Copper Falls Most in 13 Months in London; Aluminum Extends Drop

By Chanyaporn Chanjaroen

Oct. 6 (Bloomberg) -- Copper fell the most in 13 months in London and aluminum slumped to almost a three-year low as the credit crisis deepened, threatening to curb global demand for raw materials.

The London Metal Exchange index of six metals tumbled 9.6 percent last week, the most since July 2006. Declines in all commodities accelerated as Goldman Sachs Group Inc. said the U.S. economy will enter a recession ``significantly deeper'' than previously forecast.

``The metals are reflecting the global picture,'' Kevin Tuohy, a trader at MF Global Ltd. in London, said today by phone. ``People are anticipating demand to be lower as major economies slow down.''

Copper for delivery in three months fell as much as 7.7 percent to $5,545 a metric ton, the biggest intraday drop since Aug. 16, 2007. It traded at $5,610 a ton as of 12:25 p.m. local time. Aluminum fell as much as 3.9 percent to $2,248 a ton, the lowest since January 2006.

Commodities as measured by the S&P GSCI index of 24 raw materials are heading for the first annual drop since 2001 after investors and traders exited leveraged bets. Speculators' short positions, or bets on price declines, exceeded longs by 16,169 positions on the New York copper futures as of Sept. 30, the biggest since March 2007.

Miners Slump

Mining companies slumped in London trade. BHP Billiton Ltd., the world's largest mining company, fell as much as 11 percent and Rio Tinto Group lost 13 percent.

UBS AG lowered its price forecasts for copper, aluminum and most bulk commodities amid concern a slowing global economy will dent demand from builders and automakers.

Copper will average $2.50 a pound ($5,512.5 a metric ton) in 2009, down 38 percent from a previous estimate, the bank said in a report today. The price will average $3 a pound in 2010, or 33 percent less than predicted earlier. Aluminum was cut 28 percent to $1.15 a pound next year and 38 percent to $1.25 in 2010.

Raw materials also fell after the euro slid to a 13-month low against the dollar as the deepening credit crunch forced European governments to pledge bailouts of troubled banks and increase protection for depositors.

Copper stockpiles monitored by the LME gained 250 tons to 198,750 tons, according to the exchange's daily report.

Copper Premiums

Copper for immediate delivery traded at a premium of $85 a ton above the benchmark three-month contract, the highest since Aug. 26, signifying nearby futures are not easily available to buyers. Between 50 percent and 79 percent of LME-tracked copper inventories are held by one unidentified firm as of Oct. 2, according to the exchange's data.

Open interest of copper futures has risen 13 percent to 275,423 contracts since the end of June while prices have lost 34 percent, reflecting new short positions are being added. Increasing short positions on the LME could mean either more bets on price declines, or producers are hedging against further metal weakness.

Nickel fell as much as 5.3 percent to $14,350 a ton, the lowest since January 2006.

Among other metals traded on the LME, lead dropped $77.75, or 4.5 percent, to $1,642.75, zinc slipped $50, or 3.1 percent, to $1,545 a ton and tin fell $300 to $16,700 a ton.

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