to $4,780 a metric ton as of 1:50 p.m. on the London Metal Exchange, after earlier climbing as much $140. The contract slid to a 33-month low last week. Aluminum dropped $48, or 2.1 percent, to $2,157 a ton.

China's industrial production rose 11.4 percent in September from a year earlier. Economists forecast a 13.4 percent increase, the median in a Bloomberg News survey.

Poland's KGHM Polska Miedz SA copper miners voted for a 24- hour strike on Nov. 5, PAP news agency reported today. Copper output growth may stall as mines age and lower prices lead some companies to consider revising investment plans, Chile's Deputy Mining Minister Veronica Baraona said last week.

Stockpiles Rise

Inventories of the metal in warehouses monitored by the LME jumped 950 tons to 212,400 tons, taking this year's increase to 7.6 percent. Stockpiles are climbing in Hamburg for the first time since January 2006 and are the highest since January in St. Louis.

Inventories are falling in South Korea near China, the world's largest consumer of the metal. Growth may accelerate after closures to clear the air for the Olympic and Paralympic Games in August and September, said Peter Fertig, a consultant to Dresdner Kleinwort in Hainburg, Germany.

China's copper production dropped 1 percent in September from August, according to Mainland Marketing Research Co.

Industrial metals including copper and nickel will average less than previously forecast in 2009 as demand declines, Credit Suisse Group AG said, adding that its new estimates may still be too high.

Copper will average $2.50 a pound ($5,878 a ton) in 2009, below a previous forecast of $4, Credit Suisse analysts led by London-based Jeremy Gray wrote in a report e-mailed today.

Nickel will average $5.75 per pound next year, compared with an earlier forecast of $11. Zinc will average 75 cents per pound as against $1 previously, the report said.

``Many of our CEOs are now beginning to reassess their plans to build new capacity, which could in turn see a further hit to industrial production growth, but ironically create the seeds for the next commodity bull market as supply could become further constrained,'' Gray wrote.

Lead declined $30 to $1,410 a ton and nickel fell $350 to $10,450 a ton. Tin gained $50 to $13,050 a ton and zinc dropped $10 to $1,220 a ton.

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