Copper, Zinc Decline in London Trading as Stockpiles Expand

By Claudia Carpenter

Oct. 30 (Bloomberg) -- Copper and zinc fell on the London Metal Exchange as an expansion of stockpiles monitored by the bourse increased speculation that supplies are outpacing demand.

Copper inventories jumped 6,575 metric tons, or 3 percent, to 223,875 tons, the largest jump in three weeks. Zinc stockpiles are the biggest since 2006. Copper has dropped 31 percent this month, the most since at least 1988, as economic slumps curb demand from manufacturers and investors.

``People see stock numbers like this and they bail,'' said Randy North, a trader at RBC Capital Markets in London.

Copper for delivery in three months dropped $264, or 5.7 percent, to $4,387 a ton by 1:06 p.m. local time. Prices yesterday climbed 13 percent, the most since at least 1987. Zinc fell $80, or 6.4 percent, to $1,180 a ton. Prices yesterday jumped 9.6 percent, the biggest gain since at least 1989.

Copper and zinc had gained in earlier trading after BHP Billiton Ltd., Teck Cominco Ltd. and Codelco reported mining disruptions.

Chile's Escondida, the world's largest copper mine, had lower output in the first nine months and Codelco, the biggest producer, said its largest mine will miss its 2008 target. Teck Cominco declared force majeure on sales from its Red Dog zinc mine in Alaska because of bad weather.

All metals on the London Metal Exchange surged yesterday on speculation efforts by governments and central banks in Asia to revive their economies will support demand for metals.

``I am always surprised by the resilience in Asia,'' said Alex Heath, head of trading for industrial metals such as zinc and copper at RBC Capital Markets in London. ``They have a real desire to grow and improve their economies and you can be sure they will recover far faster'' than other regions, he said.

Teck Cominco

Even before the Teck Cominco disruption, zinc cutbacks because of low prices were estimated at 124,000 tons this year and 332,000 tons next year, according to a Barclays Capital report this month. Global output was still forecast to exceed demand by 439,000 tons this year and 564,000 tons next year, according to the report.

Nickel producers were set to reduce production by 35,000 tons this year and 11,000 tons next year, Barclays said. Miners will need to cut supply further to halt a drop in prices because demand may not grow next year and new capacity starts operating, said David Humphreys, chief economist of OAO GMK Norilsk Nickel, the world's largest producer of nickel.

Aluminum for delivery in three months declined $66 to $2,086 a ton, nickel dropped $865 to $12,775 a ton and lead dropped $85 to $1,495. Tin fell $575 to $14,650 a ton.

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