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LONDON

Aluminum drops to seven-year low
DAVID SHEPPARD
RTGAM

LONDON - Aluminum plunged to its lowest price in more than seven years on Tuesday as physical stocks of the metal rose to a record and tumbling global equity markets stoked concerns about crumbling demand.

Copper also fell after inventories of the metal climbed to the highest level since late 2003.

World equities dropped to the lowest in almost six years, with Europe and Asia joining the sell-off after Wall Street hit a 12-year low on Monday on growing concerns about the financial system.

"Everyone appears to be panicking at the moment - I think things will be pretty horrible through Easter at least," Alex Heath, head of base metals trading at RBC Capital Markets, said.

"Business is very sporadic at the moment, and while most of the bad news is already in the price, metals continue to follow the ebb and flow of the macroeconomic outlook."

Aluminum for delivery in three months on the London Metal Exchange fell to a low of $1,279 (U.S.) a tonne - the lowest level since November, 2001 - before paring losses to $1,295 in LME ring trade from $1,288 on Monday.

LME warehouse inventories of the energy intensive metal - used in transport and packaging - leapt by 13,125 tonnes to stand at 3.17 million tonnes, their highest ever level. Stocks have risen more than 35 per cent since December.

Strength in the dollar put more pressure on metal prices on Tuesday, with the U.S. currency hitting a three-month high against the yen. Dollar-denominated commodities become more expensive for holders of other currencies.

In Japan, production cuts by car makers have hit demand for copper, used extensively in wiring and construction. An industry official said factories were shutting for a longer period during the week due to low demand for copper products.

Japan's output of rolled copper products reached 43,390 tonnes in January, on an unadjusted basis, the lowest since August 1975.

Copper for three-month delivery fell slightly to $3,215 a tonne from $3,231 at the close on Monday.

Stocks in LME warehouses rose 1,950 tonnes to 544,700 tonnes, the highest since October 2003.

In China, low prices and slumping demand have forced the central government to buy metals as reserves, part of Beijing's plans to support smelters during the current slowdown.

The State Reserves Bureau has called a meeting in Beijing on Wednesday to buy refined zinc from smelters, its second purchase in less than two months, sources from smelters said on Tuesday.

On Friday, the SRB bought 290,000 tonnes of primary aluminum from local smelters, according to a source familiar with the purchase, and last week might have contracted to import up to 240,000 tonnes of refined copper.

Talk of SRB buying to boost reserves and the "very tight availability" of copper scrap should underpin the prices, analysts said.


"The difficulty in getting scrap from abroad as well as the high prices are causing difficulties for local refiners that use scrap as raw materials as well as downstream processors. Some of them are turning to refined copper," Yingxi Yu at Barclays Capital in Singapore said.


China's imports of refined copper jumped 41 per cent in January from a year earlier and its imports of copper scrap fell more than 56 per cent.

Mr. Yu at Barclays said demand for the industrial metal in the world's top copper consumer is expected to rise 3.5 per cent this year - half of last year's pace - compared with flat growth for the world as a whole.

Zinc fell to $1,088 from Monday's close at $1,098 a tonne. Key stainless steel ingredient nickel edged up to $9,565 from $9,550 a tonne.

Battery material lead dropped to $995 from $1,020, and tin fell to $10,350 from $10,405 a tonne.