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Aluminum falls 5.7 pct on weak oil

LONDON (Reuters) - Aluminum fell by 5.7 percent on Tuesday, retreating from the previous session’s record high as large stocks offset worries about power problems in China and softer oil prices dampened sentiment.

Aluminum for three-month delivery on the London Metal Exchange hit an intraday low at $3,120 per ton before closing at $3,145, down by 5 percent or $165. On Monday, it rallied 5 percent to a record high of $3,327 per ton.

“Overall a stronger U.S. dollar, weaker oil and concerns about the global economic outlook have hurt the complex,” analyst David Thurtell at BNP Paribas said.

Pending sales of previously owned U.S. homes plummeted by 4.7 percent in May, far more than expected and a sign of more trouble ahead for the beleaguered U.S. housing market, a real estate trade group report showed.

Copper hit an intraday low of $8,150.25 a ton, down 3.1 percent, before closing at $8,200 versus Monday’s $8,412.

“It looks as though some stops have been triggered this afternoon,” BNP Paribas’ Thurtell said.

In New York, copper for September delivery ended down 15.25 cents, or nearly 4 percent, at $3.6965 a lb on the New York Mercantile Exchange’s COMEX division, its lowest level on a settlement basis since June 18.

The metal, used in wiring and construction, touched a record high of $8,940 per ton in London and crossed the psychological $4.00 a lb mark in New York last week due to supply disruptions in Peru, the world’s second largest copper producer.

In aluminum, up to 45 percent of smelting costs are accounted for by electricity and record high oil prices and power shortages have supported prices.

But with oil prices dropping on Tuesday by $5 to around $136 per barrel, the metal used in packaging and transport faced increasing selling pressure.

Traders also said the previous session’s rally was overdone and pointed to high levels of LME stocks, at 1.08 million tons they are sufficient for more than 10 days of global consumption.

Aluminum has gained 38 percent since the start of the year and Monday's move was triggered by Aluminum Corp of China (Chalco) 2600.HK601600.SS, which said the firm's two aluminum smelters in Shanxi province-- with combined capacity of 500,000 tons -- had tight power supplies.

Smelters in Shanxi province have an annual production capacity of 1.1 million tons, around 8 percent of total capacity in China, the metal’s top producer.

The move up was also due to Century Aluminum CENX.O planning to offer new shares to pay for part of the $1.7 billion cost of unwinding all of its forward sales contracts with Swiss-based Glencore International.

Glencore holds more than a 25 percent stake in Century and is the largest shareholder, according to Reuters data.

“It seems the Century-Glencore deal was also helpful in the rally,” an LME trader said.

He also said the power problems in China were going to persist and he expected higher aluminum prices longer term.

In copper, traders said low inventories and a single dominant position holding more than 90 percent of LME stocks would support prices.

LME copper stocks stand at around 122,000 tons -- less than 3 days global consumption.

“Inventories have been and remain low,” said John Gross, director of metals management at Scott Brass Inc in Cranston, Rhode Island, and publisher of the Copper Journal. “In relation to the open interest, whether in the spot month or in total, there is a negligible amount of metal in inventory which does create the environment for the volatility and another potential run to the upside.”

Lead bucked the falling trend, and closed unchanged at $1,630 per ton because of mildly bullish stocks data, down 500 ton to 100,475.

Zinc was down at $1,750, after hitting an intraday low of $1,760 down 4.3 percent, from Monday’s close of $1,840.

Nickel was at $20,600, down from the close of $21,000 and tin fell to $22,450 from $22,750.

Metal Prices at 1:45 p.m. EDT Metal

Last Change Pct Move End 2007 Ytd Pct


LME Cu 8200.00 -212.00 -2.52 6670.00 22.94

SHFE Cu* 63140.00 200.00 +0.32 56880.00 11.01

LME Alum 3140.00 -170.00 -5.14 2403.00 30.67

SHFE Alu* 19735.00 35.00 +0.18 18180.00 8.55

COMEX Cu** 371.25 -15.25 -3.95 303.05 22.50

LME Zinc 1765.00 -75.00 -4.08 2370.00 -25.53

SHFE Zinc* 15120.00 -50.00 -0.33 18950.00 -20.21

LME Nick 20550.00 -450.00 -2.14 26350.00 -22.01

LME Lead 1635.00 5.00 +0.31 2550.00 -35.88

LME Tin 22350.00 -400.00 -1.76 16400.00 36.28

** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07


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