Copper, Aluminum Rebound From 3-Year Lows After Drop in Dollar

By Claudia Carpenter

Nov. 13 (Bloomberg) -- Copper and aluminum rebounded from three-year lows in London as a drop in the dollar may help revive demand for industrial metals. Zinc and nickel also rose.

Copper has dropped 46 percent this year and aluminum is down 20 percent as some economies, including Germany, entered a recession and the dollar climbed, raising costs for buyers using other currencies. The relationship between the euro-dollar exchange rate and the London Metal Exchange Index has strengthened, with a correlation of 0.59 since mid-July. The rate was 0.40 in the previous four months.

``Recently, the correlation between the dollar and metals prices has been extremely high,'' said Leon Westgate, an analyst at Standard Bank Ltd. in London.

Copper for delivery in three months increased $14.50 to $3,635.50 a metric ton as of 12:29 p.m. on the London Metal Exchange after earlier declining to $3,515 a ton, the lowest since Sept. 19, 2005. Aluminum was unchanged at $1,925 a ton and earlier traded at $1,903, the lowest since Oct. 21, 2005.

Prices had declined earlier today after China's industrial output grew at the slowest pace in seven years, heightening speculation that demand for industrial metals is waning.

Production rose 8.2 percent in October from a year earlier, the statistics bureau said today. None of the 18 economists in a Bloomberg survey expected such a small increase.

``No one's protected,'' said James Roberts, a broker at Sucden (U.K.) Ltd. in London. ``Until you start to see aggressive destocking or a real turn in consumer buying habits, or just general macroeconomic positive news, you're probably looking one way'' down for prices, he said.

Germany in Recession

The economy in Germany, the world's third-largest copper consumer after China and the U.S., contracted 0.5 percent in the third quarter and 0.4 percent in the second quarter -- its worst recession in at least 12 years.

Aluminum will have a supply surplus of 850,000 tons next year and 1.4 million in 2010, BNP Paribas forecast in a report yesterday.

Lead for three-month delivery rose $10 to $1,310 a ton and zinc added $11 to $1,160 a ton. Tin declined $50 to $13,650 a ton and nickel rose $190 to $10,690 a ton.

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