Copper Falls for Second Day in London on Signs of Demand Slump

By Claudia Carpenter

Nov. 6 (Bloomberg) -- Copper prices fell for a second day in London on speculation that a deepening economic slump will reduce global demand for metals. Aluminum and nickel declined.

The Bank of England lowered its key interest rate to 3 percent from 4.5 percent as evidence mounts that Britain has sunk into a recession. The European Central Bank will also probably cut interest rates today as Europe's economy is in the worst shape in 15 years. Copper yesterday erased all the gains of Nov. 4 when U.S. voters picked Barack Obama as their next president.

``Pre-election euphoria has given way to the hard reality that the economic numbers really aren't that good,'' said Shiv Madan, a metals trader at Dresdner Kleinwort in London. ``All of the industrial metals prices are closely linked with economic growth.''

Copper for delivery in three months dropped $170, or 4.2 percent, to $3,900 a metric ton by 12:09 p.m. on the London Metal Exchange.

Open-interest figures on copper on the LME dropped 0.8 percent on Nov. 4 as prices rose. That signals traders who were looking for higher prices bought back their positions. Copper has dropped 41 percent this year.

More so-called short covering may help copper to rebound above $5,000 before falling below $3,000 in the first half of 2009, Madan said.

Aluminum dropped $61 to $2,030 a ton. Toyota Motor Corp., the world's second-largest automaker, forecast the biggest drop in profit in at least 18 years as reduced lending pushed industrywide U.S. sales to the lowest since 1983. A car contains about 300 pounds (130 kilograms) of aluminum, according to Commerzbank.

Stockpiles of copper in warehouses monitored by the LME gained 5,075 tons, or 2.1 percent, to 252,550 tons, the 12th consecutive increase. Inventories are at their highest since March 2004.

Lead for three-month delivery fell $46 to $1,465 a ton and nickel declined $650 to $11,650 a ton. Zinc fell $50 to $1,130 and tin dropped $250 to $14,650 a ton.

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