Copper Leads Drop in Metals in London on China, Demand Outlook

By Chanyaporn Chanjaroen

Dec. 12 (Bloomberg) -- Copper fell in London, leading declines in all metals, on concerns demand for commodities in China and the U.S., the biggest metals consumers, will weaken further.

The U.S. Senate rejected a $14 billion bailout plan for carmakers, major users of copper, aluminum, platinum and steel. Retail sales in China advanced at the slowest pace in nine months in November, the National Bureau of Statistics said today.

“It’s not only sentiment, it’s real demand” that drove prices of all raw materials lower, Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said today by phone. Investors and traders are concerned about future economic growth, he said.

Copper for delivery in three months dropped $210, or 6.4 percent, to $3,108 a metric ton as of 10:46 a.m. local time, taking the gain in the week to 1.8 percent. Aluminum fell $46, or 2.9 percent, to $1,517 a ton, up 1.7 percent for the week.

Oil, equity markets all tumbled as the global recession is set to deepen, threatening further job losses and shutdown at factories worldwide. China’s economic slide is accelerating and won’t bottom out until after the first quarter of next year, Li Yizhong, head of the Ministry of Industry and Information Technology said today in Beijing.

Demand for copper will drop 3.5 percent next year, and aluminum will be 1.7 percent lower, London-based Goldman Sach Group Inc. analyst Jeffrey Currie said in a report yesterday. Miners and smelters need to cut production even more to counter the demand collapse, he said.

“We expect substantial surpluses across most metals to continue to pressure prices lower from current levels,” the report said. “Fundamentals are strongest for zinc and weakest for aluminum, where inventories are set to climb to extraordinary levels.”

Stockpiles Soar

Aluminum stockpiles tracked by the LME rose 15,725 tons, or 0.8 percent, to 1.92 million tons, the exchange said today, twice as much as last year and at the highest since November 1994.

Copper stockpiles added 3,975 tons, or 1.3 percent, to 306,825 tons, the highest since February 2004.

Pan Pacific Copper Co., Japan’s biggest copper smelter, will cut production 10 percent during January to March, the first output reduction in 14 years as the global economic slowdown reduces demand.

The cuts will reduce production in the sixth months ending March 31 to 295,000 metric tons of copper, down 5 percent from its October estimate.

Among other LME-traded metals, nickel slipped $420, or 3.8 percent, to $10,700 a ton, lead lost $20, or 2 percent, to $1,000 a ton and zinc fell $30.50, or 2.8 percent, to $1,075 a ton. Tin declined $350, or 2.9 percent, to $11,750 a ton.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net