Copper Falls in London as Dollar Gains, Cutting Demand Outlook

By Jae Hur

Nov. 5 (Bloomberg) -- Copper declined in London as the dollar rebounded against the euro and crude oil dropped, reducing the appeal of the metal as an alternative investment.

The dollar gained as much as 0.5 percent to $1.2912 against the euro after losing 2.7 percent yesterday, when copper jumped as much as 8.4 percent. Copper's correlation with the euro-dollar exchange rate stood at 0.96, compared with 0.92 a month earlier. A reading of 1 would mean the two moved together.

``The main factor is the currency,'' Rick Holmes, managing director at Mitsui Bussan Commodities (Australia) Pty Ltd. said by phone from Sydney. ``Metals came off a little bit'' as the euro fell against the dollar, he said.

Copper for delivery in three months on the London Metal Exchange declined as much as 1.2 percent to $4,250 a metric ton and traded at $4,265 as of 10:32 a.m. Singapore time. Copper has lost 36 percent this year, heading for the first annual drop since 2001, as rising stockpiles signal weaker demand.

Copper for January delivery on the Shanghai Futures Exchange rose 2.8 percent for the previous close to 32,650 yuan at 10:36 a.m. local time.

Crude oil declined as much as 1.8 percent today to $69.25 a barrel after gaining 10 percent yesterday.

Global copper demand will fall 0.2 percent next year, down from an earlier forecast for a 1 percent advance, because of slower economic growth in China, Credit Suisse Group analyst Jeremy Gray wrote in a report Nov. 3. China is the world's largest consumer of industrial metals.

Congo Projects

The Democratic Republic of Congo reduced its projected economic growth rate for next year to below 10 percent from 11.9 percent, because of slowing demand for its copper and other minerals, according to the Central Bank of Congo.

Congo's economy will grow 10.8 percent this year, up from 6.3 percent in 2007, Vincent Ngongo, the bank's studies director, said yesterday. Several mining projects in Congo, which holds a third of the world's cobalt reserves and 4 percent of all copper, have been scaled down or put on hold, slowing the economy's overall growth, said Ngongo.

Copper inventories tracked by the LME rose for a 10th day, reaching the highest since March 2004. Including those monitored by bourses in New York and Shanghai, stockpiles are equal to about 5.4 days of global consumption, above last year's average of 4.9 days.

Aluminum, Zinc

Among other LME-traded metals, aluminum fell 0.9 percent to $2,091 a ton and zinc dropped 2.3 percent to $1,210 as of 10:45 a.m. in Singapore. Lead was unchanged at $1,540 a ton while nickel declined 2.3 percent to $12,600 a ton.

Tin rose 2 percent to $14,795 a ton after gaining 8.2 percent yesterday as tin producers in China, the world's largest supplier and consumer, joined counterparts in Indonesia, the world's second-largest producer, to reduce output following weakening demand and prices.

Yunnan Tin Co., the world's biggest producer, has seen overseas orders tumble ``significantly'' this quarter, spokeswoman Li Xia said yesterday. Liuzhou China Tin Co., China's third-largest producer, has idled about 10 percent of capacity, a company executive said.

To contact the reporter for this story: Jae Hur in Singapore at jhur1@bloomberg.net