Copper, Nickel Extend Declines on Lower World Demand for Metals

By Claudia Carpenter and Millie Munshi

Oct. 23 (Bloomberg) -- Copper fell to a three-year low and nickel dropped to the lowest since 2003 on speculation that a global economic slump will curb demand for metals from investors who had helped send commodities to a record in July.

Copper fell below $4,000 a metric ton in London for the first time since October 2005, and the Reuters/Jefferies CRB Index of 19 commodities touched its lowest level since February 2004. The Bloomberg World Mining Index of 162 companies lost $493 billion in value since the bankruptcy of Lehman Brothers Holdings Inc. in September deepened the financial crisis.

``As long as we have uncertainty about the overall financial system, this is probably not yet the bottom for base metals,'' said Christoph Eibl, who helps manage more than $1 billion of commodity investments at Tiberius Asset Management AG in Zug, Switzerland. ``People just don't want to own any commodities that have a high correlation to overall economic developments.''

Copper for delivery in three months declined $115, or 2.8 percent, to $4,040 a ton on the London Metal Exchange. The price earlier reached $3,815, the lowest since Oct. 24, 2005. Copper has lost 55 percent since touching a record $8,940 on July 2.

The abrupt drop since then has brought ``the end of the supercycle'' for copper, and the market will remain depressed until the international economic situation improves, said Jose Pablo Arellano, the executive president of Chile's Codelco, the world's biggest copper miner.

Recession Fears

Most European equity indexes fell and shares in Japan dropped to the lowest in more than five years. BHP Billiton Ltd., the world's biggest mining company, dropped as much as 13 percent in London Stock Exchange trading.

The number of U.S. workers filing first-time claims for unemployment benefits rose last week, a report showed today. U.K. retail sales fell in September, while French business confidence dropped to the lowest in 15 years this month.

The Japanese government said this week that the world's second-largest economy has probably entered its first recession in six years.

``These global recession fears don't seem unfounded,'' said Michael K. Smith, president of T&K Futures & Options in Port St. Lucie, Florida. ``There are pretty clear signs from all over the world that things are slowing down a lot. There's definitely more room on the downside for copper.''

New York Copper

In New York, copper futures plunged to the lowest price in more than three years, dropping as much as 7.9 percent and extending the week's decline to 17 percent. The metal is down 37 percent since the end of September, heading for its worst month on record on signs of waning consumption in the U.S. and Asia.

``We're seeing a slowdown in China,'' Russell Norton, head of commodity sales at Barclays Capital in Asia, said in a Bloomberg Television interview. Buying patterns there ``have always been very price-sensitive, so when they see a falling market, the buyers step back and let the market fall.''

Copper futures for December delivery fell 6.1 cents, or 3.3 percent, to $1.8045 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $1.718, the lowest for a most-active contract since Sept. 27, 2005.

Inventories of copper in warehouses monitored by the LME advanced 1,500 tons to 209,250 tons, and aluminum stockpiles jumped 3,475 tons to 1.5 million tons, the most since February 1995, exchange figures show.

Nickel Drops

Nickel declined $650, or 6.5 percent, to $9,350 a ton after falling to $9,000. Nickel's biggest use is in making stainless steel. That market is ``weaker'' partly because of postponed purchases by some distributors as nickel prices fell from this year's high of $35,150 in March, Outokumpu Oyj, the world's fourth-largest maker of stainless steel, said in a statement today. Nickel has dropped 73 percent from this year's peak.

Aluminum edged up $2 a ton, closing at $2,007, after falling as much as 2.3 percent to $1,958, the lowest since November 2005, on the LME. Vimetco NV, the aluminum producer controlled by Russia's Vitaliy Machitski, cut annual production by 80,000 tons in China and will delay investment after prices slumped, the Amsterdam-based company said in a statement today. China is the world's largest producer of aluminum.

Zinc rose $60, or 5.3 percent, to $1,200 a ton on the LME after dropping as much as 5.6 percent earlier to touch $1,076; lead gained $26, or 2.1 percent, to $1,287 a ton; and tin climbed $450, or 3.9 percent, to $12,000 a ton.

To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net; Millie Munshi in New York at mmunshi@bloomberg.net.