Copper, Aluminum in Shanghai Plunge by Limit on Demand Outlook

By Glenys Sim

Dec. 4 (Bloomberg) -- Copper, aluminum and zinc prices on the Shanghai Futures Exchange plunged by the exchange-imposed daily limits as rising inventories increased concerns about weakening global demand for industrial metals.

London Metal Exchange warehouse stockpiles are near a five- year high for copper, at the highest in more than 14 years for aluminum, and more than doubled since the start January for zinc.

“It wasn’t a pretty picture last night and I would say people are bracing for the worst in terms of the outlook for the global economy and what this means for metal demand,” said Yuan Fang, a trader at Shanghai East Asia Futures Co.

February-delivery copper on the Shanghai Futures Exchange dropped as much as 1,080 yuan, or 4 percent, from the previous settlement price, to 25,900 yuan ($3,762) a metric ton. This is the lowest for a most-active contract since July 2004.

February-delivery zinc also slumped 4 percent to 9,165 yuan a ton. Aluminum for February delivery fell by the daily limit for a second day, by 5 percent, to 11,240 yuan a ton, the lowest ever for a most-active contract, according to traders and analysts.

“Inventories for all the metals have risen, some very significantly,” said Great Wall Futures Co. chief analyst Li Rong. “Coupled with weak economic data, there’s little to be optimistic about.”

China Slows

Economic expansion in China, the world’s largest user of industrial metals, may cool to 9 percent in 2009, the slowest pace in eight years, as the financial crisis stymies exports, the government-backed Chinese Academy of Social Sciences said Dec. 2.

The country’s October economic data signaled a deepening slowdown in Asia’s second-largest economy. Manufacturing activity contracted by a record, according to surveys by the government and CLSA Asia Pacific Markets. Industrial production rose at the weakest pace in seven years and electricity output fell.

On the London Metal Exchange, copper fell 1.2 percent to $3,680 a ton, zinc dropped 1.2 percent to $1,155, and lead lost 1.7 percent to $1,070 as of 4:20 p.m. in Singapore. Tin fell 0.5 percent to $11,900 a ton, and nickel was little changed at $9,500.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net