Aluminum Extends Drop as Automaker Shutdowns Curb Consumption

By Claudia Carpenter

Dec. 18 (Bloomberg) -- Aluminum extended declines in London as automakers prepare for factory shutdowns, further crimping demand for industrial metals. Copper also fell.

General Motors Corp., Ford Motor Co. and Chrysler LLC said they will close 59 factories over the next month. Aluminum inventories have more than doubled this year as recessions in the U.S., Japan and Germany curbed demand faster than miners have reduced production.

“Aluminum has its mind set firmly on overall poor economic conditions and the poor demand side of the equation,” said William Adams, an analyst at BaseMetals.com in London. Car shutdowns “just confirm how poor this current situation is.”

Aluminum for delivery in three months dropped $25, or 1.7 percent, to $1,485 a metric ton as of 11:48 a.m. on the London Metal Exchange.

Chrysler will shut all 30 of its plants for at least a month starting tomorrow. A car contains 319 pounds of aluminum, according to the Aluminum Association. In Japan, where vehicle sales may fall 4.9 percent next year, or 250,000 units, that’s equal to 79.75 million pounds (36,174 tons) of lost aluminum demand.

Prices of aluminum fell even as the dollar dropped against the euro and China, the world’s largest producer of aluminum, decided not to lower export taxes that may have boosted supplies.

Declines in the dollar the past two years helped buoy demand for commodities including industrial, or base metals, such as aluminum.

“Base metals have almost totally disregarded weakness of the dollar,” Adams said.

Export Tax

China will keep export duties on aluminum unchanged next year, the Ministry of Finance said today. Aluminum has dropped 38 percent this year, partly on speculation China would reduce export taxes and increase supplies on the international market.

The unchanged export tax “does remove one of the potentially bearish factors for the market,” Adams said.

Supplies in warehouses monitored by the LME rose 27,100 tons, or 1.3 percent, to almost 2.07 million tons, the most since Oct. 25, 1994.

Copper for delivery in three months slid $80 to $2,940 a ton. Inventories of copper in warehouses monitored by the LME increased 2,275 tons to 324,175 tons, the most since Feb. 12, 2004.

Zinc increased $1 to $1,101 a ton.

Tin declined $175 to $10,875 a ton, nickel fell $205 to $9,600 a ton and lead decreased $17 to $968 a ton.

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