Aluminum Erases Decline in London, Following U.S. Stock Market

Feb. 24 (Bloomberg) -- Aluminum, copper and nickel erased declines in London as U.S. stock prices rebounded from drops yesterday that pulled the Standard & Poor’s 500 Index down to its lowest close since 1997. The S&P 500 added as much as 2 percent today, heading for its biggest gain since Feb. 6. Aluminum declined to a seven-year low earlier in the day and copper lost as much as 2.3 percent on speculation that the global recession might intensify, curbing demand for industrial metals. “Stock markets will go up on the back of expectations of a turnaround in the global economy, and such a turnaround would lead to increased demand for metals,” said Charles Kernot, an analyst at Evolution Securities Ltd. in London. Aluminum for delivery in three months rose $45, or 3.5 percent, to $1,333 a metric ton at 5:44 p.m. on the London Metal Exchange. Copper added $95, or 2.9 percent, to $3,326 a ton, and nickel climbed $295, or 3.1 percent, to $9,800 a ton. All LME metals had declined earlier, pulling aluminum down to $1,279, the lowest since November 2001. Aluminum prices have dropped this year as crude oil has slid, reducing energy costs and spurring speculation that the metal’s supply may expand. Crude was little changed today after declining 4 percent yesterday. ‘Energy Intensive’ “Aluminum is very energy-intensive to produce,” said Eliane Tanner, an analyst at Credit Suisse Group in Zurich. “When prices of energy go up, then aluminum will be supported.” Honda Motor Co., Japan’s second-largest carmaker, expects domestic sales to fall as much as 11 percent in the year ending in March as the recession damps demand. Aluminum inventories have jumped 36 percent this year as U.S. car sales tumbled 37 percent in January. Transportation is the biggest use for the lightweight metal, according to Citigroup. “We expect aluminum prices to remain weak as long as the economy hasn’t bottomed and inventories are still very high,” Tanner said. “From this point of view, we’re not too positive on aluminum.” LME-tracked inventories of aluminum rose to a record 3.2 million tons, with 14 percent of supplies in warehouses in Detroit, where General Motors Corp. has its headquarters. The LME index of six industrial metals rose 0.7 percent yesterday as nickel and copper advanced. Wire, Cable Copper wire and cable shipments in Japan, the world’s fourth-largest copper buyer, dropped 21 percent in January from a year earlier, the most since February 1975, according to the Japanese Electric Wire and Cable Makers’ Association. Zinc for three-month delivery climbed $17 to $1,115 a ton. China, the world’s largest producer of zinc, will discuss buying the metal from domestic smelters tomorrow for the second time this year, three company executives familiar with the plan said. The government’s stockpiling agency may seek to buy 100,000 tons, one executive said. Zinc purchases were 59,000 tons last month. Tin gained $145 to $10,550 a ton as lead fell $13 to $1,010 a ton.