Copper Falls, Poised for Worst Month in More Than Two Decades

By Glenys Sim

Oct. 31 (Bloomberg) -- Copper fell, heading for its worst month since at least 1986, amid signs the global financial crisis is slashing demand for raw materials.

Inventories monitored by the London Metal Exchange climbed to 223,875 metric tons yesterday, the most since March 18, 2004. Supplies have increased 13 percent this year. The metal used in wires and pipes is down 36 percent this month, making it the worst performer on the LME, on concern that slowing global economic growth will reduce demand.

``Concerns over the weakened international economic outlook remain a weight on base metals prices,'' David Moore, commodity strategist at Commonwealth Bank of Australia, said in an e-mail today. ``Sentiment towards base metals remains extremely variable amid fears of recession in key developed economies.''

Copper for delivery in three months on the London Metal Exchange lost as much as 11 percent to $4,131 a ton yesterday and dropped 2.5 percent to $4,095 at 2:31 p.m. Singapore time.

December delivery copper on the Comex division of the New York Mercantile Exchange lost 2.3 percent to $1.8480 a pound at the same time.

Copper for January delivery on the Shanghai Futures Exchange fell by the 5 percent daily limit from the previous settlement price to 31,400 yuan ($4,592) a metric ton when the exchange opened for trading at 9 a.m. local time.

``In this environment, demand drivers will overwhelm supply side influences,'' Michael Jansen, JPMorgan Securities Ltd. analyst said in a report yesterday. ``We expect a move down towards $4,000 in the short to medium term.''

Cash-to-Three Month

Metal for immediate delivery was cheaper than benchmark London three-month futures by $6 a ton at yesterday's close. It was at $1 on Oct. 29, the first time there has been a discount since February, signaling ample supplies.

China's State Reserve Bureau may postpone plans to buy copper from overseas on speculation a global recession may push prices even lower, according to two traders, who requested anonymity.

The bureau won't buy copper before next year, said the traders, who had spoken to officials from the agency. The bureau discussed its intention to boost stockpiles with the country's biggest smelters and traders before the national holiday in the first week of October, they said.

Among other LME-traded metals, aluminum was down 1 percent at $2,040.25 a ton, zinc fell 1.6 percent to $1,141, lead declined 4.5 percent to $1,451, nickel slipped 5.1 percent to $11,300, and tin fell 1.7 percent to $14,400 a ton as of 2:30 p.m. in Singapore.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net