Low Chinese offtake buzz hits copper

Copper fell in London, after posting its best quarter in almost three years, as a slump in Chinese manufacturing increased speculation demand won’t rebound soon.

The CLSA China Purchasing Managers’ Index dropped to 44.8 in March from 45.1 in February, the eighth straight month that the measure has been below 50, CLSA Asia-Pacific Markets said today in an e-mailed statement.

A level below 50 indicates a contraction. A gauge for new orders in China, the world’s largest copper consumer, also retreated.

“The fall is of concern as we would have hoped that March would have been stronger than April as we move into a period of greater industrial activity,” John Meyer, head of research at Fairfax IS, said in a report.

Copper for three-month delivery on the London Metal Exchange fell $45, or 1.1 per cent, to $3,995 a tonne. Copper added 32 percent in the first quarter, its biggest gain since the second quarter of 2006.

Morgan Stanley lowered next year’s forecasts for copper, aluminum and nickel on concern that any economic recovery will be “very shallow.” It expects copper for immediate delivery, which closed at $4,003 a tonne yesterday, to decline to $1.45 a pound ($3,197 a tonne) in 2009.

“Our estimates of real end-demand suggest conditions have not improved and have actually worsened,” the bank said in a report. Production cutbacks in the copper market had not been sufficient to stem a looming oversupply, it said.

LME-monitored stockpiles of copper, used in plumbing and electrical wiring, rose 0.4 per cent to 501,775 tonnes, more than four times the amount a year ago.

Mitsubishi Materials Corp., Japan’s third-largest copper producer, will lower output by 9.3 per cent at its Japanese smelters in April to September compared with a year earlier.

Reductions in smelter output are forecast at 1.5 per cent, or 265,000 tonnes, of the global market this year, according to Barclays Capital.

In mining, production losses from closures and cutbacks are estimated at about 5.5 per cent of the market, Barclays estimates.

US stock futures and European shares slid after people familiar with the matter said the US government believes bankruptcy is the most likely option for General Motors and Chrysler LLC. Transport accounts for about a third of aluminum demand, according to Calyon.

Aluminum for three-month delivery slipped 0.8 per cent to $1,381 a tonne, extending this year’s decline to 10 per cent.

Nickel, used in stainless steel, shed $170, or 1.7 per cent, to $9,680 a tonne. Nickel has slid 17 per cent this year, the most among the main metals traded on the LME.

Sumitomo Metal Mining Co., Japan’s top nickel producer and second-largest copper smelter, will cut refined nickel output by 23 per cent in April to September compared with a year earlier on slumping demand from steelmakers.

Lead fell $35, or 2.7 per cent, to $1,235 a tonne, zinc dipped 1.6 per cent to $1,299 a tonne, and tin declined 0.5 per cent to $10,350 a tonne.