Nickel, Copper Decline on Inventories; Aluminum Erases Advance

By Claudia Carpenter

Nov. 3 (Bloomberg) -- Nickel and copper declined on the London Metal Exchange as stockpiles expanded and demand growth from China, the world's biggest user, slowed. Aluminum fell.

Global copper demand will fall 0.2 percent next year, down from an earlier forecast of a 1 percent advance, because of slower economic growth in China, Credit Suisse Group analyst Jeremy Gray wrote in a report today. Copper stockpiles in warehouses monitored by the LME are at their highest since March 2004 and nickel inventories the most since May 1999.

``Until we either see some further large cuts in production or more importantly some signs of improvement on the demand side, it's too early to get bullish'' about nickel, said Adam Rowley, an analyst at Macquarie Group Ltd. in London.

Nickel for delivery in three months fell $125, or 1 percent, to $11,975 a metric ton as of 12:17 p.m. in London. The metal used to make stainless steel declined 24 percent last month.

Copper for delivery in three months dropped $98, or 2.4 percent, to $4,001 a ton. Prices fell 36 percent in October. Stockpiles of copper in warehouses monitored by the LME gained 7,275 tons, or 3.2 percent, to 237,925 tons, the most since March 16, 2004.

China's economic slowdown is quickening and demand won't rebound until 2009, Rio Tinto Group Chief Executive Officer Tom Albanese said yesterday.

Nickel producers including Brazil's Cia. Vale do Rio Doce will make supply cutbacks totaling about 140,000 tons this year and another 100,000 tons probably will be cut next year, Macquarie said in a report today. The global supply surplus will narrow to 20,000 tons next year from 30,000 tons this year and 95,000 tons last year, Macquarie said.

New Capacity

``The market has needed substantial cuts and it needs delays in the start up of new capacity, and those are starting to come,'' Rowley said. The narrowing surplus is a ``slight positive.''

This year's 54 percent decline in nickel is the most since at least 1988 as stainless steel mills reduced purchases because of contractions in construction in the U.S. and Europe.

Tin climbed $200 to $13,600 a ton. Yunnan Tin Co., the world's biggest producer, plans to cut production 30 percent in the fourth quarter because of falling demand and lower prices. Tin declined 22 percent last month.

Aluminum declined $3 to $2,037 a ton after earlier rising $54.75 a ton. Aluminum inventories jumped 4,075 to 1.53 million tons, the highest since Feb. 3, 1995. Dubai Aluminium Co., the United Arab Emirates aluminum producer building the world's largest smelter in Abu Dhabi, said output was ``partly affected'' by an interruption to electricity supplies yesterday.

Lead fell $18 to $1,490 a ton and zinc climbed $25 to $1,150 a ton.

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