Copper Drops in London on Outlook for China Use; Lead Retreats

By Claudia Carpenter

Jan. 13 (Bloomberg) -- Copper declined for a second consecutive session in London, driven by increased stockpiles and falling demand from China, the world’s largest user of the metal. Lead fell the most in a month.

China’s copper use may drop as much as 4 percent this year, with global consumption down 7 percent, almost twice the declines forecast in December, according to Bloomsbury Minerals Economics Ltd. in London. Inventories in warehouses monitored by the London Metal Exchange had their 20th straight daily advance.

“Everyone expects copper prices could go lower,” said Chris Welch, minerals economist at Bloomsbury in London. “The recession is getting deeper.”

Copper for delivery in three months on the London Metal Exchange dropped $76, or 2.3 percent, to $3,169 a metric ton as of 11:43 a.m. local time. It fell 4.6 percent yesterday, the biggest decline since Dec. 18. Prices are still up 3.2 percent this year.

China’s imports of copper and copper-product imports rose 32 percent in December, giving an annual drop of 5 percent, the Beijing-based customs office said today. Bloomsbury last month forecast China’s copper use would drop 2.6 percent this year, with global consumption down 4.1 percent.

“Short-term good news is just short-term good news,” Welch said. “There’s no incentive for mines to maintain production at current levels.”

Lead declined as much as $99.75, or 8.5 percent, to $1,070.25 a ton, the most since Dec. 3. Inventories climbed 575 tons, or 1.3 percent, to 45,850 tons. That’s the biggest jump since Dec. 3.

Lower Prices

Energy and metals prices “will need to move lower in the near term to motivate and sustain production cuts required to return the markets to balance,” Goldman Sachs Group Inc. London- based analyst Jeffrey Currie wrote in a report dated yesterday.

Rio Tinto Group suspended work on the underground expansion of the Northparkes copper mine in Australia’s New South Wales state because of the recession. Mitsubishi Materials Corp., Japan’s third-largest copper maker, will cut output of refined copper by about 10 percent starting next month.

Copper may fall below $2,220 a ton, Welch said. The three- month copper contract retreated to a four-year low of $2,817.25 a ton on Dec. 24.

Lower estimates for copper, aluminum, lead, nickel and zinc will mean industrial metal earnings at BHP Billiton Ltd., the world’s largest mining company, will be 57 percent lower than previously forecast for the fiscal year 2009 and 66 percent lower the following year, Investec Securities Ltd. analyst Kieran Daly wrote in a report today.

Industrial Output

Copper will average $1.60 a pound ($3,527 a ton) this year, down 47 percent from a forecast in October, Daly wrote, citing a revised forecast for global industrial production to fall 1 percent. It had been expecting industrial output to rise 2.9 percent.

For Anglo American Plc, industrial metal earnings for the 2009 fiscal year will be down 82 percent from Investec’s previous estimate.

Copper inventories rose 1.5 percent to 374,850 tons, the exchange said today in a daily report. That’s the highest since Jan. 27, 2004.

Nickel fell $325 to $10,400 a ton, aluminum dropped $43 to $1,473 a ton, and tin declined $390 to $11,210 a ton.

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