Copper Falls in London on Speculation About Delayed Purchases

By Claudia Carpenter

Feb. 27 (Bloomberg) -- Copper fell for the first time this week on the London Metal Exchange on speculation manufacturers will delay purchases as slower economic growth curbs demand. Aluminum and other LME metals also dropped.

Consumption of aluminum, copper, nickel and zinc will decline this year, leading to a third consecutive surplus in all of the metals, Goldman Sachs Group Inc. said in a report dated yesterday. Copper has gained 7.1 percent this week on the first weekly drop in inventories since October, spurring speculation about increased demand in China, the world’s largest buyer.

“There has been some consumer buying interest, but I don’t think too many are pulling the trigger,” said Alex Heath, head of industrial-metals trading at RBC Capital Markets in London. “The general perception is the market will go lower still.”

Copper for three-month delivery dropped $125, or 3.6 percent, to $3,375 a metric ton at 1:04 p.m. local time. The price must exceed the 100-day moving average -- now $3,599 a ton, according to Bloomberg data -- to spur manufacturing purchases, Heath said. The contract is up 7 percent in February.

Inventories of copper in warehouses monitored by the LME fell 0.6 percent to 542,300 tons, for a weekly decline of equal size. Warehouses in Asia had the most withdrawals, while supplies climbed in the U.S. China may use 5 percent more metal in the first quarter than a year earlier, according to London-based research company Bloomsbury Minerals Economics Ltd.

“Perhaps the impact of buying programs we’ve seen from China now is beginning to start,” Heath said. “There’s little real sign of any actual restocking outside of China.”

Chinese Demand

Industrial production in Japan, the world’s fourth-largest copper buyer, plunged 10 percent last month, the Trade Ministry said today in Tokyo.

Demand from China will climb this year for copper and zinc, drop for nickel and stagnate for aluminum, Peter Mallin-Jones, an analyst at Goldman Sachs in London, wrote in the report. Total usage will drop 3 percent for copper, 3.5 percent for zinc, 2.2 percent for nickel and 4.5 percent for aluminum, he wrote.

Copper will average $3,308 a ton this year, according to the report. That implies a drop of 0.6 percent from the $3,327 a ton averaged by the three-month LME contract in 2009.

Zinc for three-month delivery declined $30, or 2.6 percent, to $1,108 a ton, a second consecutive drop. Nyrstar NV, the world’s largest zinc producer, said it will reduce production by another 190,000 tons in the first half, following a 35,000-ton fourth-quarter cut.

Aluminum dropped $36, or 2.6 percent, to $1,328 a ton, and lead fell $18, or 1.7 percent, to $1,026 a ton. Tin decreased $275, or 2.5 percent, to $10,675 a ton, while nickel lost $395, or 3.9 percent, to $9,660 a ton.

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