Copper, Aluminum Rebound as Mine Shutdowns May Erode Oversupply

By Claudia Carpenter

Nov. 21 (Bloomberg) -- Copper and aluminum rebounded from three-year lows on speculation mine shutdowns will help erode supply surpluses caused by reduced demand.

Copper has dropped 47 percent this year and aluminum is down 25 percent as auto plant shutdowns suggested global demand for industrial metals will continue to slow. Copper output topped consumption by 125,000 metric tons in August, the International Copper Study Group said yesterday.

``The longer prices stay at these levels, more mines will be forced to cut back and the mining industry will be poorly placed for a pickup in demand,'' said Leon Westgate, an analyst at Standard Bank Ltd. in London. Until demand picks up, ``any rallies are likely to be sold into,'' he said.

Copper for delivery in three months rose $58.75, or 1.7 percent, to $3,538.75 a ton as of 10 a.m. on the London Metal Exchange after earlier falling to $3,375, the lowest since July 21, 2005. Aluminum gained $25 to $1,810 a ton, rebounding from a three-year low of $1,765.

The UBS Bloomberg CMCI Index of 26 commodities yesterday declined to the lowest since December 2005 as the dollar extended its gain against the euro this year to 16 percent. The U.S. currency declined today on speculation the Federal Reserve will cut interest rates and flood the banking system with cash.

Today's reverse in the dollar is also supporting industrial metals, Westgate said. The dollar fell 0.7 percent against the euro, the first decline in four days.

Stockpiles Increase

Alcoa Inc., the biggest U.S. aluminum producer, and Namibia copper miner Weatherly International Plc are cutting output. Aluminum output worldwide in October was the lowest daily average since March, the International Aluminium Institute said yesterday.

Aluminum stockpiles tracked by the London bourse climbed 2,025 tons to 1.7 million tons and copper inventories gained 1,500 tons to 283,125 tons.

Lead gained $25 to $1,210 a ton, zinc increased $20 to $1,200 a ton and nickel advanced $350 to $10,300 a ton. Tin rose $275 to $11,575 a ton after inventories fell 75 tons to 4,290 tons, the first drop since Nov. 10.

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