Aluminum Falls to 3-Year Low as Weak Demand Bolsters Stockpiles

By Chanyaporn Chanjaroen

Nov. 18 (Bloomberg) -- Aluminum declined for a third consecutive day in London, trading at its lowest in three years, as inventories jumped on weaker demand.

Aluminum stockpiles tracked by commodity exchanges in London, New York and Shanghai, as well as the producer-backed International Aluminium Institute, have soared 35 percent this year to 3.49 million metric tons, according to Bloomberg calculations. That represents 16.4 days of global consumption, compared with six days for copper.

“Aluminum is now the most oversupplied metal on the London Metal Exchange in terms of days of consumption,” Dan Smith, a metals analyst at Standard Chartered Plc in London, said today by phone. Prices of alumina, the raw ingredient to make the metal, are also falling, reducing production costs, he said.

Aluminum for delivery in three months lost $5, or 0.3 percent, to $1,885 a metric ton as of 1:07 p.m. local time. Earlier it traded at $1,870, the lowest intraday price since Oct. 5, 2005.

A slump in North American car sales has undermined usage of metals from aluminum to steel. Rexam Plc, the world’s largest beverage can maker, said today it reduced U.S. production capacity by 9 percent to reflect lower demand.

LME-tracked aluminum stockpiles expanded 7,900 tons, or 0.5 percent, to 1.62 million tons, the exchange said today in a daily report.

Copper dropped as much as 2.7 percent to $3,561 a ton as metal inventories reported by the LME increased 2,675 tons, or almost 1 percent, to 278,575 tons.

Reduced Holding

The exchange’s data showed the largest copper stockpile owner reduced its holding this month. The unnamed firm held between 50 percent and 79 percent of total LME copper inventories as of Nov. 14. At the beginning of the month, the biggest holder had more than 90 percent of the stockpiles.

Nyrstar NV, the world’s largest zinc producer, will reduce output at smelters in Belgium and the Netherlands by 28 percent for the rest of the year and may make further cuts next year to maintain cash generation and reduce debt.

Zinc production will rise 1 percent this year, down from an earlier target of a 3 percent increase, the Balen, Belgium-based company said today in a statement. Third-quarter output of the metal declined 7 percent and production in the nine months through September increased 2 percent to 799,800 tons.

Zinc dropped $10, or 0.9 percent, to $1,160 a ton, taking this year’s drop to 51 percent.

Tin stockpiles monitored by the LME added 170, or 5 percent, to 3,600 tons, the highest since Oct. 31. The metal dropped $700, or 5.1 percent, to $13,000 a ton.

Among other LME-traded metals, lead lost $6 to $1,265 a ton and nickel dropped $240 to $10,410 a ton.

-- With reporting by Thomas Biesheuvel in London and John Martens in Brussels. Editors: James Ludden, Simon Casey

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