Copper Falls as China's Consumption May Take Months to Rebound

By Claudia Carpenter

Nov. 11 (Bloomberg) -- Copper fell in London on speculation China's $586 billion spending to support its economy will take months to spur demand for the metal used in cars and homes.

China's copper use will probably slow to 3 or 4 percent growth next year from 8 percent this year, Barclays Capital forecasts. Copper jumped 3.2 percent yesterday after China pledged ``fast and heavy-handed investment'' in housing and roads and other infrastructure.

``It is definitely going to be a good thing for metals consumption but just not immediately,'' said Gayle Berry, an analyst at Barclays in London. ``The export market is deteriorating so sharply that they need some stimulus.''

Copper fell $115, or 3 percent, to $3,760 a metric ton as of 1:08 p.m. on the London Metal Exchange. Aluminum dropped $22, or 1.1 percent, to $1,963 a ton after jumping 1.3 percent yesterday. The UBS Bloomberg CMCI Index of 26 commodities fell 2.1 percent, erasing all of yesterday's 2 percent gain.

China's exports climbed 19 percent in October from a year earlier, the slowest growth in four months, the customs bureau said in a statement on its Web site today. Imports of copper and copper products were 231,212 tons in October, the customs bureau said. That was up 13 percent from a year earlier.

``Smelters are cutting back production and premiums are falling,'' Berry said. ``These things are much better indicators of what the physical market in China is doing.''

Some copper manufacturers and traders in China said their orders, mainly for exports, were down 20 to 40 percent from a year earlier, Berry said after a visit to China two weeks ago.

`Hundreds Closed'

``Hundreds have literally closed,'' she said. About 20 percent of China's copper demand is for exports, she estimated.

Chinese producers are seeking rebates on tax exports so they can sell more products overseas as domestic demand slows. The government will ``definitely'' restore the benefits by early next year, Wang Qinhua, head of the markets and trade department of the China Nonferrous Metals Industry Association, said today.

``For the location where those exports are heading to, it could be bad news, unless demand is strong enough,'' Berry said. ``That's not in Europe, not in the U.S. and not in Japan.''

Stockpiles of the metal in warehouses monitored by the LME gained 4,625 tons, or 1.8 percent, to 265,475 tons, the 15th consecutive increase. Inventories are at their highest since March 2004.

Lead for three-month delivery fell $55 to $1,295 a ton and nickel declined $110 to $11,195 a ton. Zinc rose $4 to $1,109 and tin dropped $375 to $14,300 a ton.

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