Copper Leads Industrial Metals Lower on Slumping U.S. Economy

By Glenys Sim

March 2 (Bloomberg) -- Copper fell in Asia, leading a decline in most industrial metals, as the U.S. economy contracted at the steepest rate in more than 25 years, renewing concern the global recession is deepening.

The slump in prices also triggered losses in related equities. Consumer spending in the U.S., the largest buyer after China, fell at the fastest pace in almost 30 years, according to Commerce Department data. Japan’s manufacturers cut production by a record in January, the Trade Ministry said in a report Feb. 27.

“Economic data continues to be poor as the effects of government spending will only become more apparent in the second half of the year,” Chen Yonglin, an analyst at Citic Securities Co., said from Shanghai today. “Coupled with expectations for a weaker dollar ahead, we may start seeing support for metal prices only at the end of the year.”

London Metal Exchange copper fell as much as 2.9 percent to $3,350 a metric ton and was at $3,365 as of 11:11 a.m. Singapore time, extending a 1.5 percent decline Feb. 27. Copper for May delivery on the Shanghai Futures Exchange dropped as much as 2 percent to 27,300 yuan ($3,990) a ton before trading at 27,500 yuan.

“The domestic market will continue to consolidate in the 26,000 to 28,000 yuan range in the near term,” said Chen. “Downstream consumers are not willing to buy above 30,000 yuan, while we see purchasing activity pick up when prices fall near 25,000 yuan,” said Chen.

Jiangxi Copper

Jiangxi Copper Co., China’s largest copper producer by output, dropped 2.3 percent to 15.12 yuan, after declining as much as 6.5 percent, at 11:16 a.m. in Shanghai. In Hong Kong trading, the stock tumbled 6.5 percent.

Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, dropped 2.7 percent to 8.82 yuan, after slipping as much as 6.6 percent. In Hong Kong the stock dropped 5.1 percent.

The Commerce Department said on Feb. 27 that the U.S. economy shrank at a 6.2 percent annual pace in the three months to December, the most since 1982 and more than the government had previously estimated.

Nickel, the worst performer on the LME this year, fell for a third day, dropping as much as 0.3 percent to $9,975 a ton as the global recession cut demand for the metal used in stainless steel.

There is speculation that China’s State Reserve Bureau may buy 10,000 to 20,000 tons of nickel, according to Southwest Futures Co.’s analyst Jia Zheng.

“It isn’t a lot so I doubt it will impact prices, but I think the main reason would be to support domestic producers, which have acquired a lot of mines in peripheral regions in the past few years,” said Jia.

Among other LME-traded metals, aluminum was down 0.5 percent at $1,335 a ton, zinc dropped 0.3 percent to $1,125 a ton and lead gained 0.8 percent to $1,054 a ton.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net