By Claudia Carpenter Oct. 17 (Bloomberg) -- Copper and aluminum fell in London as a U.S. report on declines in housing construction added to evidence of slowing demand for industrial metals. U.S. housing starts fell 6.3 percent in September to 817,000 homes, the Commerce Department in Washington said. Copper has dropped 36 percent since the middle of September as the worst credit crisis in more than seven decades slashed commodity demand. Construction is the biggest source of demand for copper. ``Copper is the most overvalued of the industrial metals,'' said Michael Lewis, head of commodities research at Deutsche Bank AG in London. There is ``demand destruction.'' Copper for delivery in three months declined $80 to $4,570 a metric ton as of 1:33 p.m. on the London Metal Exchange. The housing report was expected to show a 2.6 percent decline to 872,000 units, according to the median forecast in a Bloomberg survey. The 817,000 homes in September was the lowest since 1991. Aluminum dropped $20 to $2,165 a ton. Virginia-based Friedman, Billings, Ramsey & Co. lowered its 2009 estimate for aluminum to $1 a pound ($2204.62 a ton) from $1.30 and its 2010 estimate to $1.20 a pound from $1.30, in part because of rising stockpiles. Copper stockpiles in warehouses monitored by the LME dropped 575 tons to 211,450 tons while aluminum stockpiles jumped another 11,800 tons to 1.48 million tons, according to the LME. Aluminum stockpiles have jumped 59 percent this year, compared with 7.1 percent for copper. Industrial Production Copper fell yesterday after the Federal Reserve reported the biggest drop in U.S. industrial production since December 1974. China may report next week its industrial production growth accelerated in September from August, economists said in a Bloomberg News survey. ``China is still going to be expanding,'' said Michael Khosrowpour, a trader at London-based Triland Metals Ltd., one of 12 companies trading on the floor of the London Metal Exchange. China's industrial production probably gained 13.4 percent in September from a year earlier after a 12.8 percent advance in August, according to the Bloomberg survey. The industrial production report is set for release on Oct. 20. Global economic growth will be strong enough to avoid declines in consumption of industrial metals next year, according to Barclays Capital. Monetary Fund Only when global growth slowed to 2 percent and below did demand for copper, aluminum and zinc decline, in 1982, from 1990 to 1992 and in 2001, according to Barclays analyst Gayle Berry in London. The International Monetary Fund last week forecast that global growth will slow to 3 percent in 2009 from 3.9 percent this year. Demand for nickel, used to make stainless steel, will rise 4.9 percent next year from 2.6 percent as lead demand growth quickens to 2.9 percent from 2 percent, according to a Barclays presentation this week. Nickel and zinc prices may be most supported because prices are at or close to the marginal cost of production, according to Triland. Lead was unchanged at $1,360 a ton. Tin fell $300 to $13,150 a ton and nickel dropped $380 to $10,400 a ton, and zinc declined $10 at $1,170 a ton. To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net

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