Sunday, February 15, 2009

Copper, Aluminum, Nickel Fall as Lower Usage Boosts Inventories

By Claudia Carpenter, Feb. 10 (Bloomberg)

Copper, aluminum and nickel declined in London as the global economic slowdown reduced demand for industrial metals used in buildings and cars.

Copper stockpiles in warehouses monitored by the London Metal Exchange rose 1.3 percent to the highest since November 2003, aluminum inventories are at a record and nickel inventories are the highest since July 1995. Copper climbed to a two-month high yesterday on speculation that government spending in the U.S. and China would revive demand.

“The market is recognizing realities rather than speculating on spending from stimulative packages and perceived Chinese buying,” said Herwig Schmidt, a trader at Triland Metals Ltd. in London.

Copper for delivery in three months fell $60, or 1.7 percent, to $3,520 a metric ton as of 4:26 p.m. on the LME, eroding this year’s gain to 15 percent. Nickel dropped $590, or 5.1 percent, to $10,910 a ton and aluminum declined $20, or 1.4 percent, to $1,425 a ton. Nickel is used to make stainless steel and aluminum and copper are used in cars and homes.

On the New York Mercantile Exchange Comex division, copper futures for March delivery declined 2.05 cents, or 1.3 percent, to $1.5925 a pound. Futures are up 13 percent this year.

Hulamin Ltd., Africa’s largest aluminum processor, said today that customers in the auto, transportation and construction industries are paring inventories. LME stockpiles rose 0.5 percent to 2.9 million tons, the most since the aluminum contract started in 1978.

Not Enough

Global production cuts of as much as 6 million tons, or 15 percent of last year’s output, are “clearly insufficient,” according to United Co. Rusal, Russia’s biggest producer of the lightweight metal.

“There must be additional cuts to balance demand and supply levels,” said Artem Volynets, the company’s head of corporate strategy. Demand will probably recover in two to three years, he said.

Investors are “cautiously” returning to the industrial metals markets in anticipation of supply shortages as companies cut output, Barclays Capital analyst Kevin Norrish said yesterday.

“The supply side has adjusted much more quickly than in the past,” he said. “We’re still in a commodity bull market.”

Nickel inventories jumped 582 tons to 87,288 tons and copper stockpiles climbed 6,650 tons to 514,425 tons.

Lead declined $29 to $1,170 a ton and tin dropped $220 to $11,010 a ton. Zinc fell $18 to $1,177 a ton.