Aluminum Falls to 5-Year Low in London After U.S. Demand Drop

By Claudia Carpenter

Dec. 16 (Bloomberg) -- Aluminum dropped to a five-year low in London on signs demand from the auto industry and home builders is falling faster than production cuts. Copper and other metals on the London Metal Exchange also declined.

U.S. aluminum orders plunged 13 percent in November from October, following declines in car output and new home starts, Citigroup Inc. said, citing data from the U.S. Aluminum Association. Aluminum output growth will slow to 2.6 percent next year from 5.3 percent this year after cuts by Norsk Hydro ASA and Rio Tinto Plc, Barclays Capital said in a report Dec. 4.

“Some metals are worse than others and aluminum is probably the worst,” said David Thurtell, an analyst at Citigroup in London. “So far we’ve only seen modest cutbacks by Russian and western producers.”

Aluminum for delivery in three months dropped $32, or 2.1 percent, to $1,463 a metric ton as of 11:22 a.m. on the LME and earlier fell to $1,435, the lowest since Oct. 6, 2003. Prices have dropped 39 percent this year.

Inventories of aluminum in warehouses monitored by the LME gained another 10,100 tons, or 0.5 percent, to 1.94 million tons, the most since Nov. 15, 1994. The inventories have climbed every day since Nov. 7.

Copper decreased $98 to $3,067 a ton after inventories rose 3,800 tons to 318,625 tons, the most since Feb. 16, 2004.

Shipments of copper contained in products such as air conditioners from China to the U.S. have dropped 8 percent this year, BNP Paribas SA analyst Michael Widmer wrote in a report yesterday. China and the U.S. are the largest buyers of copper.

Index of Indicators

The U.S. leading index of indicators for metals including copper and aluminum dropped 9.7 percent in October and the six- month growth rate was the lowest on record, the U.S. Geological Survey said in a report on its Web site.

Nickel declined $300 to $9,925 a ton, lead fell $38 to $987 a ton and tin dropped $210 to $11,150 tons. Tin suffered a “large” demand decline in the past month because of cutbacks in Asia’s electronics industry, according to Peter Kettle, research manager of tin industry group ITRI Ltd. Mining companies have “pretty much” made cutbacks in line with sinking demand, he said.

Zinc rose $5 to $1,085 a ton.

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