LONDON — Aluminum dropped to its lowest level in more than five years and copper tumbled to a 3-1/2 year low on Friday, as a rapidly deteriorating world economy dampened the outlook for metals consumption.
European shares fell, with miners among the biggest losers as investors held their breath and awaited key economic data from the United States, the world's largest economy.
Aluminum for three-month delivery on the London Metal Exchange hit $1,530 (U.S.) a tonne, its lowest since November 2003. The power-intensive metal was at $1,540 a tonne by 1051 GMT, still down from Thursday's close of $1,586.
Copper sank to $3,117 per tonne and was last at $3,139 per tonne, down $131 from Thursday.
“The industries, economies are now in serious pain through the world,” said Stephen Briggs, analyst at RBS Global Banking & Markets.
“Everybody – even the most bullish people – have now given up on the decoupling idea,” Mr. Briggs said, referring to the argument that China was making up for any demand slowdown in the United States.
This idea, which was popular a year ago, has been disproved by a string of bleak economic data across the world. The latest data show further bad news from the auto sector – one of the top consumers of metals.
BMW, the world's top premium carmaker, announced Friday that its global sales plunged by one-quarter in November. The news came just one day after the European Central Bank (ECB) and the Bank of England (BoE) announced bold rate cuts to cushion those economies.
Investors are now waiting for key U.S. jobs data, due out at 1330 GMT, which is expected to show the sharpest job losses in 26 years.
Barclays became the latest bank to once again downgrade its price forecasts for metals, citing the expectation of a deeper and longer global recession.
“The scale of the price decline in some metals suggests that the market is pricing in a worse deterioration in market conditions than was witnessed during the Great Depression,” the bank said in a research note.
It now expects copper at $2,900 per tonne in the first quarter of next year. Bleak demand was mirrored in rising copper stocks, now at 297,300 tonnes – having risen nearly 100,000 tonnes in only two months.
Even in China, where still several industry players look for demand recovery and relatively better growth, the situation looks grim.
China's copper consumption will grow by 5 per cent in 2009 and will remain between 5 and 6 per cent in the next few years versus double-digit percentage rises in recent years, said Shiela Ju, deputy manager for the international department of China's state-owned Antaike research group.
Mr. Briggs said smaller metals, such as zinc and tin, could hold firm compared to the other ones, as the cutbacks in these markets have been sharper and the stocks remain rather low.
Tin exports from Indonesia, which produce nearly a quarter of the world's tin, are estimated to have fallen 47 per cent in November as small smelters shut due to sliding prices.
Lead hit its lowest level since June 2006 and was last at $975 a tonne from $980 on Thursday while zinc was at $1,125 compared with $1,145. Nickel fell to $9,260 from $9,250 while tin eased to $11,675 from $11,850.
