Copper, Nickel, Zinc, Aluminum Extend Declines on Lower Demand

By Claudia Carpenter

Oct. 23 (Bloomberg) -- Copper, nickel and zinc extended declines in London on speculation the global economic slump will crimp demand for industrial, or base, metals from investors who had helped send commodity prices to a record in July.

Copper fell below $4,000 a metric ton for the first time since November 2005, nickel's the cheapest since August 2003 and zinc is the lowest since November 2004. The Bloomberg World Mining Index of 162 companies has lost $493 billion in value since the bankruptcy of Lehman Brothers Holdings Ltd. in September spurred the financial crisis worldwide.

``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 $163, or 3.9 percent, to $3,992 a ton as of 11:17 a.m. on the London Metal Exchange and earlier fell to $3,851. Prices have dropped 54 percent since July 3, the peak in the Reuters/Jefferies CRB Index of 19 commodities. That index has declined 44 percent during the same period.

European and U.S. stock indexes fell and shares in Japan dropped to the lowest in five years. BHP Billiton Ltd., the world's biggest mining company, dropped 6.1 percent in trading on the London Stock Exchange.

Japanese Exports

Japan's Finance Ministry said the nation's exports rose 1.5 percent in September while economists had expected a 5.1 percent gain. The government said this week that the world's second- largest economy has probably entered its first recession in six years.

``We're seeing a slowdown in China,'' Russell Norton, head of commodities 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.''

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.

Aluminum dropped $12 to $1,993 a ton and earlier fell to $1,970, the lowest since November 2005. Vimetco NV, the aluminum producer controlled by Russia's Vitaliy Machitski, cut 80,000 tons of output a year 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.

Nickel Drops

Nickel declined $399 to $9,601 a ton after falling to $9,200. Nickel's biggest use is in the manufacture of stainless steel. That market is ``weaker'' partly because some distributors have postponed purchases because of falling nickel prices, Outokumpu Oyj, the world's fourth-largest maker of stainless steel, said in a statement today. Nickel has dropped 63 percent this year.

Zinc declined $25 to $1,115 after dropping to $1,076, lead fell $50, or 4 percent, to $1,211 a ton and tin dropped $141 to $11,409 a ton.

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